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 February 2010
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
Years Ended December 31, 2009 and 2008 and
Independent Auditors’ Report

 


 

INDEPENDENT AUDITORS’ REPORT
The Board of Directors and Shareholders
Taiwan Semiconductor Manufacturing Company Limited
We have audited the accompanying balance sheets of Taiwan Semiconductor Manufacturing Company Limited as of December 31, 2009 and 2008, and the related statements of income, changes in shareholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the Rules Governing the Audit of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Those rules and standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Taiwan Semiconductor Manufacturing Company Limited as of December 31, 2009 and 2008, and the results of its operations and its cash flows for the years then ended in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, requirements of the Business Accounting Law and Guidelines Governing Business Accounting with respect to financial accounting standards, and accounting principles generally accepted in the Republic of China.
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 audited, in accordance with the Rules Governing the Audit of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China, the consolidated financial statements of Taiwan Semiconductor Manufacturing Company Limited and subsidiaries as of and for the years ended December 31, 2009 and 2008, and expressed an unqualified opinion 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, on such consolidated financial statements.
January 22, 2010
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 jurisdiction. The standards, procedures and practices to audit such financial statements are those generally accepted and applied in the Republic of China.
For the convenience of readers, the auditors’ report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language auditors’ report and financial statements shall prevail.

-2-


 

Taiwan Semiconductor Manufacturing Company Limited
BALANCE SHEETS
DECEMBER 31, 2009 AND 2008
(In Thousands of New Taiwan Dollars, Except Par Value)
                                 
    2009     2008  
ASSETS   Amount     %     Amount     %  
 
                               
CURRENT ASSETS
                               
Cash and cash equivalents (Notes 2 and 4)
  $ 117,043,543       20     $ 138,208,360       26  
Financial assets at fair value through profit or loss (Notes 2, 5 and 23)
    181,743             42,460        
Held-to-maturity financial assets (Notes 2, 7 and 23)
    9,944,843       2       5,881,999       1  
Receivables from related parties (Note 24)
    22,541,773       4       11,728,204       2  
Notes and accounts receivable
    19,884,520       3       11,441,176       2  
Allowance for doubtful receivables (Notes 2 and 8)
    (431,000 )           (436,746 )      
Allowance for sales returns and others (Notes 2 and 8)
    (8,583,632 )     (1 )     (5,868,582 )     (1 )
Other receivables from related parties (Note 24)
    246,003             489,742        
Other financial assets (Note 25)
    1,104,072             711,755        
Inventories (Notes 2, 3 and 9)
    18,830,216       3       12,807,936       2  
Deferred income tax assets (Notes 2 and 17)
    4,063,410       1       3,650,700       1  
Prepaid expenses and other current assets
    1,006,046             1,192,475        
 
                       
 
                               
Total current assets
    185,831,537       32       179,849,479       33  
 
                       
 
                               
LONG-TERM INVESTMENTS (Notes 2, 6, 7, 10, 11 and 23)
                               
Investments accounted for using equity method
    104,660,098       18       109,871,178       20  
Available-for-sale financial assets
    1,046,672       1       2,032,658       1  
Held-to-maturity financial assets
    12,219,055       2       11,761,325       2  
Financial assets carried at cost
    501,988             519,502        
 
                       
 
                               
Total long-term investments
    118,427,813       21       124,184,663       23  
 
                       
 
                               
PROPERTY, PLANT AND EQUIPMENT (Notes 2, 12 and 24)
                               
Cost
                               
Buildings
    124,522,047       22       114,014,588       21  
Machinery and equipment
    713,426,126       123       635,008,261       118  
Office equipment
    10,781,099       2       9,748,869       2  
 
                       
 
    848,729,272       147       758,771,718       141  
Accumulated depreciation
    (627,764,323 )     (109 )     (557,247,254 )     (103 )
Advance payments and construction in progress
    33,786,577       6       17,758,038       3  
 
                       
 
                               
Net property, plant and equipment
    254,751,526       44       219,282,502       41  
 
                       
 
                               
INTANGIBLE ASSETS
                               
Goodwill (Note 2)
    1,567,756             1,567,756        
Deferred charges, net (Notes 2 and 13)
    5,891,685       1       6,401,461       1  
 
                       
 
                               
Total intangible assets
    7,459,441       1       7,969,217       1  
 
                       
 
                               
OTHER ASSETS
                               
Deferred income tax assets (Notes 2 and 17)
    7,763,643       1       6,497,972       1  
Refundable deposits
    2,698,116       1       2,719,737       1  
Others (Note 2)
    494,546             55,677        
 
                       
 
                               
Total other assets
    10,956,305       2       9,273,386       2  
 
                       
 
                               
TOTAL
  $ 577,426,622       100     $ 540,559,247       100  
 
                       
                                 
    2009     2008  
LIABILITIES AND SHAREHOLDERS’ EQUITY   Amount     %     Amount     %  
 
                               
CURRENT LIABILITIES
                               
Financial liabilities at fair value through profit or loss (Notes 2, 5 and 23)
  $           $ 83,618        
Accounts payable
    9,678,849       2       4,314,265       1  
Payables to related parties (Note 24)
    2,039,342             1,202,350        
Income tax payable (Notes 2 and 17)
    8,761,120       2       9,222,811       2  
Salary and bonus payable
    8,677,299       1       1,601,897        
Accrued profit sharing to employees and bonus to directors (Notes 2, 3 and 19)
    6,771,338       1       15,148,057       3  
Payables to contractors and equipment suppliers
    28,756,884       5       7,574,891       1  
Accrued expenses and other current liabilities (Notes 15 and 23)
    7,886,263       1       5,951,578       1  
Current portion of bonds payable (Notes 14 and 23)
                8,000,000       2  
 
                       
 
                               
Total current liabilities
    72,571,095       12       53,099,467       10  
 
                       
 
                               
LONG-TERM LIABILITIES
                               
Bonds payable (Notes 14 and 23)
    4,500,000       1       4,500,000       1  
Other long-term payables (Notes 15 and 23)
    416,390             931,252        
 
                       
 
                               
Total long-term liabilities
    4,916,390       1       5,431,252       1  
 
                       
 
                               
OTHER LIABILITIES
                               
Accrued pension cost (Notes 2 and 16)
    3,807,176       1       3,710,009       1  
Guarantee deposits (Note 27)
    1,001,376             1,479,152        
Deferred credits (Notes 2 and 24)
    47,873             462,256        
 
                       
 
                               
Total other liabilities
    4,856,425       1       5,651,417       1  
 
                       
 
                               
Total liabilities
    82,343,910       14       64,182,136       12  
 
                       
 
                               
CAPITAL STOCK — NT$10 PAR VALUE (Notes 19 and 21)
                               
Authorized: 28,050,000 thousand shares
                               
Issued: 25,902,706 thousand shares in 2009
25,625,437 thousand shares in 2008
    259,027,066       45       256,254,373       47  
 
                       
 
                               
CAPITAL SURPLUS (Notes 2 and 19)
    55,486,010       10       49,875,255       9  
 
                       
 
                               
RETAINED EARNINGS (Note 19)
                               
Appropriated as legal capital reserve
    77,317,710       13       67,324,393       13  
Appropriated as special capital reserve
                391,857        
Unappropriated earnings
    104,564,972       18       102,337,417       19  
 
                       
 
                               
 
    181,882,682       31       170,053,667       32  
 
                       
 
                               
OTHERS (Notes 2, 21 and 23)
                               
Cumulative translation adjustments
    (1,766,667 )           481,158        
Unrealized gain/loss on financial instruments
    453,621             (287,342 )      
 
                       
 
                               
 
    (1,313,046 )           193,816        
 
                       
 
                               
Total shareholders’ equity
    495,082,712       86       476,377,111       88  
 
                       
 
                               
TOTAL
  $ 577,426,622       100     $ 540,559,247       100  
 
                       
The accompanying notes are an integral part of the financial statements.
(With Deloitte & Touche audit report dated January 22, 2010)

-3-


 

