e6vk
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 October 2009
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
Nine Months Ended September 30, 2009 and 2008 and
Independent Accountants’ Review Report

 


 

INDEPENDENT ACCOUNTANTS’ REVIEW REPORT
The Board of Directors and Shareholders
Taiwan Semiconductor Manufacturing Company Limited
We have reviewed the accompanying balance sheets of Taiwan Semiconductor Manufacturing Company Limited as of September 30, 2009 and 2008, and the related statements of income and cash flows for the nine months then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to issue a report on these financial statements based on our reviews.
We conducted our reviews in accordance with Statement on Auditing Standards No. 36, “Review of Financial Statements,” issued by the Auditing Standards Committee of the Accounting Research and Development Foundation of the Republic of China. A review consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the Republic of China, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be 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.
As discussed in Note 3 to the financial statements, effective January 1, 2009, Taiwan Semiconductor Manufacturing Company Limited adopted the newly revised Statements of Financial Accounting Standards No. 10, “Accounting for Inventories.” In addition, effective January 1, 2008, Taiwan Semiconductor Manufacturing Company Limited adopted Interpretation 2007-052, “Accounting for Bonuses to Employees, Directors and Supervisors,” issued by the Accounting Research and Development Foundation of the Republic of China and relevant requirements promulgated by the Financial Supervisory Commission of the Executive Yuan.

- 1 -


 

We have also reviewed, in accordance with Statement on Auditing Standards No. 36, the consolidated financial statements of Taiwan Semiconductor Manufacturing Company Limited and subsidiaries as of and for the nine months ended September 30, 2009 and 2008, and have issued thereon an unqualified review report with an explanatory paragraph relating to the adoption of the newly revised Statement of Financial Accounting Standard, Accounting for Inventories, and the adoption of Interpretation 2007-052, respectively.
October 9, 2009
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 review such financial statements are those generally accepted and applied in the Republic of China.
For the convenience of readers, the accountants’ review 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 accountants’ review report and financial statements shall prevail.

- 2 -


 

Taiwan Semiconductor Manufacturing Company Limited
BALANCE SHEETS
SEPTEMBER 30, 2009 AND 2008
(In Thousands of New Taiwan Dollars, Except Par Value)
(Reviewed, Not Audited)
                                 
    2009     2008  
    Amount     %     Amount     %  
ASSETS
                               
 
                               
CURRENT ASSETS
                               
Cash and cash equivalents (Notes 2 and 4)
  $ 102,286,286       20     $ 71,356,901       13  
Financial assets at fair value through profit or loss (Notes 2, 5 and 23)
    367,461             12,970        
Available-for-sale financial assets (Notes 2, 6 and 23)
                16,936,633       3  
Held-to-maturity financial assets (Notes 2, 7 and 23)
    8,374,389       2       5,063,096       1  
Receivables from related parties (Note 24)
    22,464,807       4       27,255,916       5  
Notes and accounts receivable
    20,825,053       4       22,662,860       4  
Allowance for doubtful receivables (Notes 2 and 8)
    (436,000 )           (686,143 )      
Allowance for sales returns and others (Notes 2 and 8)
    (8,874,199 )     (2 )     (5,339,469 )     (1 )
Other receivables from related parties (Note 24)
    321,499             315,293        
Other financial assets (Note 25)
    903,842             564,972        
Inventories (Notes 2, 3 and 9)
    17,194,184       3       19,429,551       4  
Deferred income tax assets (Notes 2 and 17)
    4,287,040       1       2,915,006       1  
Prepaid expenses and other current assets
    613,580             1,208,644        
 
                       
 
                               
Total current assets
    168,327,942       32       161,696,230       30  
 
                       
 
                               
LONG-TERM INVESTMENTS (Notes 2, 6, 7, 10, 11 and 23)
                               
Investments accounted for using equity method
    105,085,064       20       109,129,339       21  
Available-for-sale financial assets
    1,033,473             4,003,970       1  
Held-to-maturity financial assets
    13,278,683       3       11,416,050       2  
Financial assets carried at cost
    501,563             748,263        
 
                       
 
                               
Total long-term investments
    119,898,783       23       125,297,622       24  
 
                       
 
                               
PROPERTY, PLANT AND EQUIPMENT (Notes 2, 12 and 24)
                               
Cost
                               
Buildings
    123,783,029       24       113,146,254       21  
Machinery and equipment
    674,274,132       129       632,130,632       119  
Office equipment
    10,337,123       2       9,597,292       2  
 
                       
 
    808,394,284       155       754,874,178       142  
Accumulated depreciation
    (610,117,838 )     (117 )     (538,829,638 )     (101 )
Advance payments and construction in progress
    18,320,302       4       10,960,925       2  
 
                       
 
                               
Net property, plant and equipment
    216,596,748       42       227,005,465       43  
 
                       
 
                               
INTANGIBLE ASSETS
                               
Goodwill (Note 2)
    1,567,756             1,567,756        
Deferred charges, net (Notes 2 and 13)
    5,453,680       1       6,466,929       1  
 
                       
 
                               
Total intangible assets
    7,021,436       1       8,034,685       1  
 
                       
 
                               
OTHER ASSETS
                               
Deferred income tax assets (Notes 2 and 17)
    6,973,800       1       7,504,585       1  
Refundable deposits
    2,754,296       1       2,666,676       1  
Others (Note 2)
    487,358             57,111        
 
                       
 
                               
Total other assets
    10,215,454       2       10,228,372       2  
 
                       
 
                               
TOTAL
  $ 522,060,363       100     $ 532,262,374       100  
 
                       
 
                               
LIABILITIES AND SHAREHOLDERS’ EQUITY
                               
 
                               
CURRENT LIABILITIES
                               
Financial liabilities at fair value through profit or loss
(Notes 2, 5 and 23)
  $           $ 314,630        
Accounts payable
    8,297,913       1       6,948,805       1  
Payables to related parties (Note 24)
    2,294,155             2,573,875       1  
Income tax payable (Notes 2 and 17)
    5,726,656       1       9,071,046       2  
Bonuses payable to employees and directors (Notes 2, 3 and 19)
    8,618,411       2       13,265,568       3  
Payables to contractors and equipment suppliers
    15,520,005       3       7,390,905       1  
Accrued expenses and other current liabilities (Note 15)
    8,675,196       2       11,153,920       2  
Current portion of bonds payable (Note 14)
                8,000,000       1  
 
                       
 
                               
Total current liabilities
    49,132,336       9       58,718,749       11  
 
                       
 
                               
LONG-TERM LIABILITIES
                               
Bonds payable (Note 14)
    4,500,000       1       4,500,000       1  
Other long-term payables (Note 15)
    579,600             1,071,214        
 
                       
 
                               
Total long-term liabilities
    5,079,600       1       5,571,214       1  
 
                       
 
                               
OTHER LIABILITIES
                               
Accrued pension cost (Notes 2 and 16)
    3,786,616       1       3,695,766       1  
Guarantee deposits (Note 27)
    1,104,704             1,618,686        
Deferred credits (Notes 2 and 24)
    71,809             582,206        
 
                       
 
                               
Total other liabilities
    4,963,129       1       5,896,658       1  
 
                       
 
                               
Total liabilities
    59,175,065       11       70,186,621       13  
 
                       
 
                               
CAPITAL STOCK — NT$10 PAR VALUE (Notes 19 and 21)
                               
Authorized: 28,050,000 thousand shares
                               
Issued:         25,900,662 thousand shares in 2009
                               
        25,904,166 thousand shares in 2008
    259,006,623       50       259,041,660       49  
 
                       
 
                               
CAPITAL SURPLUS (Notes 2 and 19)
    55,439,919       10       50,463,438       9  
 
                       
 
                               
RETAINED EARNINGS (Note 19)
                               
Appropriated as legal capital reserve
    77,317,710       15       67,324,393       13  
Appropriated as special capital reserve
                391,857        
Unappropriated earnings
    71,898,923       14       103,062,463       19  
 
                       
 
                               
 
    149,216,633       29       170,778,713       32  
 
                       
 
                               
OTHERS (Notes 2, 21 and 23)
                               
Cumulative translation adjustments
    (1,272,298 )           (1,584,029 )      
Unrealized gain/loss on financial instruments
    494,421             (124,039 )      
Treasury stock: 278,875 thousand shares
                (16,499,990 )     (3 )
 
                       
 
                               
 
    (777,877 )           (18,208,058 )     (3 )
 
                       
 
                               
Total shareholders’ equity
    462,885,298       89       462,075,753       87  
 
                       
 
                               
TOTAL
  $ 522,060,363       100     $ 532,262,374       100  
 
                       
The accompanying notes are an integral part of the financial statements.
(With Deloitte & Touche review report dated October 9, 2009)

- 3 -


 

Taiwan Semiconductor Manufacturing Company Limited
STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)
(Reviewed, Not Audited)
                                 
    2009     2008  
    Amount     %     Amount     %  
GROSS SALES (Notes 2 and 24)
  $ 206,462,258             $ 266,527,657          
 
                               
SALES RETURNS AND ALLOWANCES (Notes 2 and 8)
    9,715,735               5,586,784          
 
                           
 
                               
NET SALES
    196,746,523       100       260,940,873       100  
 
                               
COST OF SALES (Notes 3, 9, 18 and 24)
    113,516,518       58       142,456,953       55  
 
                       
 
                               
GROSS PROFIT
    83,230,005       42       118,483,920       45  
 
                               
UNREALIZED GROSS PROFIT FROM AFFILIATES (Note 2)
    128,152             164,705        
 
                       
 
                               
REALIZED GROSS PROFIT
    83,101,853       42       118,319,215       45  
 
                       
 
                               
OPERATING EXPENSES (Notes 18 and 24)
                               
Research and development
    13,686,108       7       15,359,634       5  
General and administrative
    7,246,047       3       7,829,752       3  
Marketing
    1,427,041       1       1,845,955       1  
 
                       
 
                               
Total operating expenses
    22,359,196       11       25,035,341       9  
 
                       
 
                               
INCOME FROM OPERATIONS
    60,742,657       31       93,283,874       36  
 
                       
 
                               
NON-OPERATING INCOME AND GAINS
                               
Interest income (Note 2)
    938,369       1       2,084,519       1  
Valuation gain on financial instruments, net (Notes 2, 5 and 23)
    576,910                    
Settlement income (Note 27)
    494,070             456,195        
Technical service income (Notes 24 and 27)
    279,644             521,366        
Gain on settlement and disposal of financial assets, net
(Notes 2 and 23)
    53,364             396,865        
Equity in earnings of equity method investees, net (Notes 2 and 10)
                1,306,897       1  
Foreign exchange gain, net (Note 2)
                146,196        
Others (Notes 2 and 24)
    355,793             651,716        
 
                       
 
                               
Total non-operating income and gains
    2,698,150       1       5,563,754       2  
 
                       
(Continued)

- 4 -


 

Taiwan Semiconductor Manufacturing Company Limited
STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)
(Reviewed, Not Audited)
                                 
    2009     2008  
    Amount     %     Amount     %  
NON-OPERATING EXPENSES AND LOSSES
                               
Equity in losses of equity method investees, net (Notes 2 and 10)
  $ 2,772,157       1     $        
Foreign exchange loss, net (Note 2)
    611,098                    
Interest expense
    108,276             266,250        
Valuation loss on financial instruments, net (Notes 2, 5 and 23)
                299,565        
Loss on idle assets (Note 2)
                210,477        
Provision for litigation loss
                99,126        
Others (Note 2)
    102,553             89,369        
 
                       
 
                               
Total non-operating expenses and losses
    3,594,084       1       964,787        
 
                       
 
                               
INCOME BEFORE INCOME TAX
    59,846,723       31       97,882,841       38  
 
                               
INCOME TAX EXPENSE (Notes 2 and 17)
    3,294,936       2       10,395,449       4  
 
                       
 
                               
NET INCOME
  $ 56,551,787       29     $ 87,487,392       34  
 
                       
                                 
    2009     2008  
    Before     After     Before     After  
    Income     Income     Income     Income  
    Tax     Tax     Tax     Tax  
EARNINGS PER SHARE (NT$, Note 22)
                               
Basic earnings per share
  $ 2.32     $ 2.19     $ 3.74     $ 3.35  
 
                       
Diluted earnings per share
  $ 2.30     $ 2.18     $ 3.72     $ 3.33  
 
                       
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 available-for-sale financial assets instead of treasury stock for the nine months ended September 30, 2008 (Notes 2 and 21):
         
    2008  
NET INCOME
  $ 87,589,671  
 
     
 
       
EARNINGS PER SHARE (NT$)
       
Basic earnings per share
  $ 3.35  
 
     
Diluted earnings per share
  $ 3.33  
 
     
The accompanying notes are an integral part of the financial statements.
     