Taiwan Semiconductor Manufacturing Company Limited
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)
                                 
    2009     2008  
    Amount     %     Amount     %  
 
                               
GROSS SALES (Notes 2 and 24)
  $ 299,471,214             $ 330,228,027          
 
                               
SALES RETURNS AND ALLOWANCES (Notes 2 and 8)
    13,728,346               8,460,944          
 
                           
 
                               
NET SALES
    285,742,868       100       321,767,083       100  
 
                               
COST OF SALES (Notes 3, 9, 18 and 24)
    159,106,619       56       183,589,540       57  
 
                       
 
                               
GROSS PROFIT
    126,636,249       44       138,177,543       43  
 
                               
REALIZED (UNREALIZED) GROSS PROFIT FROM AFFILIATES (Note 2)
    (160,279 )           72        
 
                       
 
                               
REALIZED GROSS PROFIT
    126,475,970       44       138,177,615       43  
 
                       
 
                               
OPERATING EXPENSES (Notes 18 and 24)
                               
Research and development
    19,688,032       7       19,737,038       6  
General and administrative
    10,238,131       3       9,895,617       3  
Marketing
    2,027,454       1       2,254,728       1  
 
                       
 
                               
Total operating expenses
    31,953,617       11       31,887,383       10  
 
                       
 
                               
INCOME FROM OPERATIONS
    94,522,353       33       106,290,232       33  
 
                       
 
                               
NON-OPERATING INCOME AND GAINS
                               
Settlement income (Note 27)
    1,464,915       1       951,180        
Interest income (Note 2)
    1,117,374             2,728,892       1  
Valuation gain on financial instruments, net (Notes 2, 5 and 23)
    587,151                    
Technical service income (Notes 24 and 27)
    375,118             619,237        
Gain on settlement and disposal of financial assets, net (Notes 2 and 23)
    53,364             452,159        
Foreign exchange gain, net (Note 2)
                1,113,406       1  
Equity in earnings of equity method investees, net (Notes 2 and 10)
                72,568        
Others (Notes 2 and 24)
    523,587             788,183        
 
                       
 
                               
Total non-operating income and gains
    4,121,509       1       6,725,625       2  
 
                       
(Continued)

-4-


 

Taiwan Semiconductor Manufacturing Company Limited
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)
                                 
    2009     2008  
    Amount     %     Amount     %  
 
                               
NON-OPERATING EXPENSES AND LOSSES
                               
Equity in losses of equity method investees, net (Notes 2 and 10)
  $ 2,695,720       1     $        
Foreign exchange loss, net (Note 2)
    630,455                    
Interest expense
    142,026             355,056        
Valuation loss on financial instruments, net (Notes 2, 5 and 23)
                1,230,966       1  
Impairment of financial assets (Notes 2 and 11)
                247,488        
Loss on idle assets (Note 2)
                210,477        
Others (Note 2)
    194,639             213,052        
 
                       
 
                               
Total non-operating expenses and losses
    3,662,840       1       2,257,039       1  
 
                       
 
                               
INCOME BEFORE INCOME TAX
    94,981,022       33       110,758,818       34  
 
                               
INCOME TAX EXPENSE (Notes 2 and 17)
    5,763,186       2       10,825,650       3  
 
                       
 
                               
NET INCOME
  $ 89,217,836       31     $ 99,933,168       31  
 
                       
                                 
    2009     2008  
    Before     After     Before     After  
    Income     Income     Income     Income  
    Tax     Tax     Tax     Tax  
EARNINGS PER SHARE (NT$, Note 22)
                               
Basic earnings per share
  $ 3.68     $ 3.45     $ 4.25     $ 3.84  
 
                       
Diluted earnings per share
  $ 3.67     $ 3.44     $ 4.22     $ 3.81  
 
                       
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 year ended December 31, 2008 (Notes 2 and 21):
         
    2008  
NET INCOME
  $ 100,035,447  
 
     
 
       
EARNINGS PER SHARE (NT$)
       
Basic earnings per share
  $ 3.84  
 
     
Diluted earnings per share
  $ 3.81  
 
     
The accompanying notes are an integral part of the financial statements.
     
(With Deloitte & Touche audit report dated January 22, 2010)   (Concluded)

-5-


 

Taiwan Semiconductor Manufacturing Company Limited
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
(In Thousands of New Taiwan Dollars, Except Dividends Per Share)
                                                                                         
                                                            Others        
                                                                    Unrealized Gain                
    Capital Stock — Common Stock             Retained Earnings     Cumulative     (Loss) on             Total  
    Shares (In                     Legal Capital     Special Capital     Unappropriated             Translation     Financial             Shareholders’  
    Thousands)     Amount     Capital Surplus     Reserve     Reserve     Earnings     Total     Adjustments     Instruments     Treasury Stock     Equity  
BALANCE, JANUARY 1, 2008
    26,427,104     $ 264,271,037     $ 53,732,682     $ 56,406,684     $ 629,550     $ 161,828,337     $ 218,864,571     $ (1,072,853 )   $ 680,997     $ (49,385,032 )   $ 487,091,402  
 
                                                                                       
Appropriations of prior year’s earnings
                                                                                       
Legal capital reserve
                      10,917,709             (10,917,709 )                              
Reversal of special capital reserve
                            (237,693 )     237,693                                
Profit sharing to employees — in cash
                                  (3,939,883 )     (3,939,883 )                       (3,939,883 )
Profit sharing to employees — in stock
    393,988       3,939,883                         (3,939,883 )     (3,939,883 )                        
Cash dividends to shareholders — NT$3.00 per share
                                  (76,881,311 )     (76,881,311 )                       (76,881,311 )
Stock dividends to shareholders — NT$0.02 per share
    51,254       512,542                         (512,542 )     (512,542 )                        
Bonus to directors
                                  (176,890 )     (176,890 )                       (176,890 )
Capital surplus transferred to capital stock
    76,881       768,813       (768,813 )                                                
Net income in 2008
                                  99,933,168       99,933,168                         99,933,168  
Adjustment arising from changes in percentage of ownership in equity method investees
                (137,063 )                                               (137,063 )
Translation adjustments
                                              1,554,011                   1,554,011  
Issuance of stock from exercising stock options
    6,027       60,266       166,884                                                 227,150  
Cash dividends received by subsidiaries from the Company
                102,279                                                 102,279  
Valuation loss on available-for-sale financial assets
                                                    (233,915 )           (233,915 )
Net change in unrealized gain (loss) on financial instruments from equity method investees
                                                    (734,424 )           (734,424 )
Treasury stock repurchased
                                                          (30,427,413 )     (30,427,413 )
Treasury stock retired
    (1,329,817 )     (13,298,168 )     (3,220,714 )                 (63,293,563 )     (63,293,563 )                 79,812,445        
 
                                                                 
 
                                                                                       
BALANCE, DECEMBER 31, 2008
    25,625,437       256,254,373       49,875,255       67,324,393       391,857       102,337,417       170,053,667       481,158       (287,342 )           476,377,111  
Appropriations of prior year’s earnings
                                                                                       
Legal capital reserve
                      9,993,317             (9,993,317 )                              
Reversal of special capital reserve
                            (391,857 )     391,857                                
Cash dividends to shareholders — NT$3.00 per share
                                  (76,876,312 )     (76,876,312 )                       (76,876,312 )
Stock dividends to shareholders — NT$0.02 per share
    51,251       512,509                         (512,509 )     (512,509 )                        
Profit sharing to employees — in stock
    141,870       1,418,699       6,076,289                                                 7,494,988  
Capital surplus transferred to capital stock
    76,876       768,763       (768,763 )                                                
Net income in 2009
                                  89,217,836       89,217,836                         89,217,836  
Adjustment arising from changes in percentage of ownership in equity method investees
                115,418                                                 115,418  
Translation adjustments
                                              (2,247,825 )                 (2,247,825 )
Issuance of stock from exercising stock options
    7,272       72,722       187,811                                                 260,533  
Valuation gain on available-for-sale financial assets
                                                    14,014             14,014  
Net change in unrealized gain (loss) on financial instruments from equity method investees
                                                    726,949             726,949  
 