(With Deloitte & Touche review report dated October 9, 2009)   (Concluded)

- 5 -


 

Taiwan Semiconductor Manufacturing Company Limited
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
(In Thousands of New Taiwan Dollars)
(Reviewed, Not Audited)
                 
    2009     2008  
CASH FLOWS FROM OPERATING ACTIVITIES
               
Net income
  $ 56,551,787     $ 87,487,392  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
    55,547,956       55,280,082  
Unrealized gross profit from affiliates
    128,152       164,705  
Amortization of premium/discount of financial assets
    (6,248 )     (75,112 )
Gain on disposal of available-for-sale financial assets, net
    (37,370 )     (397,535 )
Gain on held-to-maturity financial assets redeemed by the issuer
    (16,091 )      
Loss on disposal of financial assets carried at cost
    97       670  
Equity in losses (earnings) of equity method investees, net
    2,772,157       (1,306,897 )
Dividends received from equity method investees
    1,402,592       1,804,351  
Gain on disposal of property, plant and equipment and other assets, net
    (77,173 )     (236,265 )
Loss on idle assets
          210,477  
Deferred income tax
    (1,112,168 )     2,090,342  
Changes in operating assets and liabilities:
               
Decrease (increase) in:
               
Financial assets and liabilities at fair value through profit or loss
    (408,619 )     96,097  
Receivables from related parties
    (10,736,603 )     (554,268 )
Notes and accounts receivable
    (9,383,877 )     (4,751,532 )
Allowance for doubtful receivables
    (746 )     (2,829 )
Allowance for sales returns and others
    3,005,617       1,482,784  
Other receivables from related parties
    160,152       218,106  
Other financial assets
    (192,087 )     (233,274 )
Inventories
    (4,386,248 )     1,557,591  
Prepaid expenses and other current assets
    578,895       (346,833 )
Increase (decrease) in:
               
Accounts payable
    4,306,139       (2,537,013 )
Payables to related parties
    1,091,805       (425,755 )
Income tax payable
    (3,496,155 )     (1,917,918 )
Bonuses payable to employees and directors
    965,342       13,265,568  
Accrued expenses and other current liabilities
    641,917       31,466  
Accrued pension cost
    76,607       38,087  
Deferred credits
    (206,551 )     (71,809 )
 
           
 
               
Net cash provided by operating activities
    97,169,279       150,870,678  
 
           
 
               
CASH FLOWS FROM INVESTING ACTIVITIES
               
Acquisitions of:
               
Property, plant and equipment
    (44,452,382 )     (45,995,935 )
Available-for-sale financial assets
          (21,697,000 )
Held-to-maturity financial assets
    (9,405,409 )     (5,989,999 )
Investments accounted for using equity method
    (262,922 )     (380,569 )
Financial assets carried at cost
    (986 )     (1,884 )
(Continued)

- 6 -


 

Taiwan Semiconductor Manufacturing Company Limited
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
(In Thousands of New Taiwan Dollars)
(Reviewed, Not Audited)
                 
    2009     2008  
Proceeds from disposal or redemption of:
               
Available-for-sale financial assets
  $ 1,037,370     $ 24,638,222  
Held-to-maturity financial assets
    5,418,000       9,773,000  
Financial assets carried at cost
    18,828       1,111  
Property, plant and equipment and other assets
    68,579       2,033,745  
Proceeds from return of capital by investees
    20,201       2,460,122  
Cash from merger of subsidiaries
          270,650  
Increase in deferred charges
    (438,308 )     (2,243,684 )
Decrease (increase) in refundable deposits
    (34,559 )     74,862  
 
           
 
               
Net cash used in investing activities
    (48,031,588 )     (37,057,359 )
 
           
 
               
CASH FLOWS FROM FINANCING ACTIVITIES
               
Repayment of bonds payable
    (8,000,000 )      
Decrease in guarantee deposits
    (374,448 )     (621,991 )
Proceeds from exercise of employee stock options
    190,995       222,552  
Cash dividends
    (76,876,312 )     (76,881,311 )
Cash bonus paid to employees
          (3,939,883 )
Bonus to directors
          (176,890 )
Repurchase of treasury stock
          (33,480,997 )
 
           
 
               
Net cash used in financing activities
    (85,059,765 )     (114,878,520 )
 
           
 
               
NET DECREASE IN CASH AND CASH EQUIVALENTS
    (35,922,074 )     (1,065,201 )
 
               
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    138,208,360       72,422,102  
 
           
 
               
CASH AND CASH EQUIVALENTS, END OF PERIOD
  $ 102,286,286     $ 71,356,901  
 
           
 
               
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
               
Interest paid
  $ 351,803     $ 355,000  
 
           
Income tax paid
  $ 7,770,195     $ 10,228,005  
 
           
 
               
INVESTING AND FINANCING ACTIVITIES AFFECTING BOTH CASH AND NON-CASH ITEMS
               
Acquisition of property, plant, and equipment
  $ 52,075,005     $ 47,997,100  
Increase in payables to contractors and equipment suppliers
    (7,622,623 )     (2,001,165 )
 
           
Cash paid
  $ 44,452,382     $ 45,995,935  
 
           
 
               
Disposal of property, plant and equipment and other assets
  $ 60,488     $ 2,041,836  
Decrease (increase) in other receivables from related parties
    8,091       (8,091 )
 
           
Cash received
  $ 68,579     $ 2,033,745  
 
           
(Continued)

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Taiwan Semiconductor Manufacturing Company Limited
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
(In Thousands of New Taiwan Dollars)
(Reviewed, Not Audited)
                 
    2009     2008  
Repurchase of treasury stock
  $     $ 30,427,413  
Decrease in accrued expenses and other current liabilities
          3,053,584  
 
           
Cash paid
  $     $ 33,480,997  
 
           
 
               
NON-CASH FINANCING ACTIVITIES
               
Bonus to employees transferred to capital stock
  $ 7,494,988     $  
 
           
Current portion of bonds payable
  $     $ 8,000,000  
 
           
Current portion of other long-term payables (under accrued expenses and other current liabilities)
  $ 775,567     $ 1,901,323  
 
           
The accompanying notes are an integral part of the financial statements.
     
(With Deloitte & Touche review report dated October 9, 2009)   (Concluded)

- 8 -


 

Taiwan Semiconductor Manufacturing Company Limited
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
(Reviewed, Not Audited)
1.   GENERAL
 
    Taiwan Semiconductor Manufacturing Company Limited (the “Company” or “TSMC”), a Republic of China (R.O.C.) corporation, was incorporated on February 21, 1987. The Company is a dedicated foundry in the semiconductor industry which engaged mainly in the manufacturing, selling, packaging, testing and computer-aided designing of integrated circuits and other semiconductor devices and the manufacturing of masks. 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).
 
    As of September 30, 2009 and 2008, the Company had 20,566 and 20,702 employees, respectively.
 
2.   SUMMARY OF 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 acquired with maturities of less than three months from the date of purchase are classified as cash equivalents. The carrying amount approximates fair value.

- 9 -


 

    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
 
    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.
 
    The fair value of structured time deposits is estimated using valuation techniques. Fair value of open-end mutual funds is determined using the net assets value at the end of the period. For debt securities, fair value is determined using the average of bid and asked prices at the end of the period.
 
    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
 
    Debt 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 the 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.

- 10 -


 

    Revenue Recognition and Allowance for Sales Returns and Others
 
    The Company recognizes revenue when evidence of an arrangement exists, the rewards of ownership and significant risk of the goods has been transferred to the buyer, price is fixed or determinable, and collectibility is reasonably assured. Provisions for estimated sales returns and others are 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 recorded at standard cost and adjusted to approximate weighted-average cost on the balance sheet date.
 
    Prior to January 1, 2009, inventories were stated at the lower of cost or market value. Any write-down was made on a total-inventory basis. Market value represented replacement cost for raw materials, supplies and spare parts and net realizable value for work in process and finished goods.
 
    As stated in note 3, effective January 1, 2009, inventories are stated at the lower of cost or net realizable value. Inventory write-downs are made on an item-by-item basis, except where it may be appropriate to group similar or related items. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and necessary selling costs.
 
    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. 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. 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 (except for financial assets other than investments accounted for using the equity method and deferred income tax assets). 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.

- 11 -


 

    Gains or losses on sales from the Company to equity method investees are deferred in proportion to the Company’s ownership percentages 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 over each of which the Company has control are deferred in proportion to the Company’s weighted-average ownership percentage in the investee which records gains or losses. In transactions between equity method investees over either or both of which the Company has no control, gains or losses on sales are deferred in proportion to the multiplication of the Company’s weighted-average ownership percentages in the investees. Such gains or losses are recorded until they are realized through transactions with third parties.
 
    If an investee’s functional currency is a foreign currency, differences will result from the translation of the investee’s financial statements into the reporting currency of the Company. Such differences are charged or credited to cumulative translation adjustments, 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.
 
    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.
 
    Property, Plant and Equipment, Assets Leased to Others and Idle Assets
 
    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 and assets leased to others, 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.
 
    When property, plant and equipment are determined to be idle or useless, they are transferred to idle assets at the lower of the net realizable value or carrying amount. Depreciation on the idle assets is provided continuously, and the idle assets are tested for impairment on a periodical basis.

- 12 -


 

    Intangible Assets
 
    Goodwill represents the excess of the consideration paid for acquisition over the fair value of identifiable net assets acquired. Goodwill is no longer amortized and instead is tested for impairment annually. If an event occurs or circumstances change which indicate 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 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.
 
    Expenditures related to research activities and those related to development activities that do not meet the criteria for capitalization are charged to expenses 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 an inter-period allocation for its income tax whereby 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.
 
    Stock-based Compensation
 
    Employee stock options that were granted or modified in the period from January 1, 2004 to December 31, 2007 are accounted for by the interpretations issued by the Accounting Research and Development Foundation of the Republic of China. The Company adopted the intrinsic value method and any compensation cost determined using this method is recognized in earnings over the employee vesting period. Employee stock option plans that were granted or modified after December 31, 2007 are accounted for using fair value method in accordance with Statement of Financial Accounting Standards No. 39, “Accounting for Share-based Payment.” The Company did not grant or modify any employee stock options since January 1, 2008.

- 13 -


 

    Bonuses to Employees and Directors
 
    Effective January 1, 2008, the Company adopted Interpretation 2007-052, “Accounting for Bonuses to Employees, Directors and Supervisors,” which requires companies to record bonuses paid to employees and directors as an expense rather than as an appropriation of earnings.
 
    Treasury Stock
 
    Treasury stock is stated at cost and shown as a deduction in shareholders’ equity. When the Company retires treasury stock, the treasury stock account is reduced and the common stock as well as the capital surplus — additional paid-in capital are reversed on a pro rata basis. When the book value of the treasury stock exceeds the sum of the par value and additional paid-in capital, the difference is charged to capital surplus — treasury stock transactions and to retained earnings for any remaining amount.
 
    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 other than derivative contracts 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.
 
3.   ACCOUNTING CHANGES
 
    Effective January 1, 2009, the Company adopted the newly revised SFAS No. 10, “Accounting for Inventories.” The main revisions are (1) inventories are stated at the lower of cost or net realizable value, and inventories are written down to net realizable value item-by-item except when the grouping of similar or related items is appropriate; (2) unallocated overheads are recognized as expenses in the period in which they are incurred; and (3) abnormal cost, write-downs of inventories and any reversal of write-downs are recorded as cost of sales for the period. Such changes in accounting principle did not have significant effect on the Company’s financial statements for the nine months ended September 30, 2009.
 
    Effective January 1, 2008, the Company adopted Interpretation 2007-052, “Accounting for Bonuses to Employees, Directors and Supervisors,” issued in March 2007 by the ARDF, which requires companies to record bonuses paid to employees, directors and supervisors as an expense rather than as an appropriation of earnings. The adoption of this interpretation resulted in a decrease in net income and earnings per share (after income tax and retroactively adjusted for the issuance of stock dividend) of NT$11,055,454 thousand and NT$0.42, respectively, for the nine months ended September 30, 2008.
 
    Effective January 1, 2008, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 39, “Accounting for Share-based Payment,” which requires companies to record share-based payment transactions in the financial statements at fair value. Such a change in accounting principle did not have any effect on the Company’s financial statements as of and for the nine months ended September 30, 2008.