                                                                 
 
                                                                                       
BALANCE, DECEMBER 31, 2009
    25,902,706     $ 259,027,066     $ 55,486,010     $ 77,317,710     $     $ 104,564,972     $ 181,882,682     $ (1,766,667 )   $ 453,621     $     $ 495,082,712  
 
                                                                 
Note:   Profit sharing to employees and bonus to directors in the amount of NT$6,771,338 thousand and NT$15,148,057 thousand, respectively, had been charged against earnings of 2009 and 2008.
The accompanying notes are an integral part of the financial statements.
(With Deloitte & Touche audit report dated January 22, 2010)

-6-


 

Taiwan Semiconductor Manufacturing Company Limited
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
(In Thousands of New Taiwan Dollars)
 
                 
    2009     2008  
 
               
CASH FLOWS FROM OPERATING ACTIVITIES
               
Net income
  $ 89,217,836     $ 99,933,168  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
    74,327,868       74,569,562  
Unrealized (realized) gross profit from affiliates
    160,279       (72 )
Amortization of premium/discount of financial assets
    6,322       (97,381 )
Impairment of financial assets
          247,488  
Gain on disposal of available-for-sale financial assets, net
    (37,370 )     (443,404 )
Gain on held-to-maturity financial assets redeemed by the issuer
    (16,091 )      
Loss (gain) on disposal of financial assets carried at cost, net
    97       (8,755 )
Equity in losses (earnings) of equity method investees, net
    2,695,720       (72,568 )
Dividends received from equity method investees
    1,402,592       1,804,351  
Gain on disposal of property, plant and equipment and other assets, net
    (138,613 )     (298,769 )
Loss on idle assets
          210,477  
Deferred income tax
    (1,678,381 )     2,361,261  
Changes in operating assets and liabilities:
               
Decrease (increase) in:
               
Financial assets and liabilities at fair value through profit or loss
    (222,901 )     (164,405 )
Receivables from related parties
    (10,813,569 )     14,973,444  
Notes and accounts receivable
    (8,443,344 )     6,470,152  
Allowance for doubtful receivables
    (5,746 )     (252,226 )
Allowance for sales returns and others
    2,715,050       2,011,897  
Other receivables from related parties
    235,470       43,835  
Other financial assets
    (392,317 )     (380,057 )
Inventories
    (6,022,280 )     8,179,206  
Prepaid expenses and other current assets
    290,470       (330,664 )
Increase (decrease) in:
               
Accounts payable
    4,925,758       (5,171,553 )
Payables to related parties
    836,992       (1,797,280 )
Income tax payable
    (461,691 )     (1,766,153 )
Salary and bonus payable
    7,075,402       (30,280 )
Accrued profit sharing to employees and bonus to directors
    (881,731 )     15,148,057  
Accrued expenses and other current liabilities
    1,259,544       (3,112,220 )
Accrued pension cost
    97,167       52,330  
Deferred credits
    (230,487 )     (129,494 )
 
           
 
               
Net cash provided by operating activities
    155,902,046       211,949,947  
 
           
 
               
CASH FLOWS FROM INVESTING ACTIVITIES
               
Acquisitions of:
               
Property, plant and equipment
    (86,970,843 )     (56,766,192 )
Available-for-sale financial assets
          (23,697,000 )
Held-to-maturity financial assets
    (10,803,805 )     (12,371,965 )
     (Continued)

-7-


 

Taiwan Semiconductor Manufacturing Company Limited
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
(In Thousands of New Taiwan Dollars)
 
                 
    2009     2008  
 
               
Investments accounted for using equity method
  $ (320,443 )   $ (494,765 )
Financial assets carried at cost
    (1,411 )     (20,681 )
Proceeds from disposal or redemption of:
               
Available-for-sale financial assets
    1,037,370       45,584,934  
Held-to-maturity financial assets
    6,293,000       15,004,000  
Financial assets carried at cost
    18,828       10,606  
Property, plant and equipment and other assets
    71,850       2,042,899  
Proceeds from return of capital by investees
    27,753       2,465,293  
Cash from merger of subsidiaries
          270,650  
Increase in deferred charges
    (1,347,228 )     (3,199,813 )
Decrease in refundable deposits
    21,621       21,801  
 
           
 
               
Net cash used in investing activities
    (91,973,308 )     (31,150,233 )
 
           
 
               
CASH FLOWS FROM FINANCING ACTIVITIES
               
Repayment of bonds payable
    (8,000,000 )      
Decrease in guarantee deposits
    (477,776 )     (761,525 )
Proceeds from exercise of employee stock options
    260,533       227,150  
Cash dividends
    (76,876,312 )     (76,881,311 )
Profit sharing to employees in cash
          (3,939,883 )
Bonus to directors
          (176,890 )
Repurchase of treasury stock
          (33,480,997 )
 
           
 
               
Net cash used in financing activities
    (85,093,555 )     (115,013,456 )
 
           
 
               
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    (21,164,817 )     65,786,258  
 
               
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
    138,208,360       72,422,102  
 
           
 
               
CASH AND CASH EQUIVALENTS, END OF YEAR
  $ 117,043,543     $ 138,208,360  
 
           
 
               
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
               
Interest paid
  $ 351,803     $ 355,056  
 
           
Income tax paid
  $ 7,791,196     $ 10,282,464  
 
           
 
               
INVESTING AND FINANCING ACTIVITIES AFFECTING BOTH CASH AND NON-CASH ITEMS
               
Acquisition of property, plant, and equipment
  $ 108,592,471     $ 58,951,343  
Increase in payables to contractors and equipment suppliers
    (21,620,819 )     (2,185,151 )
Nonmonetary exchange trade-out price
    (809 )      
 
           
Cash paid
  $ 86,970,843     $ 56,766,192  
 
           
     (Continued)

-8-


 

Taiwan Semiconductor Manufacturing Company Limited
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
(In Thousands of New Taiwan Dollars)
 
                 
    2009     2008  
 
               
Disposal of property, plant and equipment and other assets
  $ 64,390     $ 2,051,168  
Decrease (increase) in other receivables from related parties
    8,269       (8,269 )
Nonmonetary exchange trade-out price
    (809 )      
 
           
Cash received
  $ 71,850     $ 2,042,899  
 
           
 
               
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
               
Current portion of bonds payable
  $     $ 8,000,000  
 
           
Current portion of other long-term payable (under accrued expenses and other current liabilities)
  $ 769,144     $ 1,026,421  
 
           
The accompanying notes are an integral part of the financial statements.
(With Deloitte & Touche audit report dated January 22, 2010)
(Concluded)

-9-


 

Taiwan Semiconductor Manufacturing Company Limited
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
1.   GENERAL
 
    Taiwan Semiconductor Manufacturing Company Limited (the “Company” or “TSMC”), a Republic of China (R.O.C.) corporation, was incorporated on February 21, 1987. The Company is a dedicated foundry in the semiconductor industry which engages 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 December 31, 2009 and 2008, the Company had 22,292 and 20,425 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.

-10-


 

    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 debt securities is determined using the average of bid and asked prices at the end of the year.
 
    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. 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 collectability of receivables. The Company determines the amount of the allowance for doubtful receivables with a charge of 1% of the amount of outstanding receivables considering the account aging analysis and current trends in the credit quality of its customers.

-11-


 

    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 collectability is reasonably assured. Provisions for estimated sales returns and others are recorded in the year 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.
 
    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

-12-


 

    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 year 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.
 
    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.

-13-


 

    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 year’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.
 
    Profit Sharing to Employees and Bonus to Directors
 
    Effective January 1, 2008, the Company adopted Interpretation 2007-052, “Accounting for Bonuses to Employees, Directors and Supervisors,” which requires companies to record profit sharing to employees and bonus to directors as an expense rather than as an appropriation of earnings.

-14-


 

    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 Statement of Financial Accounting Standards (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 on an item-by-item basis except when the grouping of similar or related items is appropriate; (2) unallocated overheads are recognized as expenses in the year 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 year. Such changes in accounting principle did not have significant effect on the Company’s financial statements for the year ended December 31, 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 profit sharing to employees and bonus to 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$12,627,332 thousand and NT$0.48, respectively, for the year ended December 31, 2008.
 
    Effective January 1, 2008, the Company adopted 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 year ended December 31, 2008.

-15-


 

4.   CASH AND CASH EQUIVALENTS
                 
    December 31  
    2009     2008  
 
               
Cash and deposits in banks
  $ 114,023,307     $ 129,538,047  
Repurchase agreements collateralized by government bonds
    3,020,236       8,670,313  
 
           
 
               
 
  $ 117,043,543     $ 138,208,360  
 
           
5.   FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
                 
    December 31  
    2009     2008  
Trading financial assets
               
 
               
Forward exchange contracts
  $     $ 28,411  
Cross currency swap contracts
    181,743       14,049  
 
           
 
               
 
  $ 181,743     $ 42,460  
 
           
 
               
Trading financial liabilities
               
 
               
Forward exchange contracts
  $     $ 34,243  
Cross currency swap contracts
          49,375  
 
           
 
               
 
  $     $ 83,618  
 
           
    The Company entered into derivative contracts during the years ended December 31, 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.
 
    Outstanding forward exchange contracts consisted of the following:
         
        Contract Amount
    Maturity Date   (In Thousands)
 
       
December 31, 2008
       
 
       
Sell US$/Buy NT$
  January 2009 to February 2009   US$135,000/NT$4,430,925
Sell EUR/Buy NT$
  January 2009   EUR1,500/NT$63,150
    Outstanding cross currency swap contracts consisted of the following:
                         
                    Range of  
    Contract Amount     Range of     Interest Rates  
Maturity Date   (In Thousands)     Interest Rates Paid     Received  
 
                       
December 31, 2009
                       
 
                       
January 2010 to February 2010
  US$ 750,000/NT$24,201,706       0.24%-0.70%     0.00%-0.38%
(Continued)

-16-


 

                         
            Range of     Range of  
    Contract Amount     Interest Rates     Interest Rates  
Maturity Date   (In Thousands)     Paid     Received  
 
                       
December 31, 2008
                       
 
                       
January 2009
  US$ 307,000/NT$10,061,232       0.54%-5.00%     0.00%-3.83%
(Concluded)
    For the years ended December 31, 2009 and 2008, changes in fair value related to derivative financial instruments recognized in earnings was a net gain of NT$587,151 thousand and a net loss of NT$1,230,966 thousand, respectively.
 
6.   AVAILABLE-FOR-SALE FINANCIAL ASSETS
                 
    December 31  
    2009     2008  
 
               
Corporate bonds
  $ 1,046,672     $ 2,032,658  
 
           
7.   HELD-TO-MATURITY FINANCIAL ASSETS
                 
    December 31  
    2009     2008  
 
               
Corporate bonds
  $ 12,266,311     $ 16,136,752  
Structured time deposits
    7,000,000        
Government bonds
    2,897,587       1,506,572  
 
           
 
    22,163,898       17,643,324  
Current portion
    (9,944,843 )     (5,881,999 )
 
           
 
               
 
  $ 12,219,055     $ 11,761,325  
 
           
    Structured time deposits categorized as held-to-maturity financial assets consisted of the following:
                                 
    Principal     Interest     Range of        
    Amount     Receivable     Interest Rates     Maturity Date  
 
                               
December 31, 2009
                               
 
                               
Callable domestic deposits
  $ 7,000,000     $ 4,308       0.36%-0.95 %   July 2010 to August 2011
 
                           
8.   ALLOWANCES FOR DOUBTFUL RECEIVABLES, SALES RETURNS AND OTHERS
 
    Movements of the allowance for doubtful receivables were as follows:
                 
    Years Ended December 31  
    2009     2008  
 
               
Balance, beginning of year
  $ 436,746     $ 688,972  
Provision
    238,061        
Write-off
    (243,807 )     (252,226 )
 
           
 
               
Balance, end of year
  $ 431,000     $ 436,746  
 
           

-17-


 

    Movements of the allowance for sales returns and others were as follows:
                 
    Years Ended December 31  
    2009     2008  
 
               
Balance, beginning of year
  $ 5,868,582     $ 3,856,685  
Provision
    13,728,346       8,460,944  
Write-off
    (11,013,296 )     (6,449,047 )
 
           
 
               
Balance, end of year
  $ 8,583,632     $ 5,868,582  
 
           
9.   INVENTORIES
                 
    December 31  
    2009     2008  
 
               
Finished goods
  $ 2,355,232     $ 4,444,657  
Work in process
    14,230,318       7,117,049  
Raw materials
    1,420,466       716,870  
Supplies and spare parts
    824,200       529,360  
 
           
 
               
 
  $ 18,830,216     $ 12,807,936  
 
           
    Write-down of inventories to net realizable value in the amount of NT$199,732 thousand and NT$879,434 thousand, respectively, were included in the cost of sales for the years ended December 31, 2009 and 2008.
 
10.   INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD
                                 
    December 31  
    2009     2008  
            % of             % of  
    Carrying     Owner-     Carrying     Owner-  
    Amount     ship     Amount     ship  
 
                               
TSMC Global Ltd. (TSMC Global)
  $ 45,397,256       100     $ 45,756,519       100  
TSMC Partners, Ltd. (TSMC Partners)
    32,545,619       100       3,730,913       100  
Vanguard International Semiconductor Corporation (VIS)
    9,365,232       37       9,787,275       37  
Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)
    6,157,141       39       6,808,192       39  
TSMC China Company Limited (TSMC China)
    2,961,043       100       6,267,128       100  
TSMC North America
    2,723,727       100       2,435,666       100  
Xintec Inc. (Xintec)
    1,475,014       41       1,506,384       42  
VentureTech Alliance Fund III, L.P. (VTAF III)
    1,309,615       98       1,305,605       98  
VentureTech Alliance Fund II, L.P. (VTAF II)
    1,122,810       98       975,367       98  
Global UniChip Corporation (GUC)
    983,126       35       950,263       36  
Emerging Alliance Fund, L.P. (Emerging Alliance)
    305,866       99       433,481       99  
Taiwan Semiconductor Manufacturing Company Europe B.V. (TSMC Europe)
    159,467       100       124,594       100  
     (Continued)

-18-


 

                                 
    December 31  
    2009     2008  
            % of             % of  
    Carrying     Owner-     Carrying     Owner-  
    Amount     ship     Amount     ship  
 
                               
TSMC Japan Limited (TSMC Japan)
  $ 135,663       100     $ 137,617       100  
TSMC Korea Limited (TSMC Korea)
    18,519       100       15,117       100  
TSMC International Investment Ltd. (TSMC International)
                29,637,057       100  
 
                           
 
                               
 
  $ 104,660,098             $ 109,871,178          
 
                           
     (Concluded)
    The Company will subscribe through a private placement for new shares of Motech Industries Inc. (“Motech”) under a Share Subscription Agreement entered into on December 9, 2009. The total consideration is approximately NT$6.2 billion (US$193 million). After the subscription of shares, the Company will own 20% of the Motech shares. The transaction is still subject to Motech’s shareholders’ approval and regulatory approval.
 
    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 into the Company in the third quarter of 2008.
 
    For the years ended December 31, 2009 and 2008, equity in earnings/losses of equity method investees was a net loss of NT$2,695,720 thousand and a net gain of NT$72,568 thousand, respectively. Related equity in earnings/losses of equity method investees were determined based on the audited financial statements, except those of TSMC Japan, TSMC Europe and TSMC Korea for the year ended December 31, 2009. The Company believes that, had TSMC Japan, TSMC Europe and TSMC Korea’s financial statements been audited, any adjustments arising would have had no material effect on the Company’s financial statements.
 
    As of December 31, 2009 and 2008, fair values of publicly traded stocks in investments accounted for using equity method (VIS and GUC) were NT$18,027,990 thousand and NT$9,889,107 thousand, respectively.
 