- 14 -


 

4.   CASH AND CASH EQUIVALENTS
                 
    September 30  
    2009     2008  
Cash and deposits in banks
  $ 91,703,367     $ 64,366,513  
Repurchase agreements collateralized by government bonds
    10,582,919       6,990,388  
 
           
 
               
 
  $ 102,286,286     $ 71,356,901  
 
           
5.   FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
                 
    September 30  
    2009     2008  
Trading — financial assets
               
 
               
Forward exchange contracts
  $     $ 12,970  
Cross currency swap contracts
    367,461        
 
           
 
               
 
  $ 367,461     $ 12,970  
 
           
Trading — financial liabilities
               
 
               
Forward exchange contracts
  $     $ 136,050  
Cross currency swap contracts
          178,580  
 
           
 
               
 
  $     $ 314,630  
 
           
The Company entered into derivative contracts during the nine months ended September 30, 2009 and 2008 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. Therefore, the Company did not apply hedge accounting treatment for its derivative contracts.
As of September 30, 2009, no forward exchange contracts was outstanding. As of September 30, 2008, outstanding forward exchange contracts consisted of the following:
         
        Contract Amount
    Maturity Date   (in Thousands)
Sell EUR/buy NT$
  October 2008   EUR15,000/NT$691,465
Sell EUR/buy US$
  October 2008   EUR7,000/US$10,175
Sell US$/buy NT$
  October 2008 to December 2008   US$565,000/NT$18,054,010
Outstanding cross currency swap contracts consisted of the following:
                         
            Range of   Range of
    Contract Amount   Interest Rates   Interest Rates
      Maturity Date   (in Thousands)   Paid   Received
September 30, 2009
                       
 
                       
October 2009 to December 2009
  US$ 950,000/NT$30,935,532       0.30%-1.00 %     0.00%-0.61 %
 
                       
September 30, 2008
                       
 
                       
October 2008 to November 2008
  US$ 536,000/NT$17,080,480       2.48%-14.00 %     0.00%-2.40 %

- 15 -


 

For the nine months ended September 30, 2009 and 2008, valuation on financial instruments arising from derivative financial instruments was a net gain of NT$576,910 thousand and a net loss of NT$299,565 thousand, respectively.
6.   AVAILABLE-FOR-SALE FINANCIAL ASSETS
                 
    September 30  
    2009     2008  
Corporate bonds
  $ 1,033,473     $ 2,790,337  
Open-end mutual funds
          14,146,296  
Structured time deposits
          4,003,970  
 
           
 
    1,033,473       20,940,603  
Current portion
          (16,936,633 )
 
           
 
               
 
  $ 1,033,473     $ 4,003,970  
 
           
Structured time deposits categorized as available-for-sale financial assets consisted of the following:
                                 
    Principal     Carrying              
    Amount     Amount     Interest Rate     Maturity Date  
September 30, 2008
                               
 
                               
Callable deposits Domestic deposits
  $ 4,000,000     $ 4,003,970       2.71%-2.80 %   September 2011
 
                           
The interest rate of the callable deposits was pre-determined by the Company and the banks.
7.   HELD-TO-MATURITY FINANCIAL ASSETS
                 
    September 30  
    2009     2008  
Corporate bonds
  $ 12,748,902     $ 10,778,406  
Structured time deposits
    6,000,000       3,500,000  
Government bonds
    2,904,170       2,200,740  
 
           
 
    21,653,072       16,479,146  
Current portion
    (8,374,389 )     (5,063,096 )
 
           
 
               
 
  $ 13,278,683     $ 11,416,050  
 
           
     Structured time deposits categorized as held-to-maturity financial assets consisted of the following:
                                 
                    Range of        
    Principal     Interest     Interest        
    Amount     Receivable     Rates     Maturity Date  
September 30, 2009
                               
 
                               
Callable domestic deposits
  $ 6,000,000     $ 3,404       0.67%-0.95 %   March 2011 to August 2011
 
                           
 
                               
September 30, 2008
                               
 
                               
Callable domestic deposits
                               
 
  $ 3,500,000     $ 12,287       1.83%-2.90 %   October 2008 to September 2011
 
                           

- 16 -


 

8.   ALLOWANCES FOR DOUBTFUL RECEIVABLES, SALES RETURNS AND OTHERS
     Movements of the allowance for doubtful receivables were as follows:
                 
    Nine Months Ended  
    September 30  
    2009     2008  
Balance, beginning of period
  $ 436,746     $ 688,972  
Provision
    243,061        
Write-off
    (243,807 )     (2,829 )
 
           
 
               
Balance, end of period
  $ 436,000     $ 686,143  
 
           
     Movements of the allowance for sales returns and others were as follows:
                 
    Nine Months Ended  
    September 30  
    2009     2008  
Balance, beginning of period
  $ 5,868,582     $ 3,856,685  
Provision
    9,715,735       5,586,784  
Write-off
    (6,710,118 )     (4,104,000 )
 
           
 
               
Balance, end of period
  $ 8,874,199     $ 5,339,469  
 
           
9.   INVENTORIES
                 
    September 30  
    2009     2008  
Finished goods
  $ 2,013,527     $ 4,054,388  
Work in process
    13,654,961       13,966,641  
Raw materials
    907,655       863,378  
Supplies and spare parts
    618,041       545,144  
 
           
 
               
 
  $ 17,194,184     $ 19,429,551  
 
           
Write-down of inventories to net realizable value in the amount of NT$313,175 thousand and NT$448,520 thousand, respectively, were included in the cost of sales for sales for the nine months ended September 30, 2009 and 2008.

- 17 -


 

10.   INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD
                                 
    September 30  
    2009     2008  
            % of             % of  
    Carrying     Owner-     Carrying     Owner-  
    Amount     ship     Amount     ship  
TSMC Global Ltd. (TSMC Global)
  $ 45,492,790       100     $ 44,368,847       100  
TSMC Partners, Ltd. (TSMC Partners)
    32,627,788       100       3,667,050       100  
Vanguard International Semiconductor Corporation (VIS)
    9,410,696       37       10,151,846       37  
Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)
    5,899,305       39       6,761,630       39  
TSMC China Company Limited (TSMC China)
    3,606,012       100       7,308,098       100  
TSMC North America
    2,686,753       100       2,390,713       100  
Xintec Inc. (Xintec)
    1,372,699       41       1,445,512       42  
VentureTech Alliance Fund III, L.P. (VTAF III)
    1,341,398       98       1,208,584       98  
VentureTech Alliance Fund II, L.P. (VTAF II)
    1,059,820       98       1,016,435       98  
Global UniChip Corporation (GUC)
    960,442       36       891,783       36  
Emerging Alliance Fund, L.P. (Emerging Alliance)
    319,571       99       418,709       99  
Taiwan Semiconductor Manufacturing Company Europe B.V. (TSMC Europe)
    152,965       100       116,122       100  
TSMC Japan Limited (TSMC Japan)
    136,710       100       116,484       100  
TSMC Korea Limited (TSMC Korea)
    18,115       100       14,940       100  
TSMC International Investment Ltd. (TSMC International)
                29,252,586       100  
 
                           
 
                               
 
  $ 105,085,064             $ 109,129,339          
 
                           
    TSMC Partners and TSMC International were both 100% owned subsidiaries of the Company. To simplify the organization structure of investment, TSMC Partners merged TSMC International in June 2009.
 
    Chi Cherng and Hsin Ruey, both 100% owned subsidiaries of the Company, were engaged in investing activities. To simplify the organization structure of investment, the Company merged Chi Cherng and Hsin Ruey in the third quarter of 2008.
 
    For the nine months ended September 30, 2009 and 2008, equity in earnings/losses of equity method investees was a net loss of NT$2,772,157 thousand and a net gain of NT$1,306,897 thousand, respectively. Related equity in earnings/losses of equity method investees were determined based on the reviewed financial statements, except those of Emerging Alliance, TSMC Japan, TSMC Europe and TSMC Korea for the nine months ended September 30, 2009. The Company believes that, had Emerging Alliance, TSMC Japan, TSMC Europe and TSMC Korea’s financial statements been reviewed, any adjustments arising would have had no material effect on the Company’s financial statements.
 
    As of September 30, 2009 and 2008, fair value of publicly traded stocks in investments accounted for using equity method (VIS and GUC) was NT$15,891,684 thousand and NT$15,446,393 thousand, respectively.

- 18 -


 

    Movements of the difference between the cost of investments and the Company’s share in investees’ net assets allocated to depreciable assets were as follows:
                 
    Nine Months Ended  
    September 30  
    2009     2008  
Balance, beginning of period
  $ 2,053,253     $ 2,677,388  
Amortization
    (468,101 )     (468,101 )
 
           
 
               
Balance, end of period
  $ 1,585,152     $ 2,209,287  
 
           
     Movements of the aforementioned difference allocated to goodwill were as follows:
                 
    Nine Months Ended  
    September 30  
    2009     2008  
Balance, beginning of period
  $ 1,061,885     $ 987,349  
From merger of subsidiaries
          74,536  
 
           
 
               
Balance, end of period
  $ 1,061,885     $ 1,061,885  
 
           
11.   FINANCIAL ASSETS CARRIED AT COST
                 
    September 30  
    2009     2008  
Non-publicly traded stocks
  $ 338,584     $ 364,913  
Mutual Funds
    162,979       383,350  
 
           
 
               
 
  $ 501,563     $ 748,263  
 
           
12.   PROPERTY, PLANT AND EQUIPMENT
                                         
    Nine Months Ended September 30, 2009  
    Balance,                                
    Beginning of                             Balance,  
    Period     Additions     Disposals     Reclassification     End of Period  
Cost
                                       
Buildings
  $ 114,014,588     $ 9,778,198     $ (9,823 )   $ 66     $ 123,783,029  
Machinery and equipment
    635,008,261       40,995,876       (1,732,570 )     2,565       674,274,132  
Office equipment
    9,748,869       738,667       (150,347 )     (66 )     10,337,123  
 
                             
 
    758,771,718     $ 51,512,741     $ (1,892,740 )   $ 2,565       808,394,284  
 
                             
 
                                       
Accumulated depreciation
                                       
Buildings
    65,351,514     $ 6,067,051     $ (9,823 )   $ 66       71,408,808  
Machinery and equipment
    484,046,160       47,404,997       (1,129,563 )     2,565       530,324,159  
Office equipment
    7,849,580       685,519       (150,162 )     (66 )     8,384,871  
 
                             
 
    557,247,254     $ 54,157,567     $ (1,289,548 )   $ 2,565       610,117,838  
 
                             
 
                                       
Advance payments and construction in progress
    17,758,038     $ 562,264     $     $       18,320,302  
 
                             
 
                                       
 
  $ 219,282,502                             $ 216,596,748  
 
                                   

- 19 -


 

                                         
    Nine Months Ended September 30, 2008  
    Balance,                              
    Beginning of     Additions                 Balance,  
    Period     (Deductions)     Disposals     Reclassification     End of Period  
Cost
                                       
Buildings
  $ 101,907,892     $ 11,247,197     $ (8,524 )   $ (311 )   $ 113,146,254  
Machinery and equipment
    589,131,625       46,276,182       (3,143,000 )     (134,175 )     632,130,632  
Office equipment
    9,167,107       595,749       (165,621 )     57       9,597,292  
 
                             
 
    700,206,624     $ 58,119,128     $ (3,317,145 )   $ (134,429 )     754,874,178  
 
                             
 
                                       
Accumulated depreciation
                                       
Buildings
    57,349,828     $ 5,901,060     $ (8,524 )   $ (4 )     63,242,360  
Machinery and equipment
    422,278,071       46,820,532       (1,025,129 )     (119,347 )     467,954,127  
Office equipment
    7,097,120       701,627       (165,622 )     26       7,633,151  
 
                             
 
    486,725,019     $ 53,423,219     $ (1,199,275 )   $ (119,325 )     538,829,638  
 
                             
Advance payments and construction in progress
    21,082,953     $ (10,122,028 )   $     $       10,960,925  
 
                             
 
                                       
 
  $ 234,564,558                             $ 227,005,465  
 
                                   
     No interest was capitalized during the nine months ended September 30, 2009 and 2008.
13.   DEFERRED CHARGES, NET
                                                 
    Nine Months Ended September 30, 2009  
    Balance,                                        
    Beginning of                                     Balance,  
    Period     Additions     Amortization     Disposals     Reclassification     End of Period  
Technology license fees
  $ 3,786,251     $     $ (614,959 )   $     $     $ 3,171,292  
Software and system design costs
    1,559,857       438,308       (569,672 )                 1,428,493  
Patent and others
    1,055,353             (201,458 )                 853,895  
 
                                   
 
 
  $ 6,401,461     $ 438,308     $ (1,386,089 )   $     $     $ 5,453,680  
 
                                   
                                                 
    Nine Months Ended September 30, 2008  
    Balance,                                        
    Beginning of                                     Balance,  
    Period     Additions     Amortization     Disposals     Reclassification     End of Period  
Technology license fees
  $ 5,349,937     $     $ (1,172,765 )   $     $     $ 4,177,172  
Software and system design costs
    1,309,272       670,031       (509,931 )     (14,279 )     59       1,455,152  
Patent and others
    513,204       454,125       (132,724 )                 834,605  
 
                                   
 
                                               
 
  $ 7,172,413     $ 1,124,156     $ (1,815,420 )   $ (14,279 )   $ 59     $ 6,466,929  
 
                                   
14.   BONDS PAYABLE
                 
    September 30  
    2009     2008  
Domestic unsecured bonds:
               
Issued in January 2002 and repayable in January 2009 and 2012 in two installments, 2.75% and 3.00% interest payable annually, respectively
  $ 4,500,000     $ 12,500,000  
Current portion
          (8,000,000 )
 
           
 
               
 
  $ 4,500,000     $ 4,500,000  
 
           

- 20 -


 

15.   OTHER LONG-TERM PAYABLES
 
    Most of the Company’s long-term payables resulted from license agreements for certain semiconductor-related patents. As of September 30, 2009, future payments for other long-term payables were as follows:
         
Year of Payment   Amount  
2009 (4th quarter)
  $ 442,619  
2010
    493,948  
2011
    418,600  
 
     
 
    1,355,167  
Current portion (classified under accrued expenses and other current liabilities)
    (775,567 )
 
     
 
       
 
  $ 579,600  
 
     
16.   PENSION PLANS
 
    The pension mechanism under the Labor Pension 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 and recognized pension costs of NT$441,429 thousand and NT$495,468 thousand for the nine months ended September 30, 2009 and 2008, respectively.
 