    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:
                 
    Years Ended December 31  
    2009     2008  
 
               
Balance, beginning of year
    2,053,253     $ 2,677,388  
Amortization
    (624,135 )     (624,135 )
 
           
 
               
Balance, end of year
  $ 1,429,118     $ 2,053,253  
 
           

-19-


 

    Movements of the aforementioned difference allocated to goodwill were as follows:
                 
    Years Ended December 31  
    2009     2008  
 
               
Balance, beginning of year
  $ 1,061,885     $ 987,349  
From merger of subsidiaries
          74,536  
 
           
 
               
Balance, end of year
  $ 1,061,885     $ 1,061,885  
 
           
11.   FINANCIAL ASSETS CARRIED AT COST
                 
    December 31  
    2009     2008  
 
               
Non-publicly traded stocks
  $ 338,584     $ 357,509  
Mutual funds
    163,404       161,993  
 
           
 
               
 
  $ 501,988     $ 519,502  
 
           
    For the year ended December 31 2008, the Company recognized impairment of financial assets carried at cost of NT$247,488 thousand.
 
12.   PROPERTY, PLANT AND EQUIPMENT
                                         
    Year Ended December 31, 2009  
    Balance,                                
    Beginning of                             Balance,  
    Year     Additions     Disposals     Reclassification     End of Year  
Cost
                                       
Buildings
  $ 114,014,588     $ 10,520,371     $ (12,978 )   $ 66     $ 124,522,047  
Machinery and equipment
    635,008,261       80,824,102       (2,408,802 )     2,565       713,426,126  
Office equipment
    9,748,869       1,219,459       (187,163 )     (66 )     10,781,099  
 
                             
 
    758,771,718     $ 92,563,932     $ (2,608,943 )   $ 2,565       848,729,272  
 
                             
Accumulated depreciation
                                       
Buildings
    65,351,514     $ 8,186,551     $ (12,971 )   $ 66       73,525,160  
Machinery and equipment
    484,046,160       63,395,862       (1,750,677 )     2,565       545,693,910  
Office equipment
    7,849,580       882,718       (186,979 )     (66 )     8,545,253  
 
                             
 
    557,247,254     $ 72,465,131     $ (1,950,627 )   $ 2,565       627,764,323  
 
                             
Advance payments and construction in progress
    17,758,038     $ 16,028,539     $     $       33,786,577  
 
                             
 
                                       
 
  $ 219,282,502                             $ 254,751,526  
 
                                   
                                         
    Year Ended December 31, 2008  
    Balance,                              
    Beginning of     Additions                     Balance,  
    Year     (Deductions)     Disposals     Reclassification     End of Year  
Cost
                                       
Buildings
  $ 101,907,892     $ 12,115,531     $ (8,524 )   $ (311 )   $ 114,014,588  
Machinery and equipment
    589,131,625       49,396,313       (3,385,502 )     (134,175 )     635,008,261  
Office equipment
    9,167,107       764,414       (182,709 )     57       9,748,869  
 
                             
 
    700,206,624     $ 62,276,258     $ (3,576,735 )   $ (134,429 )     758,771,718  
 
                             
Accumulated depreciation
                                       
Buildings
    57,349,828     $ 8,010,214     $ (8,524 )   $ (4 )     65,351,514  
Machinery and equipment
    422,278,071       63,145,978       (1,258,542 )     (119,347 )     484,046,160  
Office equipment
    7,097,120       935,140       (182,706 )     26       7,849,580  
 
                             
 
    486,725,019     $ 72,091,332     $ (1,449,772 )   $ (119,325 )     557,247,254  
 
                             
Advance payments and construction in progress
    21,082,953     $ (3,324,915 )   $     $       17,758,038  
 
                             
 
                                       
 
  $ 234,564,558                             $ 219,282,502  
 
                                   
    No interest was capitalized during the years ended December 31, 2009 and 2008.

-20-


 

13.   DEFERRED CHARGES, NET
                                                 
    Year Ended December 31, 2009  
    Balance,                                        
    Beginning of                                     Balance,  
    Year     Additions     Amortization     Disposals     Reclassification     End of Year  
 
                                               
Technology license fees
  $ 3,786,251     $     $ (806,450 )   $     $     $ 2,979,801  
Software and system design costs
    1,559,857       861,783       (774,667 )                 1,646,973  
Patent and others
    1,055,353       485,445       (275,887 )                 1,264,911  
 
                                   
 
                                               
 
  $ 6,401,461     $ 1,347,228     $ (1,857,004 )   $     $     $ 5,891,685  
 
                                   
                                                 
    Year Ended December 31, 2008  
    Balance,                                        
    Beginning of                                     Balance,  
    Year     Additions     Amortization     Disposals     Reclassification     End of Year  
 
                                               
Technology license fees
  $ 5,349,937     $     $ (1,563,686 )   $     $     $ 3,786,251  
Software and system design costs
    1,309,272       945,279       (680,474 )     (14,279 )     59       1,559,857  
Patent and others
    513,204       733,342       (191,193 )                 1,055,353  
 
                                   
 
                                               
 
  $ 7,172,413     $ 1,678,621     $ (2,435,353 )   $ (14,279 )   $ 59     $ 6,401,461  
 
                                   
14.   BONDS PAYABLE
                 
    December 31  
    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  
 
           
15.   OTHER LONG-TERM PAYABLES
 
    The Company’s long-term payables mainly resulted from license agreements for certain semiconductor-related patents. As of December 31, 2009, future payments for other long-term payables were as follows:
         
Year of Payment   Amount  
 
       
2010
  $ 769,144  
2011
    416,390  
 
     
 
    1,185,534  
Current portion (classified under accrued expenses and other current liabilities)
    (769,144 )
 
     
 
       
 
  $ 416,390  
 
     

-21-


 

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$608,731 thousand and NT$657,870 thousand for the years ended December 31, 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.
 
    Pension information on the defined benefit plan is summarized as follows:
                     
   
 
               
a.  
Components of net periodic pension cost for the year
               
        2009     2008  
   
Service cost
  $ 166,460     $ 151,603  
   
Interest cost
    149,297       170,025  
   
Projected return on plan assets
    (56,170 )     (67,315 )
   
Amortization
    29,134       3,776  
   
 
           
   
 
               
   
Net periodic pension cost
  $ 288,721     $ 258,089  
   
 
           
   
 
               
                     
   
 
               
b.   Reconciliation of funded status of the plans and accrued pension cost at December 31, 2009 and 2008
        2009     2008  
   
Benefit obligation
               
   
Vested benefit obligation
  $ 123,524     $ 114,930  
   
Nonvested benefit obligation
    3,754,388       4,146,366  
   
 
           
   
Accumulated benefit obligation
    3,877,912       4,261,296  
   
Additional benefits based on future salaries
    2,614,358       3,245,483  
   
 
           
   
Projected benefit obligation
    6,492,270       7,506,779  
   
Fair value of plan assets
    (2,612,295 )     (2,441,687 )
   
 
           
   
Funded status
    3,879,975       5,065,092  
   
Unrecognized net transition obligation
    (91,291 )     (99,591 )
   
Prior service cost
    161,977       169,216  
   
Unrecognized net loss
    (143,485 )     (1,424,708 )
   
 
           
   
 
               
   
Accrued pension cost
  $ 3,807,176     $ 3,710,009  
   
 
           
   
 
               
   
Vested benefit
  $ 135,501     $ 126,259  
   
 
           
   
 
               
c.  
Actuarial assumptions at December 31, 2009 and 2008
               
   
 
               
   
Discount rate used in determining present values
    2.25 %     2.00 %
   
Future salary increase rate
    3.00 %     3.00 %
   
Expected rate of return on plan assets
    1.50 %     2.25 %
   
 
               
d.  
Contributions to the Funds for the year
  $ 191,554     $ 202,263  
   
 
           
   
 
               
e.  
Payments from the Funds for the year
  $ 37,801     $ 28,990  
   
 
           