    The Company has a defined benefit plan under the Labor Standards Law that provides benefits based on an employee’s length of service 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 Labor Pension Fund Supervisory Committee (the Committee) and deposited in the Committee’s name in the Bank of Taiwan. The Company recognized pension costs of NT$216,482 thousand and NT$201,741 thousand for the nine months ended September 30, 2009 and 2008, respectively.
 
    Movements of the Fund and accrued pension cost under the defined benefit plan were summarized as follows:
                 
    Nine Months Ended  
    September 30  
    2009     2008  
The Fund
               
Balance, beginning of period
  $ 2,389,519     $ 2,145,010  
Contributions
    143,540       157,390  
Interest
    52,445       71,236  
Payments
    (37,801 )     (28,990 )
 
           
 
               
Balance, end of period
  $ 2,547,703     $ 2,344,646  
 
           
 
               
Accrued pension cost
               
Balance, beginning of period
  $ 3,710,009     $ 3,657,679  
Accruals
    76,607       38,087  
 
           
 
               
Balance, end of period
  $ 3,786,616     $ 3,695,766  
 
           

- 21 -


 

17.   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:
                 
    Nine Months Ended  
    September 30  
    2009     2008  
Income tax expense based on “income before income tax” at statutory rate (25%)
  $ 14,961,671     $ 24,470,700  
Tax effect of the following:
               
Tax-exempt income
    (6,678,202 )     (7,412,660 )
Temporary and permanent differences
    2,854,793       778,663  
Others
    69,174       41,235  
Income tax credits used
    (5,603,718 )     (8,938,969 )
 
           
 
               
Income tax currently payable
  $ 5,603,718     $ 8,938,969  
 
           
 
               
b. Income tax expense consisted of the following:
               
 
               
Income tax currently payable
  $ 5,603,718     $ 8,938,969  
Income tax adjustments on prior years
    (1,155,113 )     (707,255 )
Other income tax adjustments
    (41,501 )     73,393  
Net change in deferred income tax assets
               
Investment tax credits
    (3,159,546 )     3,227,924  
Temporary differences
    143,079       (326,907 )
Valuation allowance
    1,904,299       (810,675 )
 
           
 
               
Income tax expense
  $ 3,294,936     $ 10,395,449  
 
           
c.   Net deferred income tax assets consisted of the following:
                 
    September 30  
    2009     2008  
Current deferred income tax assets
               
Investment tax credits
  $ 3,442,000     $ 2,915,006  
Temporary differences
    845,040        
 
           
 
               
 
  $ 4,287,040     $ 2,915,006  
 
           
 
Noncurrent deferred income tax assets
               
Investment tax credits
  $ 13,329,764     $ 8,693,825  
Temporary differences
    1,947,981       1,470,218  
Valuation allowance
    (8,303,945 )     (2,659,458 )
 
           
 
               
 
  $ 6,973,800     $ 7,504,585  
 
           
    In May 2009, the amendment of Article 5 of the Income Tax Law of the Republic of China announced that the income tax rate of profit-seeking enterprises will be reduced from 25% to 20%, and will be effective starting in 2010. The Company recalculated its deferred tax assets and liabilities in accordance with the amended Article and adjusted the resulting difference as an income tax benefit and expense.

- 22 -


 

d.   Integrated income tax information:
 
    The balance of the imputation credit account as of September 30, 2009 and 2008 was NT$214,826 thousand and NT$1,602,560 thousand, respectively.
 
    The estimated and actual creditable ratio for distribution of earnings of 2008 and 2007 was 9.10% and 9.83%, 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 September 30, 2009, 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
  $ 500,000     $ 500,000       2009  
              1,216,551             2010  
 
            4,592,615       2,892,378       2011  
 
            3,142,459       3,142,459       2012  
 
            2,049,992       2,049,992       2013  
 
                           
 
 
          $ 11,501,617     $ 8,584,829          
 
                           
 
Statute for Upgrading Industries
 
Research and development expenditures
  $ 2,663,784     $       2010  
      2,687,841       2,687,841       2011  
 
            2,688,201       2,688,201       2012  
 
            2,580,384       2,580,384       2013  
 
                           
 
 
          $ 10,620,210     $ 7,956,426          
 
                           
 
Statute for Upgrading Industries
 
Personnel training expenditures
  $ 23,146     $       2010  
            36,568       36,568       2011  
 
            27,036       27,036       2012  
 
                           
 
 
          $ 86,750     $ 63,604          
 
                           
 
Statute for Upgrading Industries
 
Investments in important technology-based enterprises
  $ 87,101     $ 87,101       2009  
      79,804       79,804       2010  
 
                           
 
 
          $ 166,905     $ 166,905          
 
                           
g.   The profits generated from the following projects are exempt from income tax for a five-year period:
     
    Tax-exemption Period
Construction of Fab 14 — Module A
  2006 to 2010
Construction of Fab 12 — Module B and expansion of Fab 14 — Module A
  2007 to 2011
Construction of Fab 14 — Module B and expansion of Fab 12 and others
  2008 to 2012
h.   The tax authorities have examined income tax returns of the Company through 2006. All investment tax credit adjustments assessed by the tax authorities have been recognized accordingly.

- 23 -


 

18. LABOR COST, DEPRECIATION AND AMORTIZATION
                         
    Nine Months Ended September 30, 2009  
            Classified as        
    Classified as     Operating        
    Cost of Sales     Expenses     Total  
Labor cost
                       
Salary and bonus
  $ 11,010,069     $ 8,299,658     $ 19,309,727  
Labor and health insurance
    458,611       278,310       736,921  
Pension
    409,387       248,524       657,911  
Meal
    305,276       132,322       437,598  
Welfare
    107,465       67,310       174,775  
Others
    79,471       14,697       94,168  
 
                 
 
                       
 
  $ 12,370,279     $ 9,040,821     $ 21,411,100  
 
                 
 
                       
Depreciation
  $ 51,354,934     $ 2,790,434     $ 54,145,368  
 
                 
Amortization
  $ 897,733     $ 488,356     $ 1,386,089  
 
                 
                         
    Nine Months Ended September 30, 2008  
            Classified as        
    Classified as     Operating        
    Cost of Sales     Expenses     Total  
Labor cost
                       
Salary and bonus
  $ 14,026,566     $ 10,006,675     $ 24,033,241  
Labor and health insurance
    506,692       285,693       792,385  
Pension
    445,831       251,378       697,209  
Meal
    332,621       134,159       466,780  
Welfare
    141,981       83,180       225,161  
Others
    140,675       11,378       152,053  
 
                 
 
                       
 
  $ 15,594,366     $ 10,772,463     $ 26,366,829  
 
                 
 
                       
Depreciation
  $ 50,585,293     $ 2,825,532     $ 53,410,825  
 
                 
Amortization
  $ 1,332,761     $ 482,659     $ 1,815,420  
 
                 
19. SHAREHOLDERS’ EQUITY
As of September 30, 2009, 1,097,513 thousand ADSs of the Company were traded on the NYSE. The number of common shares represented by the ADSs was 5,487,565 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. In addition, the capital surplus from long-term investments may not be used for any purpose.

- 24 -


 

Capital surplus consisted of the following:
                 
    September 30  
    2009     2008  
Additional paid-in capital
  $ 23,408,710     $ 18,154,782  
From merger
    22,805,390       23,053,576  
From convertible bonds
    8,893,190       8,989,973  
From long-term investments
    332,574       265,052  
Donations
    55       55  
 
           
 
               
 
  $ 55,439,919     $ 50,463,438  
 
           
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 equals 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 subject to shareholders’ approval in the following year.
The Company has recorded bonuses to employees and directors with an estimate based on historical experience with a charge to earnings of approximately 15% of net income. If the actual amounts subsequently resolved by the shareholders differ from the estimated amounts, the differences are recorded in the year of shareholders’ resolution as a change in accounting estimate. If stock bonuses are resolved to be distributed to employees, the number of shares is determined by dividing the amount of bonuses by the closing price (after considering the effect of dividends) of the shares on the day preceding the shareholders’ meeting.
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.

- 25 -


 

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 2008 and 2007 had been approved in the shareholders’ meetings held on June 10, 2009 and June 13, 2008, 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 2008     Year 2007     Year 2008     Year 2007  
Legal capital reserve
  $ 9,993,317     $ 10,917,709                  
Special capital reserve
    (391,857 )     (237,693 )                
Bonus to employees — in cash
          3,939,883                  
Bonus to employees — in stock
          3,939,883                  
Cash dividends to shareholders
    76,876,312       76,881,311     $ 3.00     $ 3.00  
Stock dividends to shareholders
    512,509       512,542       0.02       0.02  
Bonus to directors
          176,890                  
 
                           
 
                               
 
  $ 86,990,281     $ 96,130,525                  
 
                           
Bonus to employees that have been paid in cash and in stock as well as bonus to directors in the amounts of NT$7,494,988 thousand, NT$7,494,988 thousand and NT$158,080 thousand for 2008, respectively, had been approved in the shareholders’ meeting held on June 10, 2009. The employee stock bonus of 141,870 thousand shares was determined by the closing price of the Company’s common shares (after considering the effect of dividends) of the day immediately preceding the shareholders’ meeting, which was NT$52.83. The resolved amounts of the bonus to employees and to directors were consistent with the resolutions of meeting of the Board of Directors held on February 10, 2009 and same amount had been charged against earnings of 2008.
The shareholders’ meeting held on June 10, 2009 also resolved to distribute stock dividends out of capital surplus, and stock dividends to shareholders as well as bonuses to employees to be paid in stock in the amount of NT$768,763 thousand, NT$512,509 thousand and NT$7,494,988 thousand, respectively. The aforementioned capital increase had taken effect on July 21, 2009.
The information about appropriations of the bonus to employees and directors 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.

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20. STOCK-BASED COMPENSATION PLANS
The Company’s Employee Stock Option Plans, consisting of 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 equal to the closing price of the Company’s common shares listed on the TSE on the grant date.
Options of the aforementioned plans that had never been granted or had been granted but subsequently canceled had expired as of September 30, 2009.
Information about outstanding options for the nine months ended September 30, 2009 and 2008 was as follows:
                 
            Weighted-
            average
    Number of   Exercise
    Options   Price
    (in Thousands)   (NT$)
Nine months ended September 30, 2009
               
 
               
Balance, beginning of period
    36,234     $ 34.0  
Options granted
    175       34.0  
Options exercised
    (5,228 )     36.5  
Options canceled
    (321 )     46.5  
 
               
 
               
Balance, end of period
    30,860       33.5  
 
               
 
               
Nine months ended September 30, 2008
               
 
               
Balance, beginning of period
    41,875     $ 35.6  
Options granted
    767       35.2  
Options exercised
    (5,880 )     37.8  
Options canceled
    (302 )     46.3  
 
               
 
               
Balance, end of period
    36,460       35.3  
 
               
The number of outstanding options and exercise prices have been adjusted to reflect the distribution of earnings in accordance with the plans. The options granted were the result of the aforementioned adjustment.

- 27 -


 

As of September 30, 2009, information about outstanding options was as follows:
                         
    Options Outstanding  
            Weighted-     Weighted-  
            average     average  
Range of   Number of     Remaining     Exercise  
Exercise   Options (in     Contractual     Price  
Price (NT$)   Thousands)     Life (Years)     (NT$)  
$22.8- $32.0
    22,685       3.41     $ 29.2  
38.0-   50.1
    8,175       5.14       45.5  
 
                     
 
                       
 
    30,860               33.5  
 
                     
As of September 30, 2009, all of the above outstanding options were exercisable.
No compensation cost was recognized under the intrinsic value method for the nine months ended September 30, 2009 and 2008. Had the Company used the fair value based method to evaluate the options using the Black-Scholes model, the assumptions and pro forma results of the Company for the nine months ended September 30, 2009 and 2008 would have been as follows:
                 
    Nine Months Ended
    September 30
    2009   2008
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
  $ 56,551,787     $ 87,487,392  
Pro forma net income
    56,173,879       87,482,618  
 
               
Earnings per share (EPS) — after income tax (NT$):
               
Basic EPS as reported
  $ 2.19     $ 3.35  
Pro forma basic EPS
    2.18       3.35  
Diluted EPS as reported
    2.18       3.33  
Pro forma diluted EPS
    2.16       3.33  
21. TREASURY STOCK
                                         
                            (Shares in Thousands)  
    Beginning           Stock           Ending
    Shares   Addition   Dividends   Retirement   Shares
Nine months ended September 30, 2008
                                       
Parent company stock held by subsidiaries
    34,096             171       34,267        
Repurchase under share buyback plan
    800,000       495,549             1,016,674       278,875  
 
                                       
 
                                       
 
    834,096       495,549       171       1,050,941       278,875  
 
                                       

- 28 -


 

As of September 30, 2008, the book value of the treasury stock was NT$16,499,990 thousand and the market value was NT$14,640,938 thousand. The Company’s common shares held by subsidiaries were treated as treasury stock and the holders are entitled to the rights of shareholders, with the exception of voting rights.
The Company held a meeting of the Board of Directors on November 13, 2007 and approved a share buyback plan to repurchase the Company’s common shares up to 800,000 thousand shares listed on the TSE during the period from November 14, 2007 to January 13, 2008 for the buyback price in the range from NT$43.2 to NT$94.2. The Company had repurchased 800,000 thousand common shares. All the treasury stock repurchased under this share buyback plan was retired in February 2008.
The Company held a meeting of the Board of Directors on May 13, 2008 and approved a share buyback plan to repurchase the Company’s common shares up to 500,000 thousand shares listed on the TSE during the period from May 14, 2008 to July 13, 2008 for the buyback price in the range from NT$48.25 to NT$100.50. The Company had repurchased 216,674 thousand common shares. All the treasury stock repurchased under this share buyback plan was retired in August 2008.
The Company held a meeting of the Board of Directors on August 12, 2008 and approved a share buyback plan to repurchase the Company’s common shares up to 283,000 thousand shares listed on the TSE during the period from August 13, 2008 to October 12, 2008 for the buyback price in the range from NT$42.85 to NT$86.20. The Company had repurchased 278,875 thousand common shares. All the treasury stock repurchased under this share buyback plan was retired in November 2008.
As discussed in Note 10, the Company merged Chi Cherng and Hsin Ruey in the third quarter of 2008. The Company’s common shares held by Chi Cherng and Hsin Ruey in the number of 34,267 thousand shares were retired in August 2008.
22. EARNINGS PER SHARE
      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  
Nine months ended September 30, 2009
                                       
 
                                       
Basic EPS
                                       
Earnings available to common shareholders
  $ 59,846,723     $ 56,551,787       25,813,614     $ 2.32     $ 2.19  
 
                                   
Effect of dilutive potential common shares
Bonus to employees
                153,069                  
Stock options
                14,459                  
 
                                 
 
                                       
Diluted EPS
                                       
Earnings available to common shareholders (including effect of dilutive potential common shares)
  $ 59,846,723     $ 56,551,787       25,981,142     $ 2.30     $ 2.18  
 
                             
 
                                       
Nine months ended September 30, 2008
                                       
 
                                       
Basic EPS
                                       
Earnings available to common shareholders
  $ 97,882,841     $ 87,487,392       26,139,848     $ 3.74     $ 3.35  
 
                                   
Effect of dilutive potential common shares
Bonus to employees
                133,161                  
Stock options
                17,001                  
 
                                 
 
                                       
Diluted EPS
                                       
Earnings available to common shareholders (including effect of dilutive potential common shares)
  $ 97,882,841     $ 87,487,392       26,290,010     $ 3.72     $ 3.33  
 
                             

- 29 -


 

As discussed in Note 3, effective January 1, 2008, the Company adopted Interpretation 2007-052 that requires companies to record bonuses paid to employees as an expense rather than as an appropriation of earnings. If the Company may settle the obligation by cash, by issuing share, or in combination of both cash and shares, potential shares from bonus to employees which will be settled in shares should be included in the weighted average number of shares outstanding in calculation of diluted EPS, if the shares have a dilutive effect. The number of shares is estimated by dividing the amount of bonus to employees by the closing price (after considering the dilutive effect of dividends) of the common shares on the balance sheet date. Such dilutive effect of the potential shares needs to be included in the calculation of diluted EPS until the shares of employee bonus are resolved in the shareholders’ meeting in the following year.
The average number of shares outstanding for EPS calculation has been retroactively adjusted for the issuance of stock dividends and employee stock bonuses. This adjustment caused each of the basic and diluted after income tax EPS for the nine months ended September 30, 2008 to decrease from NT$3.36 to NT$3.35 and NT$3.34 to NT$3.33, respectively.
23. DISCLOSURES FOR FINANCIAL INSTRUMENTS
  a.   Fair values of financial instruments were as follows:
                                 
    September 30
    2009   2008
    Carrying           Carrying    
    Amount   Fair Value   Amount   Fair Value
Assets
                               
 
                               
Financial assets at fair value through profit or loss
  $ 367,461     $ 367,461     $ 12,970     $ 12,970  
Available-for-sale financial assets
    1,033,473       1,033,473       20,940,603       20,940,603  
Held-to-maturity financial assets
    21,653,072       21,747,720       16,479,146       16,604,176  
 
                               
Liabilities
                               
 
                               
Financial liabilities at fair value through profit or loss
                314,630       314,630  
Bonds payable (including current portion)
    4,500,000       4,583,826       12,500,000       12,630,945  
Other long-term payables (including current portion)
    1,355,167       1,355,167       2,972,537       2,972,537  
  b.   Methods and assumptions used in estimating fair values of financial instruments
  1)   The aforementioned financial instruments do not include cash and cash equivalents, receivables, other financial assets, refundable deposits, payables and guarantee deposits. The carrying amounts of these financial instruments approximate their fair values due to their short maturities.
 
  2)   Except for derivatives and structured time deposits, fair values of financial assets at fair value through profit or loss, available-for-sale and held-to-maturity financial assets were based on their quoted market prices.
 
  3)   For those derivatives and structured time deposits with no quoted market prices, their fair values are determined using valuation techniques incorporating estimates and assumptions that were consistent with prevailing market conditions.
 
  4)   Fair value of bonds payable was based on their quoted market price.

- 30 -


 

  5)   Fair value of other long-term payables was based on the present value of expected cash flows, which approximates their carrying amount.
  c.   The changes in fair value of derivatives contracts which was outstanding as of September 30, 2009 and 2008 estimated using valuation techniques were recognized as gains of NT$367,461 thousand and losses of NT$301,660 thousand, respectively.
 
  d.   As of September 30, 2009 and 2008, financial assets exposed to fair value interest rate risk were NT$23,054,006 thousand and NT$37,432,719 thousand, respectively and financial liabilities exposed to fair value interest rate risk were NT$4,500,000 thousand and NT$12,814,630 thousand, respectively.
 
  e.   Movements of the unrealized gains or losses on financial instruments for the nine months ended September 30, 2009 and 2008 were as follows:
                         
    Nine Months Ended September 30, 2009  
    From     From        
    Available-     Available-for-        
    for-sale     sale Financial        
    Financial     Assets Held by        
    Assets     Investees     Total  
Balance, beginning of period
  $ 32,658     $ (320,000 )   $ (287,342 )
Recognized directly in shareholders’ equity
    38,185       780,948       819,133  
Removed from shareholders’ equity and recognized in earnings
    (37,370 )           (37,370 )
 
                 
 
                       
Balance, end of period
  $ 33,473     $ 460,948     $ 494,421  
 
                 
                         
    Nine Months Ended September 30, 2008  
    From     From        
    Available-     Available-for-        
    for-sale     sale Financial        
    Financial     Assets Held by        
    Assets     Investees     Total  
Balance, beginning of period
  $ 266,573     $ 414,424     $ 680,997  
Recognized directly in shareholders’ equity
    179,779       (587,280 )     (407,501 )
Removed from shareholders’ equity and recognized in earnings
    (397,535 )           (397,535 )
 
                 
 
                       
Balance, end of period
  $ 48,817     $ (172,856 )   $ (124,039 )
 
                 
  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. Subject to turmoils in the global financial market, the Company had evaluated its financial instruments and the Company believed the exposure to market risk as of September 30, 2009 was not significant.

- 31 -


 

  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. Subject to turmoils in the global financial market, the Company evaluated whether the financial instruments for any possible counter-party or third-parties are reputable financial institutions, business enterprises, and government agencies and accordingly, the Company believed that the Company’s exposure to credit risk as of September 30, 2009 was not significant.
 
  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.
24. RELATED PARTY TRANSACTIONS
The Company engages in business transactions with the following related parties:
  a.   Subsidiaries
 
      TSMC North America
TSMC China
TSMC Europe
TSMC Japan
TSMC Korea
 
  b.   Investees
 
      GUC (with a controlling financial interest)
Xintec (with a controlling financial interest)
VIS (accounted for using equity method)
SSMC (accounted for using equity method)

 
  c.   Indirect subsidiaries
 
      WaferTech, LLC (WaferTech)
TSMC Technology, Inc. (TSMC Technology)
TSMC Design Technology Canada Inc. (TSMC Canada)
 
  d.   Indirect investee
 
      VisEra Technology Company, Ltd. (VisEra), an indirect investee accounted for using equity method.
 
  e.   Others
 
      Related parties over which the Company has control or exercises significant influence but with which the Company had no material transactions.

- 32 -


 

Transactions with the aforementioned parties, other than those disclosed in other notes, are summarized as follows:
                                 
    2009     2008  
    Amount     %     Amount     %  
Nine months ended September 30
                               
 
                               
Sales
                               
TSMC North America
  $ 111,683,024       54     $ 156,727,226       59  
Others
    1,662,378       1       1,333,072        
 
                       
 
                               
 
  $ 113,345,402       55     $ 158,060,298       59  
 
                       
 
                               
Purchases
                               
WaferTech
  $ 3,872,117       18     $ 6,776,756       21  
TSMC China
    2,611,248       12       3,882,384       12  
SSMC
    2,530,044       11       3,624,887       11  
VIS
    2,433,937       11       2,584,615       8  
 
                       
 
                               
 
  $ 11,447,346       52     $ 16,868,642       52  
 
                       
 
                               
Manufacturing expenses — outsourcing
                               
VisEra
  $ 22,550           $ 66,328        
 
                       
 
                               
Marketing expenses — commission
                               
TSMC Europe
  $ 234,892       16     $ 299,045       16  
TSMC Japan
    166,109       12       195,344       11  
TSMC Korea
    10,667       1       13,522       1  
 
                       
 
                               
 
  $ 411,668       29     $ 507,911       28  
 
                       
 
                               
Research and development expenses
                               
TSMC Technology (primarily consulting fee)
  $ 299,636       2     $ 263,287       2  
TSMC Canada (primarily consulting fee)
    115,534       1       138,515       1  
Others
    41,778             13,319        
 
                       
 
                               
 
  $ 456,948       3     $ 415,121       3  
 
                       
 
                               
Sales of property, plant and equipment and other assets
                               
Xintec
  $ 58,450       97     $        
TSMC China
                1,849,317       91  
Others
    263             10,665        
 
                       
 
                               
 
  $ 58,713       97     $ 1,859,982       91  
 
                       
 
                               
Non-operating income and gains
                               
VIS (primarily technical service income, see Note 27e)
  $ 179,168       7     $ 262,132       5  
TSMC China
    146,585       5       233,761       4  
SSMC (primarily technical service income, see Note 27d)
    98,806       4       193,039       3  
Others
    263             85,277       2  
 
                       
 
                               
 
  $ 424,822       16     $ 774,209       14  
 
                       

- 33 -


 

                                 
    2009     2008  
    Amount     %     Amount     %  
As of September 30
                               
 
                               