-22-


 

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:
                 
    Years Ended December 31  
    2009     2008  
 
               
Income tax expense based on “income before income tax” at statutory rate (25%)
  $ 23,745,246     $ 27,689,695  
Tax effect of the following:
               
Tax-exempt income
    (8,621,941 )     (9,610,935 )
Temporary and permanent differences
    3,124,974       1,815,594  
Others
    247,050       41,235  
Income tax credits used
    (9,914,570 )     (10,967,795 )
 
           
 
               
Income tax currently payable
  $ 8,580,759     $ 8,967,794  
 
           
  b.   Income tax expense consisted of the following:
                 
    Years Ended December 31  
    2009     2008  
 
               
Income tax currently payable
  $ 8,580,759     $ 8,967,794  
Income tax adjustments on prior years
    (1,155,113 )     (707,255 )
Other income tax adjustments
    15,921       203,850  
Net change in deferred income tax assets
               
Investment tax credits
    (1,119,523 )     1,224,537  
Temporary differences
    41,456       (1,792,789 )
Valuation allowance
    (600,314 )     2,929,513  
 
           
 
               
Income tax expense
  $ 5,763,186     $ 10,825,650  
 
           
  c.   Net deferred income tax assets consisted of the following:
                 
    December 31  
    2009     2008  
 
               
Current deferred income tax assets
               
Investment tax credits
  $ 3,210,254     $ 2,791,000  
Temporary differences
               
Allowance for sales returns and others
    794,507       710,098  
Others
    58,649       149,602  
 
           
 
               
 
  $ 4,063,410     $ 3,650,700  
 
           
Noncurrent deferred income tax assets
               
Investment tax credits
  $ 11,521,487     $ 10,821,218  
Temporary differences
               
Depreciation
    1,909,152       1,625,499  
Others
    132,336       450,901  
Valuation allowance
    (5,799,332 )     (6,399,646 )
 
           
 
               
 
  $ 7,763,643     $ 6,497,972  
 
           

-23-


 

      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 in accordance with the amended Article and adjusted the resulting difference as an income tax expense.
 
  d.   Integrated income tax information:
 
      The balance of the imputation credit account as of December 31, 2009 and 2008 were NT $369,265 thousand and NT$521,634 thousand, respectively.
 
      The estimated and actual creditable ratios for distribution of earnings of 2009 and 2008 was 0.35% and 9.10%, 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 December 31, 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
  $ 579,804     $     2009  
      1,216,551           2010  
 
            4,644,652           2011  
 
            3,457,388       3,457,388     2012  
 
            3,310,922       3,310,922     2013  
 
                           
 
                               
 
          $ 13,209,317     $ 6,768,310          
 
                           
 
                               
Statute for Upgrading Industries
 
Research and development expenditures
  $ 2,663,784     $     2010  
      2,671,264       1,971,732     2011  
 
            2,691,517       2,691,517     2012  
 
            3,250,265       3,250,265     2013  
 
                           
 
                               
 
          $ 11,276,830     $ 7,913,514          
 
                           
 
                               
Statute for Upgrading Industries
 
Personnel training expenditures
  $ 23,146     $     2010  
            19,293       19,293     2011  
 
            30,624       30,624     2012  
 
                           
 
                               
 
          $ 73,063     $ 49,917          
 
                           
 
                               
Statute for Upgrading Industries
 
Investments in important technology-based enterprises
  $ 7,297     $     2009  
      79,804           2010  
 
                           
 
                               
 
          $ 87,101     $          
 
                           

-24-


 

  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 2007. All investment tax credit adjustments assessed by the tax authorities have been recognized accordingly.
18.   LABOR COST, DEPRECIATION AND AMORTIZATION
                         
    Year Ended December 31, 2009  
            Classified as        
    Classified as     Operating        
    Cost of Sales     Expenses     Total  
Labor cost
                       
Salary and bonus
  $ 15,874,268     $ 12,218,675     $ 28,092,943  
Labor and health insurance
    630,735       385,013       1,015,748  
Pension
    557,206       340,181       897,387  
Meal
    414,749       180,542       595,291  
Welfare
    155,795       97,282       253,077  
Others
    97,229       19,108       116,337  
 
                 
 
                       
 
  $ 17,729,982     $ 13,240,801     $ 30,970,783  
 
                 
 
                       
Depreciation
  $ 68,606,242     $ 3,842,623     $ 72,448,865  
 
                 
Amortization
  $ 1,199,386     $ 657,618     $ 1,857,004  
 
                 
                         
    Year Ended December 31, 2008  
            Classified as        
    Classified as     Operating        
    Cost of Sales     Expenses     Total  
Labor cost
                       
Salary and bonus
  $ 17,088,512     $ 11,989,661     $ 29,078,173  
Labor and health insurance
    677,817       379,196       1,057,013  
Pension
    587,281       328,669       915,950  
Meal
    437,910       174,906       612,816  
Welfare
    174,641       100,989       275,630  
Others
    190,323       15,979       206,302  
 
                 
 
                       
 
  $ 19,156,484     $ 12,989,400     $ 32,145,884  
 
                 
 
                       
Depreciation
  $ 68,373,886     $ 3,701,241     $ 72,075,127  
 
                 
Amortization
  $ 1,771,919     $ 663,434     $ 2,435,353  
 
                 
19.   SHAREHOLDERS’ EQUITY
 
    As of December 31, 2009, 1,097,513 thousand ADSs of the Company were traded on the NYSE. The number of common shares represented by the ADSs is 5,487,565 thousand (one ADS represents five common shares).

-25-


 

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.
Capital surplus consisted of the following:
                 
    December 31  
    2009     2008  
 
               
Additional paid-in capital
  $ 23,457,805     $ 17,962,468  
From merger
    22,805,390       22,805,390  
From convertible bonds
    8,893,190       8,893,190  
From long-term investments
    329,570       214,152  
Donations
    55       55  
 
           
 
               
 
  $ 55,486,010     $ 49,875,255  
 
           
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 profit sharing 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 profit sharing to employees in stock 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 shareholder’s approval in the following year.
The Company has recorded profit sharing to employees as a charge to earnings of approximately 7.5% and 15% of net income for the years ended December 2009 and 2008, respectively; bonuses to directors were accrued with an estimate based on historical experience. 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 profit sharing is resolved to be distributed to employees in stock, the number of shares is determined by dividing the amount of profit sharing 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.

-26-


 

The appropriation for legal capital reserve shall be made until the reserve equals the Company’s paid-in capital. The reserve may be used to offset a deficit, or be distributed as dividends and bonuses for the portion in excess of 50% of the paid-in capital if the Company has no unappropriated earnings and the reserve balance has exceeded 50% of the Company’s paid-in capital. The Company Law also prescribes that, when the reserve has reached 50% of the Company’s paid-in capital, up to 50% of the reserve may be transferred to capital.
A special capital reserve equivalent to the net debit balance of the other components of shareholders’ equity (for example, cumulative translation adjustments and unrealized loss on financial instruments, but excluding treasury stock) shall be made from unappropriated earnings pursuant to existing regulations promulgated by the Securities and Futures Bureau (SFB). Any special reserve appropriated may be reversed to the extent that the net debit balance reverses.
The appropriations of earnings for 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 )                
Profit sharing to employees — in cash
          3,939,883                  
Profit sharing 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                  
 
                           
Profit sharing 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 profit sharing to employee in stock 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 profit sharing to employees and bonus 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 profit sharing 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.
As of January 22, 2010, the Board of Directors has not resolved the appropriation for earnings of 2009.
The information about the appropriations of profit sharing to employees and bonus to directors is available at the Market Observation Post System website.
Under the Integrated Income Tax System that became effective on January 1, 1998, 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.

-27-


 

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 plans that had never been granted or had been granted but subsequently canceled had expired as of December 31, 2009.
 