Receivables
                               
TSMC North America
  $ 22,009,288       98     $ 26,903,610       99  
Others
    455,519       2       352,306       1  
 
                       
 
                               
 
  $ 22,464,807       100     $ 27,255,916       100  
 
                       
 
                               
Other receivables
                               
VIS
  $ 141,358       44     $ 86,918       28  
TSMC China
    119,544       37       115,766       37  
SSMC
    42,588       13       63,490       20  
TSMC North America
    13,851       5       18,985       6  
WaferTech
    3,921       1       25,958       8  
Others
    237             4,176       1  
 
                       
 
                               
 
  $ 321,499       100     $ 315,293       100  
 
                       
 
                               
Payables
                               
VIS
  $ 759,737       33     $ 668,215       26  
WaferTech
    605,006       26       800,324       31  
TSMC China
    456,026       20       370,154       14  
SSMC
    273,184       12       574,010       22  
TSMC Technology
    126,074       6       64,799       3  
Others
    74,128       3       96,373       4  
 
                       
 
                               
 
  $ 2,294,155       100     $ 2,573,875       100  
 
                       
 
                               
Deferred credits
                               
TSMC China
  $ 43,730       61     $ 230,617       40  
VisEra
                15,544       2  
 
                       
 
                               
 
  $ 43,730       61     $ 246,161       42  
 
                       
The sales prices and payment terms to related parties were not significantly different from those of sales to third parties. For other related party transactions, prices and terms were determined in accordance with mutual agreements.
The Company deferred the net gains (classified under the deferred credits) derived from sales of property, plant, and equipment to TSMC China and VisEra, and then recognized such gains (classified under the non-operating income and gains) over the depreciable lives of the disposed assets.
The Company leased certain buildings and facilities to VisEra. The rental income were classified under non-operating income and gains. The lease terms and prices were determined in accordance with mutual agreements. The lease agreement between the Company and VisEra expired in April 2008.
25. PLEDGED OR MORTGAGED ASSETS
As of September 30, 2009, the Company had pledged time deposits of NT$605,602 thousand (classified as other financial assets) as collateral for land lease agreements and customs duty guarantee.

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26. 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 2009 to December 2028 and can be renewed upon expiration.
As of September 30, 2009, future lease payments were as follows:
         
Year   Amount  
2009 (4th quarter)
  $ 75,328  
2010
    256,543  
2011
    254,962  
2012
    287,491  
2013
    265,847  
2014 and thereafter
    2,014,873  
 
     
 
       
 
  $ 3,155,044  
 
     
27. SIGNIFICANT COMMITMENTS AND CONTINGENCIES
Significant commitments and contingencies of the Company as of September 30, 2009, excluding those disclosed in other notes, were as follows:
  a.   Under a technical cooperation agreement with ITRI, the R.O.C. Government or its designee approved by the Company can use up to 35% of the Company’s capacity if the Company’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.
 
  b.   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 September 30, 2009 the Company had a total of US$32,654 thousand of guarantee deposits.
 
  c.   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.) are required, in the aggregate, to purchase at least 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 fall below a specific percentage of its capacity, the defaulting party is required to compensate SSMC for all related unavoidable costs.
 
  d.   The Company provides technical services to SSMC under a Technical Cooperation Agreement (the Agreement) effective March 30, 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 will be automatically renewed for successive periods of five years each unless pre-terminated by either party under certain conditions.

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  e.   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.
 
  f.   TSMC, TSMC North America and WaferTech filed a series of lawsuits in late 2003 and 2004 against Semiconductor Manufacturing International Corporation, SMIC (Shanghai) and SMIC Americas (aggregately referring to as “SMIC”). The lawsuits alleged that SMIC infringed multiple TSMC, TSMC North America and WaferTech patents and misappropriated TSMC, TSMC North America and WaferTech’s trade secrets. These suits were settled out of court on January 30, 2005. As part of the settlement, Semiconductor Manufacturing International Corporation shall pay US$175 million over six years to resolve TSMC, TSMC North America and WaferTech’s claims. As of September 30, 2009, SMIC had paid US$135 million 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, TSMC North America and WaferTech in the same court, alleging TSMC, TSMC North America and WaferTech of breach of the settlement agreement and implied covenant of good faith and fair dealing, in response to TSMC, TSMC North America and WaferTech’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 California State Superior Court of Alameda County issued an Order on TSMC, TSMC North America and WaferTech’s pre-trial motion for a preliminary injunction against SMIC on September 7, 2007. In the Order, the Court found “TSMC has demonstrated a significant likelihood that it will ultimately prevail on the merits of its claim for breach of certain paragraphs of the (2005) Settlement Agreement” with SMIC. The Court also found “TSMC has demonstrated a significant probability of establishing that SMIC retains and is using TSMC Information in SMIC’s 0.13um and smaller technologies, and there is significant threat of serious irreparable harm to TSMC if SMIC were to disclose or transfer that information before final resolution of the case.” Therefore, the Court ordered that, effective immediately, SMIC must provide advance notice and an opportunity for TSMC, TSMC North America and WaferTech to object before disclosing items enumerated in the Court Order to SMIC’s third party partners. The Court, however, did not grant a preliminary injunction as requested by TSMC, TSMC North America and WaferTech. In January 2009, the court in the California action held a four-day bench trial to determine whether a Settlement Agreement existed between the parties, and if there were an agreement, the interpretation of certain terms. SMIC contended that there was no binding Settlement Agreement, and TSMC, TSMC North America and WaferTech contended that the Settlement Agreement signed on January 30, 2005 and finalized shortly thereafter and repeatedly ratified bound the parties. On March 10, 2009, the Court issued its Statement of Decision. The Court rejected SMIC’s contention, and found that the parties were bound by the Settlement Agreement identified by TSMC, TSMC North America and WaferTech. The Court also interpreted the meaning of certain provisions within the Settlement Agreement. Regarding the claims raised by SMIC in the Beijing lawsuit, the Beijing People’s High Court has on June 10, 2009 rejected those claims and dismissed the lawsuit. SMIC has appealed. The matters are pending in both courts. The result of the above-mentioned litigation cannot be determined at this time.
28. 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;

- 36 -


 

  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: None;
 
  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 3 attached;
 
  h.   Receivable from related parties amounting to at least NT$100 million or 20% of the paid-in capital: Please see Table 4 attached;
 
  i.   Names, locations, and related information of investees on which the Company exercises significant influence: Please see Table 5 attached;
 
  j.   Information about derivatives of investees over which the Company has a controlling interest:
TSMC China entered into forward exchange contracts during the nine months ended September 30, 2009 to manage exposures due to foreign exchange rate fluctuations. Outstanding forward exchange contracts as of September 30, 2009:
         
        Contract Amount
    Maturity Date   (in Thousands)
Sell US$/Buy RMB
  October 2009    US$3,950/RMB26,974
For the nine months ended September 30, 2009, net losses arising from forward exchange contracts of TSMC China were NT$844 thousand.
Xintec entered into forward exchange contracts during the nine months ended September 30, 2009 to manage exposures due to foreign exchange rate fluctuations. Outstanding forward exchange contracts as of September 30, 2009:
         
        Contract Amount
    Maturity Date   (in Thousands)
Sell US$/Buy NT$
  October 2009 to November 2009    US$9,100/NT$295,973
For the nine months ended September 30, 2009, net gains arising from forward exchange contracts of Xintec were NT$686 thousand.
  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 6 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 24.

- 37 -


 

TABLE 1
Taiwan Semiconductor Manufacturing Company Limited and Investees
MARKETABLE SECURITIES HELD
SEPTEMBER 30, 2009
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
                                                             
                        September 30, 2009    
                                                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  
Corporate bond
                                                       
   
Taiwan Mobile Co., Ltd.
       
Available-for-sale financial assets
        $ 1,033,473       N/A     $ 1,033,473          
   
Taiwan Power Company
       
Held-to-maturity financial assets
          3,384,845       N/A       3,393,121          
   
Formosa Petrochemical Corporation
          ²             3,179,081       N/A       3,206,644          
   
 
                                                       
   
Nan Ya Plastics Corporation
          ²             1,999,746       N/A       2,031,690          
   
 
                                                       
   
Formosa Plastics Corporation
          ²             1,671,881       N/A       1,688,217          
   
 
                                                       
   
China Steel Corporation
          ²             1,513,313       N/A       1,532,465          
   
 
                                                       
   
CPC Corporation, Taiwan
          ²             1,000,036       N/A       999,854          
   
 
                                                       
   
Government bond
                                                       
   
European Investment Bank Bonds
       
Held-to-maturity financial assets
          2,015,610       N/A       2,025,500          
   
2003 Asian Development Bank Govt. Bond
          ²             888,560       N/A       875,103          
   
 
                                                       
   
Stocks
                                                       
   
TSMC Global
  Subsidiary  
Investments accounted for using equity method
    1       45,492,790       100       45,492,790          
   
 
                                                       
   
TSMC Partners
  Subsidiary     ²       988,268       32,627,788       100       32,627,788          
 
   
VIS
 
Investee accounted for using equity method
          628,223       9,410,696       37       8,795,129          
   
SSMC
 
Investee accounted for using equity method
          314       5,899,305       39       5,274,907          
   
TSMC North America
  Subsidiary     ²       11,000       2,686,753       100       2,686,753          
   
 
                                                       
   
Xintec
 
Investee with a controlling financial interest
          93,081       1,372,699       41       1,328,827          
   
GUC
 
Investee with a controlling financial interest
          46,688       960,442       36       7,096,555          
   
TSMC Europe
  Subsidiary     ²             152,965       100       152,965          
   
 
                                                       
   
TSMC Japan
  Subsidiary     ²       6       136,710       100       136,710          
   
 
                                                       
   
TSMC Korea
  Subsidiary     ²       80       18,115       100       18,115          
   
 
                                                       
   
United Industrial Gases Co., Ltd.
       
Financial assets carried at cost
    16,783       193,584       10       288,159          
   
Shin-Etsu Handotai Taiwan Co., Ltd.
          ²       10,500       105,000       7       328,546          
   
 
                                                       
   
W.K. Technology Fund IV
          ²       4,000       40,000       2       43,413          
   
 
                                                       
   
Fund
                                                       
   
Horizon Ventures Fund
       
Financial assets carried at cost
          103,992       12       103,992          
   
Crimson Asia Capital
          ²             58,987       1       58,987          
   
 
                                                       
   
Capital
                                                       
   
TSMC China
  Subsidiary  
Investments accounted for using equity method
          3,606,012       100       3,607,259          
   
VTAF III
  Subsidiary     ²             1,341,398       98       1,324,195          
   
 
                                                       
   
VTAF II
  Subsidiary     ²             1,059,820       98       1,055,364          
   
 
                                                       
   
Emerging Alliance
  Subsidiary     ²             319,571       99       319,571          
(Continued)

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                    September 30, 2009    
                                            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 Partners  
Corporate bond
                                                   
   
General Elec Cap Corp. Mtn
   
Held-to-maturity financial assets
        US$ 20,606       N/A     US$ 21,412          
   
General Elec Cap Corp. Mtn
      ²           US$ 20,239       N/A     US$ 21,078          
   
 
                                                   
   
Common Stocks
                                                   
   
TSMC Development, Inc. (TSMC Development)
  Subsidiary  
Investments accounted for using equity method
    1     US$ 690,624       100     US$ 690,624          
   
VisEra Holding Company
 
Investee accounted for using equity method
    ²       43,000     US$ 68,198       49     US$ 68,198          
   
InveStar Semiconductor Development Fund, Inc. (II)LDC. (ISDF II)
  Subsidiary     ²       32,289     US$ 28,133       97     US$ 28,133          
   
 
                                                   
   
TSMC Technology
  Subsidiary     ²       1     US$ 8,932       100     US$ 8,932          
   
 
                                                   
   
InveStar Semiconductor Development Fund, Inc. (ISDF)
  Subsidiary     ²       7,680     US$ 7,746       97     US$ 7,746          
   
 
                                                   
   
TSMC Canada
  Subsidiary     ²       2,300     US$ 3,057       100     US$ 3,057          
   
 
                                                   
   
Mcube Inc.
 
Investee accounted for using equity method
    ²       5,333     US$ 800       74     US$ 800          
   
 
                                                   
   
Preferred stock
                                                   
   
Mcube Inc.
 
Investee accounted for using equity method
 
Investments accounted for using equity method
    1,000     US$ 1,000       10     US$ 1,000          
   
 
                                                   
TSMC Development  
Corporate bond
                                                   
   
GE Capital Corp.
   
Held-to-maturity financial assets
        US$ 20,363       N/A     US$ 21,078          
   
JP Morgan Chase & Co.
      ²           US$ 15,000       N/A     US$ 15,246          
   
 
                                                   
   
Stocks
                                                   
   
WaferTech
  Subsidiary  
Investments accounted for using equity method
    293,637     US$ 196,675       100     US$ 196,675          
   
 
                                                   
Emerging Alliance  
Common stock
                                                   
   
RichWave Technology Corp.
   
Financial assets carried at cost
    4,247     US$ 1,648       10     US$ 1,648          
   
Global Investment Holding Inc.
      ²       10,000     US$ 3,065       6     US$ 3,065          
   
 
                                                   
   
Preferred stock
                                                   
   
Audience, Inc.
   
Financial assets carried at cost
    1,654     US$ 250       1     US$ 250          
   
Axiom Microdevices, Inc.
      ²       1,000     US$ 24       1     US$ 24          
   
 
                                                   
   
Mosaic Systems, Inc.
      ²       2,481     US$ 12       6     US$ 12          
   
 
                                                   
   
Next IO, Inc.
      ²       800     US$ 500       1     US$ 500          
   
 
                                                   
   
Optichron, Inc.
      ²       1,281     US$ 1,072       2     US$ 1,072          
   
 
                                                   
   
Optimal Corporation
      ²           US$ 229           US$ 229          
   
 
                                                   
   
Pixim, Inc.
      ²       4,642     US$ 1,137       2     US$ 1,137          
   
 
                                                   
   
QST Holdings, LLC
      ²           US$ 131       4     US$ 131          
   
 
                                                   
   
Teknovus, Inc.
      ²       6,977     US$ 1,327       2     US$ 1,327          
   
 
                                                   
   
Capital
                                                   
   
VentureTech Alliance Holdings, LLC (VTA Holdings)
  Subsidiary  
Investments accounted for using equity method
                7                

- 39 -


 

     
                                                         
                    September 30, 2009    
                                            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 II  
Common stock
                                                   
   
Leadtrend
   
Available-for-sale financial assets
    1,515     US$ 9,204       5     US$ 9,204          
   
RichWave Technology Corp.
   
Financial assets carried at cost
    1,043     US$ 730       1     US$ 730          
   
Sentelic
      ²       1,200     US$ 2,040       15     US$ 2,040          
   
 
                                                   
   
Preferred stock
                                                   
   
5V Technologies, Inc.
   
Financial assets carried at cost
    2,890     US$ 2,168       15     US$ 2,168          
   
Aquantia
      ²       2,108     US$ 2,573       5     US$ 2,573          
   
 
                                                   
   
Audience, Inc.
      ²       7,956     US$ 1,838       2     US$ 1,838          
   
 
                                                   
   
Axiom Microdevices, Inc.
      ²       7,017     US$ 741       13     US$ 741          
(Continued)

- 40 -


 

     
                                                     
                September 30, 2009    
                                        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 II   Preferred stock  
 
                                           
    Beceem Communications    
Financial assets carried at cost
    834     US$ 1,701       1     US$ 1,701          
    Impinj, Inc.     ²     475     US$ 1,000           US$ 1,000          
    Next IO, Inc.     ²     3,795     US$ 953       2     US$ 953          
    Optichron, Inc.     ²     2,784     US$ 2,664       4     US$ 2,664          
    Pixim, Inc.     ²     33,347     US$ 1,878       2     US$ 1,878          
    Power Analog Microelectronics     ²     6,249     US$ 3,185       18     US$ 3,185          
    QST Holdings, LLC     ²         US$ 593       19     US$ 593          
    Teknovus, Inc.     ²     1,599     US$ 454           US$ 454          
    Xceive     ²     3,800     US$ 1,496       2     US$ 1,496          
 
    Capital  
 
                                           
    VTA Holdings  
Subsidiary
 
Investments accounted for using equity method
                31                
 
VTAF III   Common stock  
 
                                           
   
Mutual-Pak Technology Co., Ltd.
 
Subsidiary
 
Investments accounted for using equity method
    4,590     US$ 1,055       51     US$ 1,055          
    Acionn Technology Corporation  
Investee accounted for using equity method
  ²     4,500     US$ 730       41     US$ 730          
 
    Preferred stock  
 
                                           
    Auramicro, Inc.    
Financial assets carried at cost
    3,816     US$ 1,145       20     US$ 1,145          
    BridgeLux, Inc.     ²     4,955     US$ 6,391       4     US$ 6,391          
    Exclara, Inc.     ²     21,708     US$ 4,568       18     US$ 4,568          
    GTBF, Inc.     ²     1,154     US$ 1,500       N/A     US$ 1,500          
    InvenSense, Inc.     ²     816     US$ 1,000       1     US$ 1,000          
    LiquidLeds Lighting Corp.     ²     1,600     US$ 800       11     US$ 800          
    M2000, Inc.     ²     3,000     US$ 3,000       5     US$ 3,000          
    Neoconix, Inc.     ²     3,283     US$ 4,608       6     US$ 4,608          
    Powervation, Ltd.     ²     310     US$ 4,678       19     US$ 4,678          
    Quellan, Inc.     ²     3,106     US$ 495       6     US$ 495          
    Silicon Technical Services, LLC     ²     1,055     US$ 1,208       2     US$ 1,208          
    Tilera, Inc.     ²     3,222     US$ 2,781       3     US$ 2,781          
    Validity Sensors, Inc.     ²     8,070     US$ 3,089       3     US$ 3,089          
 
    Capital  
 
                                           
   
Growth Fund Limited (Growth Fund)
 
Subsidiary
 
Investments accounted for using equity method
        US$ 856       100     US$ 856          
    VTA Holdings  
Subsidiary
  ²                 62                
 
Growth Fund   Common stock  
 
                                           
    Staccato    
Financial assets carried at cost
    10     US$ 25           US$ 25          
    SiliconBlue Technologies Inc.     ²     5,107     US$ 762       2     US$ 762          

- 41 -


 

     
                                                     
                September 30, 2009    
                                        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
ISDF   Common stock  
 
                                           
    Memsic, Inc.    
Available-for-sale financial assets
    1,364     US$ 5,113       6     US$ 5,113          
   
Capella Microsystems (Taiwan), Inc.
   
Financial assets carried at cost
    557     US$ 154       2     US$ 154          
 
    Preferred stock  
 
                                           
    Integrated Memory Logic, Inc.    
Financial assets carried at cost
    2,872     US$ 1,221       9     US$ 1,221          
    IP Unity, Inc.     ²     1,008     US$ 290       1     US$ 290          
    NanoAmp Solutions, Inc.     ²     541     US$ 327       2     US$ 327          
    Sonics, Inc.     ²     230     US$ 730       2     US$ 730          
(Continued)

- 42 -


 

     
                                                 
                September 30, 2009        
                                    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  
ISDF II
  Common stock                                            
 
  Memsic, Inc.     Available-for-sale financial assets   1,145   US$ 4,292       5     US$ 4,292          
 
  Treadchip Technologies Corp.     ²   503   US$ 1,306       1     US$ 1,306          
 
  Sonics, Inc.     Financial assets carried at cost   278   US$ 32       3     US$ 32          
 
  Epic Communication, Inc.     ²   50   US$ 23           US$ 23          
 
  EON Technology, Corp.     ²   2,494   US$ 691       3     US$ 691          
 
  Goyatek Technology, Corp.     ²   932   US$ 545       6     US$ 545          
 
  Capella Microsystems (Taiwan), Inc.     ²   561   US$ 210       2     US$ 210          
 
  Auden Technology MFG. Co., Ltd.     ²   1,049   US$ 223       3     US$ 223          
 
                                               
 
  Preferred stock                                            
 
  Alchip Technologies Limited     Financial assets carried at cost   6,979   US$ 3,664       18     US$ 3,664          
 
  FangTek, Inc.     ²   7,064   US$ 3,428       16     US$ 3,428          
 
  Kilopass Technology, Inc.     ²   3,887   US$ 500       5     US$ 500          
 
  NanoAmp Solutions, Inc.     ²   375   US$ 227       1     US$ 227          
 
  Sonics, Inc.     ²   264   US$ 926       3     US$ 926          
 
                                               
GUC
  Open-end mutual funds                                            
 
  Jih Sun Bond Fund     Available-for-sale financial assets   5,671   $ 80,010           $ 80,010          
 
  FSITC Taiwan Bond Fund     ²   294     50,004             50,004          
 
  Cathay Bond Fund     ²   1,674     20,005             20,005          
 
                                               
 
  Common stock                                            
 
  GUC-NA   Subsidiary   Investments accounted for using equity method   800     36,870       100       36,870          
 
                                               
 
  GUC-Japan   Subsidiary   ²   1     13,062       100       13,062          
 
  GUC-Europe   Subsidiary   ²       5,281       100       5,281          
 
  GUC-BVI   Subsidiary   ²   50     1,485       100       1,485          
 
                                               
Xintec
  Capital                                            
 
  Compositech Ltd.     Financial assets carried at cost   587           3                
 
                                               
TSMC Global
  Money market funds                                            
 
  Ssga Cash Mgmt Global Offshore     Available-for-sale financial assets   225,978   US$ 225,978       N/A     US$ 225,978          
 
                                               
 
  Government bond                                            
 
  US Treasury N/B     Available-for-sale financial assets   25,000   US$ 25,019       N/A     US$ 25,019          
 
  United States Treas Nts     ²   10,496   US$ 10,595       N/A     US$ 10,595          
 
  WI Treasury     ²   107,500   US$ 107,100       N/A     US$ 107,100          
 
  Societe De Financement De Lec     Held-to-maturity financial assets   15,000   US$ 15,000       N/A     US$ 15,081          
 
                                               
 
  Corporate bond                                            
 
  Ab Svensk Exportkredit Swedish     Available-for-sale financial assets   5,000   US$ 5,189       N/A     US$ 5,189          
 
  American Exp Bk Fdic Gtd Tlgp     ²   1,750   US$ 1,786       N/A     US$ 1,786          
 
  Bear Stearns Cos Inc.     ²   5,000   US$ 4,965       N/A     US$ 4,965          
 
  Citibank NA     ²   5,000   US$ 4,997       N/A     US$ 4,997          
 
  General Elec Cap Corp.     ²   5,000   US$ 4,817       N/A     US$ 4,817          
 
  General Elec Cap Corp.     ²   7,000   US$ 7,002       N/A     US$ 7,002          
 
  Keycorp Fdic Gtd Tlgp     ²   5,000   US$ 5,061       N/A     US$ 5,061          
 
  Met Life Glob Funding I     ²   500   US$ 505       N/A     US$ 505          

- 43 -


 

     
                                                 
                September 30, 2009        
                                    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  
 
  Metropolitan Life Global Fdg I     ²   1,750   US$ 1,646       N/A     US$ 1,646          
 
  Royal Bk of Scotland Plc     ²   5,000   US$ 5,071       N/A     US$ 5,071          
 
  Royal Bk Scotland Grp Plc 144A     ²   6,500   US$ 6,597       N/A     US$ 6,597          
 
  Suncorp Metway Ltd.     ²   5,000   US$ 5,187       N/A     US$ 5,187          
 
  Wachovia Corp. New     ²   4,000   US$ 4,238       N/A     US$ 4,238          
 
  Nationwide Building Society     Held-to-maturity financial assets   8,000   US$ 8,000       N/A     US$ 8,010          
     
(Continued)

- 44 -


 

     
                                                 
            September 30, 2009      
                                        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
  Corporate issued note                                            
 
  Royal bk of scotland     Available-for-sale financial assets     5,000     US$ 4,982       N/A     US$ 4,982      
 
  Barclays U.S. Fdg LLC     ²     4,500     US$ 4,489       N/A     US$ 4,489      
 
                                               
 
  Agency bonds                                            
 
  Finma Pool 852347     Available-for-sale financial assets     3,805     US$ 4,033       N/A     US$ 4,033      
(Concluded)

- 45 -


 

     
TABLE 2
Taiwan Semiconductor Manufacturing Company Limited and Investees
MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
                                                                                                             
                    Beginning Balance     Acquisition     Disposal (Note 2)     Ending Balance (Note 3)          
        Financial                   Amount     Shares/Units     Amount             Amount     Carrying Value     Gain (Loss) or                
    Marketable Securities Type and   Statement       Nature of   Shares/Units     (US$ in     (in Thousands)     (US$ in     Shares/Units     (US$ in     (US$ in     Disposal (US$     Shares/Units     Amount (US$          
Company Name   Name   Account   Counter-party   Relationship   (in Thousands)     Thousands)     (Note 1)     Thousands)     (In Thousands)     Thousands)     Thousands)     in Thousands)     (In Thousands)     in Thousands)          
The Company
  Corporate bond                                                                                                    
 