    Information about outstanding options for the years ended December 31, 2009 and 2008 was as follows:
                 
            Weighted-
    Number of   average
    Options   Exercise Price
    (In Thousands)   (NT$)
Year ended December 31, 2009
               
 
               
Balance, beginning of year
    36,234     $ 34.0  
Options granted
    175       34.0  
Options exercised
    (7,272 )     35.8  
Options canceled
    (327 )     46.5  
 
               
 
               
Balance, end of year
    28,810       33.5  
 
               
 
               
Year ended December 31, 2008
               
 
               
Balance, beginning of year
    41,875       35.6  
Options granted
    767       35.2  
Options exercised
    (6,027 )     37.7  
Options canceled
    (381 )     46.5  
 
               
 
               
Balance, end of year
    36,234       35.3  
 
               
The numbers 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.

-28-


 

    As of December 31, 2009, information about outstanding options was as follows:
                             
        Options Outstanding
                Weighted-average    
                Remaining   Weighted-average
Range of Exercise   Number of Options   Contractual Life   Exercise Price
Price (NT$)   (In Thousands)   (Years)   (NT$)
 
$ 22.8-$32.0       21,179       3.18     $ 29.1  
   38.0-  50.1       7,631       4.88       45.5  
                             
                             
          28,810       3.63       33.5  
                             
    As of December 31, 2009, all of the above outstanding options were exercisable.
 
    No compensation cost was recognized under the intrinsic value method for the years ended December 31, 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 years ended December 31, 2009 and 2008 would have been as follows:
                 
    Years Ended December 31
    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
  $ 89,217,836     $ 99,933,168  
Pro forma net income
    88,838,182       100,037,622  
Earnings per share (EPS) — after income tax (NT$):
               
Basic EPS as reported
  $ 3.45     $ 3.84  
Pro forma basic EPS
    3.44       3.84  
Diluted EPS as reported
    3.44       3.81  
Pro forma diluted EPS
    3.43       3.81  
21.   TREASURY STOCK
     (Shares in Thousands)
                                         
    Beginning           Stock           Ending
    Shares   Addition   Dividends   Retirement   Shares
Year ended December 31, 2008
                                       
 
                                       
Parent company stock held by subsidiaries
    34,096             171       34,267        
Repurchase under share buyback plan
    800,000       495,549             1,295,549        
 
                                       
 
                                       
 
    834,096       495,549       171       1,329,816        
 
                                       
    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.

-29-


 

    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  
Year ended December 31, 2009
                                       
 
                                       
Basic EPS
                                       
Earnings available to common shareholders
  $ 94,981,022     $ 89,217,836       25,835,802     $ 3.68     $ 3.45  
 
                                   
Effect of dilutive potential common shares
                77,801                  
 
                                 
 
                                       
Diluted EPS
                                       
Earnings available to common shareholders (including effect of dilutive potential common shares)
  $ 94,981,022     $ 89,217,836       25,913,603     $ 3.67     $ 3.44  
 
                             
 
                                       
Year ended December 31, 2008
                                       
 
                                       
Basic EPS
                                       
Earnings available to common shareholders
  $ 110,758,818     $ 99,933,168       26,039,186     $ 4.25     $ 3.84  
 
                                   
Effect of dilutive potential common shares
                196,493                  
 
                                 
 
                                       
Diluted EPS
                                       
Earnings available to common shareholders (including effect of dilutive potential common shares)
  $ 110,758,818     $ 99,933,168       26,235,679     $ 4.22     $ 3.81  
 
                             

-30-


 

    As discussed in Note 3, effective January 1, 2008, the Company adopted Interpretation 2007-052 that requires companies to record profit sharing to employees as an expense rather than as an appropriation of earnings. If the Company may settle the obligation by cash, by issuing shares, or in combination of both cash and shares, profit sharing 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 profit sharing to employees in stock 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 profit sharing to employees 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. This adjustment caused both of the basic and diluted after income tax EPS for the year ended December 31, 2008 to decrease from NT$3.86 to NT$3.84 and NT$3.83 to NT$3.81, respectively.
 
23.   DISCLOSURES FOR FINANCIAL INSTRUMENTS
  a.   Fair values of financial instruments were as follows:
                                 
    December 31
    2009   2008
    Carrying           Carrying    
    Amount   Fair Value   Amount   Fair Value
Assets
                               
 
                               
Financial assets at fair value through profit or loss
  $ 181,743     $ 181,743     $ 42,460     $ 42,460  
Available-for-sale financial assets
    1,046,672       1,046,672       2,032,658       2,032,658  
Held-to-maturity financial assets
    22,163,898       22,251,517       17,643,324       17,674,733  
 
                               
Liabilities
                               
 
                               
Financial liabilities at fair value through profit or loss
                83,618       83,618  
Bonds payable (including current portion)
    4,500,000       4,574,979       12,500,000       12,612,423  
Other long-term payables (including current portion)
    1,185,534       1,185,534       1,957,673       1,957,673  
  b.   Methods and assumptions used in the estimation of 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)   The fair values of those derivatives and structured time deposits are determined using valuation techniques incorporating estimates and assumptions that were consistent with prevailing market conditions.
 
  4)   Fair value of the bonds payable was based on their quoted market price.
 
  5)   Fair value of other long-term payables was based on the present value of expected cash flows, which approximates their carrying amount.

-31-


 

  c.   The changes in fair value of derivatives contracts which were outstanding as of December 31, 2009 and 2008 estimated using valuation techniques were recognized as net gains of NT$181,743 thousand and net losses of NT$41,158 thousand, respectively.
 
  d.   As of December 31, 2009 and 2008, financial assets exposed to fair value interest rate risk were NT$23,392,313 thousand and NT$19,718,442 thousand, respectively and financial liabilities exposed to fair value interest rate risk were NT$4,500,000 thousand and NT$12,583,618 thousand, respectively.
 
  e.   Movements of the unrealized gains or losses on financial instruments for the years ended December 31, 2009 and 2008 were as follows:
                         
    Year Ended December 31, 2009  
    From     From        
    Available-     Available-for-        
    for-sale     sale Financial        
    Financial     Assets Held by        
    Assets     Investees     Total  
 
                       
Balance, beginning of year
  $ 32,658     $ (320,000 )   $ (287,342 )
Recognized directly in shareholders’ equity
    51,384       726,949       778,333  
Removed from shareholders’ equity and recognized in earnings
    (37,370 )           (37,370 )
 
                 
 
                       
Balance, end of year
  $ 46,672     $ 406,949     $ 453,621  
 
                 
                         
    Year Ended December 31, 2008  
    From     From        
    Available-     Available-for-        
    for-sale     sale Financial        
    Financial     Assets Held by        
    Assets     Investees     Total  
 
                       
Balance, beginning of year
  $ 266,573     $ 414,424     $ 680,997  
Recognized directly in shareholders’ equity
    209,489       (734,424 )     (524,935 )
Removed from shareholders’ equity and recognized in earnings
    (443,404 )           (443,404 )
 
                 
 
                       
Balance, end of year
  $ 32,658     $ (320,000 )   $ (287,342 )
 
                 
  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 and held-to-maturity 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 turmoil in the global financial market, the Company had evaluated its financial instruments and the Company believed the exposure to market risk as of December 31, 2009 was not significant.

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  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 turmoil 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 December 31, 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.