  Taiwan Mobile Co., Ltd.   Available-for-sale financial assets  
Grand Cathay Securities Corp. and several financial institutions
          $ 2,032,658           $           $ 1,037,370     $ 1,000,000     $ 37,370           $ 1,033,473          
 
  Taiwan Power Company   Held-to-maturity financial assets   ²             4,209,629             203,892                                     3,384,845          
 
  Formosa Petrochemical Corporation   ²   ²             3,554,908             457,351                                     3,179,081          
 
  Formosa Plastic Corporation   ²   ²             2,385,285             203,994                                     1,671,881          
 
  China Steel Corporation   ²   ²             1,000,000             514,672                                     1,513,313          
 
                                                                                                       
 
  Government bond                                                                                                    
 
  European Investment Bank Bonds   Held-to-maturity financial assets  
Grand Cathay Securities Corp. and several financial institutions
            383,387             2,025,500             400,000       383,909       16,091             2,015,610          
 
                                                                                                       
 
  Capital                                                                                                    
 
  VTAF III   Investments accounted for using equity method     Subsidiary           1,305,605             262,922                                     1,341,398          
 
                                                                                                       
TSMC
  Corporate bond                                                                                                    
Development
  JP Morgan Chase & Co.   Held-to-maturity financial assets  
JP Morgan Securitied Inc.
                      US$ 15,000                                   US$ 15,000          
 
                                                                                                       
GUC
  Open-end mutual funds                                                                                                    
 
  Jih Sun Bond Fund   Available-for-sale financial assets  
Jih Sun Investment Trust Co., Ltd.
                  13,475       190,000       7,804       110,075       110,000       75       5,671       80,010          
 
  FSITC Taiwan Bond Fund   ²  
First Securities Investment Trust Co., Ltd.
                  794       135,000       500       85,193       85,000       193       294       50,004          
 
 
Prudential Financial Bond Fund
  ²  
Prudential Financial Securities Investment Trust Enterprise
                  11,261       170,000       11,261       170,319       170,000       319                      
 
  PCA Well Pool Fund   ²  
PCA Securities Investment Trust Co., Ltd.
                  13,121       170,000       13,261       170,241       170,000       241                      
 
  Hua Nan Phoenix Bond Fund   ²  
Hua Nan Investment Trust Co., Ltd.
                  6,434       100,000       6,434       100,131       100,000       131                      
 
                                                                                                       
TSMC Global
  Money market funds                                                                                                    
 
  Ssga Cash Mgmt Global Offshore   Available-for-sale financial assets         30,435     US$ 30,435       471,418     US$ 471,418       275,875     US$ 275,875     US$ 275,875             225,978     US$ 225,978          
 
                                                                                                       
 
  Government bond                                                                                                    
 
  US Treasury N/B   Available-for-sale financial assets                     25,000     US$ 25,014                               25,000     US$ 25,019          
 
  WI Treasury   ²                     107,500     US$ 107,100                               107,500     US$ 107,100          
 
  Societe De Financement De Lec   Held-to-maturity financial assets                     15,000     US$ 15,000                               15,000     US$ 15,000          
(Continued)

- 46 -


 

     
                                                                                                 
                    Beginning Balance     Acquisition     Disposal (Note 2)     Ending Balance (Note 3)  
        Financial                   Amount     Shares/Units     Amount             Amount     Carrying Value     Gain (Loss) or        
    Marketable Securities Type and   Statement       Nature of   Shares/Units     (US$ in     (in Thousands)     (US$ in     Shares/Units     (US$ in     (US$ in     Disposal (US$     Shares/Units     Amount (US$  
Company Name   Name   Account   Counter-party   Relationship   (in Thousands)     Thousands)     (Note 1)     Thousands)     (In Thousands)     Thousands)     Thousands)     in Thousands)     (In Thousands)     in Thousands)  
TSMC Global
  Corporate bond                                                                                            
 
  Ab Svensk Exportkredit Swedish  
Available-for-sale financial assets
            $       5,000     US$ 5,185           $     $     $       5,000     US$ 5,189  
 
  Bear Stearns Cos Inc.   ²                     5,000     US$ 4,965                               5,000     US$ 4,965  
 
  Chase Manhattan Corp. New   ²         3,250     US$ 3,353           US$     3,250     US$ 3,380     US$ 3,480     US$ (100 )         US$  
 
  Citibank NA   ²                     5,000     US$ 4,995                               5,000     US$ 4,997  
 
  Deutsche Bank Ag London   ²         2,995     US$ 3,013                   2,995     US$ 3,021     US$ 3,041     US$ (20 )            
 
  General Elec Cap Corp.   ²                     5,000     US$ 4,834                               5,000     US$ 4,817  
 
  General Elec Cap Corp.   ²                     7,000     US$ 7,002                               7,000     US$ 7,002  
 
  Keycorp Fdic Gtd Tlgp   ²                     5,000     US$ 5,061                               5,000     US$ 5,061  
 
  Morgan Stanley   ²         4,855     US$ 4,552                   4,855     US$ 4,751     US$ 4,768     US$ (17 )            
 
  Royal Bk of Scotland Plc   ²                     5,000     US$ 5,106                               5,000     US$ 5,071  
 
  Royal Bk Scotland Grp Plc 144A   ²                     6,500     US$ 6,597                               6,500     US$ 6,597  
 
  Suncorp Metway Ltd.   ²                     5,000     US$ 5,192                               5,000     US$ 5,187  
 
  Wachovia Corp. New   ²                     4,000     US$ 4,239                               4,000     US$ 4,238  
 
  Wachovia Corp. New   ²         3,130     US$ 3,135                   3,130     US$ 3,195     US$ 3,100     US$ 95              
 
  Wells Fargo + Co. New Med Trm   ²         4,500     US$ 4,493                   4,500     US$ 4,524     US$ 4,282     US$ 242              
 
  Nationwide Building Society  
Held-to-maturity financial assets
                    8,000     US$ 8,000                               8,000     US$ 8,000  
 
 
  Corporate issued note                                                                                            
 
  Royal bk of scotland  
Available-for-sale financial assets
                    5,000     US$ 4,982                               5,000     US$ 4,982  
 
  Barclays U.S. Fdg LLC   ²                     4,500     US$ 4,489                               4,500     US$ 4,489  
 
 
  Agency bonds                                                                                            
 
  Fed Hm Ln Pc Pool 1g1282  
Available-for-sale financial assets
        3,215     US$ 3,285                   3,179     US$ 3,281     US$ 3,171     US$ 110       36        
 
  Fed Hm Ln Pc Pool B19205   ²         5,449     US$ 5,501                   5,335     US$ 5,511     US$ 5,225     US$ 286       114        
 
  Federal Home Ln Mtg Corp.   ²         3,060     US$ 3,108                   3,005     US$ 3,078     US$ 3,003     US$ 75       55        
 
  Fnma Pool 257245   ²         3,456     US$ 3,513                   3,415     US$ 3,513     US$ 3,437     US$ 76       41        
 
  Fnma Pool 691283   ²         2,963     US$ 3,039                   2,932     US$ 3,028     US$ 2,920     US$ 108       31        
 
  Fnma Pool 852347   ²                     3,805     US$ 4,038                               3,805     US$ 4,033  
 
  Fnma Pool 888738   ²         3,669     US$ 3,776                   3,659     US$ 3,828     US$ 3,801     US$ 27       10        
 
  Fnma Pool 888793   ²         4,105     US$ 4,242                   4,071     US$ 4,265     US$ 4,207     US$ 58       34        
 
  Fed Home Ln Bank   ²         5,000     US$ 5,305                   5,000     US$ 5,282     US$ 5,035     US$ 247              
 
  Federal Farm Cr Bks   ²         3,400     US$ 3,610                   3,400     US$ 3,590     US$ 3,411     US$ 179              
 
  Federal Farm Credit Bank   ²         3,375     US$ 3,433                   3,375     US$ 3,430     US$ 3,370     US$ 60              
 
  Federal Home Ln Bks   ²         3,725     US$ 3,854                   3,725     US$ 3,852     US$ 3,721     US$ 131              
 
  Federal Home Ln Bks   ²         5,000     US$ 5,320                   5,000     US$ 5,312     US$ 5,098     US$ 214              
 
  Federal Home Ln Bks   ²         4,000     US$ 4,148                   4,000     US$ 4,151     US$ 4,136     US$ 15              
 
  Federal Home Ln Mtg   ²         5,000     US$ 5,340                   5,000     US$ 5,334     US$ 5,186     US$ 148              
 
  Federal Home Ln Mtg Corp.   ²         3,340     US$ 3,428                   3,340     US$ 3,432     US$ 3,336     US$ 96              
 
  Federal Home Ln Mtg Corp.   ²         3,500     US$ 3,560                   3,500     US$ 3,561     US$ 3,494     US$ 67              
 
  Federal Home Ln Mtg Corp.   ²         3,500     US$ 3,743                   3,500     US$ 3,749     US$ 3,786     US$ (37 )            

- 47 -


 

     
                                                                                                 
                    Beginning Balance     Acquisition     Disposal (Note 2)     Ending Balance (Note 3)  
        Financial                   Amount     Shares/Units     Amount             Amount     Carrying Value     Gain (Loss) or        
    Marketable Securities Type and   Statement       Nature of   Shares/Units     (US$ in     (in Thousands)     (US$ in     Shares/Units     (US$ in     (US$ in     Disposal (US$     Shares/Units     Amount (US$  
Company Name   Name   Account   Counter-party   Relationship   (in Thousands)     Thousands)     (Note 1)     Thousands)     (In Thousands)     Thousands)     Thousands)     in Thousands)     (In Thousands)     in Thousands)  
 
  Federal Home Loan Bank   ²         4,500     US$ 4,710                   4,500     US$ 4,709     US$ 4,518     US$ 191              
 
  Federal Natl Mtg Assn   ²         3,700     US$ 3,713                   3,700     US$ 3,712     US$ 3,700     US$ 12              
 
  Federal Natl Mtg Assn   ²         4,000     US$ 4,169                   4,000     US$ 4,179     US$ 4,116     US$ 63              
 
  Federal Natl Mtg Assn   ²         3,500     US$ 3,809                   3,500     US$ 3,801     US$ 3,645     US$ 156              
 
  Federal Natl Mtg Assn   ²         3,750     US$ 4,134                   3,750     US$ 4,127     US$ 4,151     US$ (24 )            
(Continued)

- 48 -


 

     
                                                                                               
                    Beginning Balance   Acquisition     Disposal (Note 2)     Ending Balance (Note 3)  
        Financial                   Amount   Shares/Units     Amount             Amount     Carrying Value     Gain (Loss) or              
    Marketable Securities Type and   Statement       Nature of   Shares/Units     (US$ in   (in Thousands)     (US$ in     Shares/Units     (US$ in     (US$ in     Disposal (US$     Shares/Units     Amount (US$  
Company Name   Name   Account   Counter-party   Relationship   (in Thousands)     Thousands)   (Note 1)     Thousands)     (In Thousands)     Thousands)     Thousands)     in Thousands)     (In Thousands)     in Thousands)  
 
  Corporate issued asset-backed securities                                                                                          
    Banc Amer Coml Mtg Inc.   Available-for-sale
financial assets
        4,597     US$ 4,584         $       4,472     US$ 4,480     US$ 4,584     US$ (104 )     125     $  
 
  Cit Equip Coll Tr   ²         4,000     US$ 3,884                 4,000     US$ 3,925     US$ 3,996     US$ (71 )            
 
  Credit Suisse First Boston Mtg   ²         4,353     US$ 4,349                 4,090     US$ 4,085     US$ 4,188     US$ (103 )     263        
 
  First Un Natl Bk Coml Mtg Tr   ²         4,788     US$ 4,715                 4,774     US$ 4,780     US$ 4,954     US$ (174 )     14        
 
  Lb Ubs Coml Mtg Tr   ²         3,737     US$ 3,495                 3,725     US$ 3,537     US$ 3,697     US$ (160 )     12        
 
  Tiaa Seasoned Coml Mtg Tr   ²         3,397     US$ 3,163                 3,375     US$ 3,283     US$ 3,392     US$ (109 )     22        
 
  Wamu Mtg   ²         3,214     US$ 2,925                 3,172     US$ 3,106     US$ 3,114     US$ (8 )     42        
 
Note 1:   The shares/units and amount of marketable securities acquired do not include stock dividends from investees.
 
Note 2:   The data for marketable securities disposed exclude bonds maturities and capital return from subsidiaries.
 
Note 3:   The ending balance includes the amortization of premium/discount on bonds investments, unrealized valuation gains/ losses on financial assets, translation adjustments or equity in earnings/ losses of equity method investees.