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    Transactions with the aforementioned parties, other than those disclosed in other notes, are summarized as follows:
                                 
    2009     2008  
    Amount     %     Amount     %  
For the year
                               
 
                               
Sales
                               
TSMC North America
  $ 161,251,368       54     $ 192,986,719       58  
Others
    2,231,343       1       1,814,440       1  
 
                       
 
                               
 
  $ 163,482,711       55     $ 194,801,159       59  
 
                       
 
                               
Purchases
                               
WaferTech
  $ 5,560,707       18     $ 8,207,876       22  
TSMC China
    3,787,113       12       4,717,676       12  
SSMC
    3,537,659       11       4,441,795       12  
VIS
    3,312,656       10       3,209,028       8  
 
                       
 
                               
 
  $ 16,198,135       51     $ 20,576,375       54  
 
                       
 
                               
Manufacturing expenses
                               
Xintec (rent and outsourcing)
  $ 36,101           $        
VisEra (outsourcing)
    35,737             72,174        
 
                       
 
                               
 
  $ 71,838           $ 72,174        
 
                       
 
                               
Marketing expenses — commission
                               
TSMC Europe
  $ 325,463       16     $ 367,846       16  
TSMC Japan
    233,855       12       251,367       11  
Others
    24,726       1       16,408       1  
 
                       
 
                               
 
  $ 584,044       29     $ 635,621       28  
 
                       
 
                               
Research and development expenses
                               
TSMC Technology (primarily consulting fee)
  $ 409,686       2     $ 352,900       2  
TSMC Canada (primarily consulting fee)
    157,527       1       172,291       1  
Others
    49,251             19,934        
 
                       
 
                               
 
  $ 616,464       3     $ 545,125       3  
 
                       
 
                               
Sales of property, plant and equipment
                               
Xintec
  $ 58,450       91     $        
TSMC China
    595       1       1,849,317       91  
Other
    263             10,843        
 
                       
 
                               
 
  $ 59,308       92     $ 1,860,160       91  
 
                       

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    2009     2008  
    Amount     %     Amount     %  
 
                               
Non-operating income and gains
                               
VIS (primarily technical service income, see Note 27e)
  $ 224,740       5     $ 296,250       4  
TSMC China
    184,626       4       297,418       5  
SSMC (primarily technical service income, see Note 27d)
    141,488       3       244,865       4  
VisEra
                100,821       1  
Others
    263             178        
 
                       
 
                               
 
  $ 551,117       12     $ 939,532       14  
 
                       
 
                               
As of December 31
                               
 
                               
Receivables
                               
TSMC North America
  $ 22,203,242       98     $ 11,512,777       98  
Others
    338,531       2       215,427       2  
 
                       
 
                               
 
  $ 22,541,773       100     $ 11,728,204       100  
 
                       
 
                               
Other receivables
                               
TSMC China
  $ 111,103       45     $ 112,933       23  
VIS
    81,663       33       42,969       9  
SSMC
    39,629       16       56,949       12  
TSMC North America
    8,676       4       256,624       52  
Others
    4,932       2       20,267       4  
 
                       
 
                               
 
  $ 246,003       100     $ 489,742       100  
 
                       
 
                               
Payables
                               
WaferTech
  $ 561,165       27     $ 171,089       14  
VIS
    529,060       26       317,491       26  
TSMC China
    481,500       24       117,417       10  
SSMC
    238,741       12       162,807       14  
TSMC Technology
    109,220       5       41,904       3  
TSMC North America
    4,222             327,250       28  
Others
    115,434       6       64,392       5  
 
                       
 
                               
 
  $ 2,039,342       100     $ 1,202,350       100  
 
                       
 
                               
Deferred credits
                               
TSMC China
  $ 7,970       17     $ 183,896       40  
 
                       
    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 leased certain buildings, facilities, and machinery and equipment from Xintec. The lease terms and prices were determined in accordance with mutual agreements. The rental expense was classified under manufacturing expenses.

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    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 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 was 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.
 
    Compensation of directors and management personnel:
                 
    Years Ended December 31  
    2009     2008  
 
               
Salaries, incentives and special compensation
  $ 588,508     $ 272,325  
Bonus
    411,358       705,376  
 
           
 
               
 
  $ 999,866     $ 977,701  
 
           
    The information about the compensation of directors and management personnel is available in the annual report for the shareholders’ meeting. Total compensation expense for the year ended December 31, 2009 includes estimated profit sharing to employees and bonus to directors of the Company that relate to 2009 but will be paid in the following year. The actual amount will be finalized and approved upon the resolution of the shareholders’ meeting in 2010. The total compensation for the year ended December 31, 2008 included the bonuses appropriated from earnings of 2008 which was approved by the shareholders’ meeting held in 2009.
 
25.   PLEDGED OR MORTGAGED ASSETS
 
    As of December 31, 2009, the Company had pledged time deposits of NT$824,797 thousand (classified as other financial assets) as collateral for land lease agreements and customs duty guarantee.
 
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 March 2010 to December 2029 and can be renewed upon expiration.
 
    As of December 31, 2009, future lease payments were as follows:
         
Year   Amount  
 
       
2010
  $ 355,842  
2011
    353,566  
2012
    353,566  
2013
    331,921  
2014
    318,935  
2015 and thereafter
    2,754,388  
 
     
 
       
 
  $ 4,468,218  
 
     

-36-


 

27.   SIGNIFICANT COMMITMENTS AND CONTINGENCIES
 
    Significant commitments and contingencies of the Company as of December 31, 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 December 31, 2009 the Company had a total of US$29,582 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.
 
  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 December 31, 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

-37-


 

      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. On November 4, 2009, after a two-month trial, a jury in the California action found SMIC to have both breached the 2005 settlement agreement and misappropriated TSMC, TSMC North America and WaferTech’s trade secrets. TSMC, TSMC North America and WaferTech have subsequently settled both lawsuits with SMIC. Pursuant to the new settlement agreement, the parties have agreed to the entry of a stipulated judgment in favor of TSMC, TSMC North America and WaferTech in the California action, and to the dismissal of SMIC’s appeal against the Beijing High Court’s finding in favor of TSMC, TSMC North America and WaferTech. Under the new settlement agreement and the related stipulated judgment, SMIC has agreed to make cash payments by installments to TSMC totaling US$200 million, which are in addition to the US$135 million previously paid to TSMC under the 2005 settlement agreement, and to provide TSMC with other valuable consideration.
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;
 
  d.   Marketable securities acquired or disposed of at costs or prices of at least NT$100 million or 20% of the paid-in capital: Please see Table 2 attached;
 
  e.   Acquisition of individual real estate properties at costs of at least NT$100 million or 20% of the paid-in capital: Please see Table 3 attached;
 
  f.   Disposal of individual real estate properties at prices of at least NT$100 million or 20% of the paid-in capital: None;
 
  g.   Total purchases from or sales to related parties of at least NT$100 million or 20% of the paid-in capital: Please see Table 4 attached;

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  h.   Receivable from related parties amounting to at least NT$100 million or 20% of the paid-in capital: Please see Table 5 attached;
 
  i.   Names, locations, and related information of investees on which the Company exercises significant influence: Please see Table 6 attached;
 
  j.   Information about derivatives of investees over which the Company has a controlling interest:
 
      TSMC China entered into forward exchange contracts during the year ended December 31, 2009 to manage exposures due to foreign exchange rate fluctuations.
 
      As of December 31, 2009, no forward exchange contracts of TSMC China was outstanding. For the year ended December 31, 2009, net losses arising from forward exchange contracts of TSMC China were NT$866 thousand.
 
      Xintec entered into forward exchange contracts during the year ended December 31, 2009 to manage exposures due to foreign exchange rate fluctuations. Outstanding forward exchange contracts as of December 31, 2009:
         
        Contract Amount
    Maturity Date   (In Thousands)
 
       
Sell US$/Buy NT$
  February 2010   US$21,300/NT$686,788
      For the year ended December 31, 2009, net gains arising from forward exchange contracts of Xintec were NT$4,448 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 7 attached.
 
  2)   Significant direct or indirect transactions with the investee, its prices and terms of payment, unrealized gain or loss, and other related information which is helpful to understand the impact of investment in mainland China on financial reports: Please see Note 24.
29.   SEGMENT FINANCIAL INFORMATION
  a.   Industry financial information
 
      The Company operates in one industry. Therefore, the disclosure of industry financial information is not applicable to the Company.
 
  b.   Geographic information
 
      The Company has no significant foreign operations. Therefore, the disclosure of geographic information is not applicable to the Company.

-39-


 

  c.   Export sales
                 
    Years Ended December 31  
Area   2009     2008  
 
               
Americas
  $ 166,813,136     $ 199,512,258  
Asia
    59,496,755       49,386,819  
Europe and others
    31,350,249       37,622,148  
 
           
 
               
 
  $ 257,660,140     $ 286,521,225  
 
           
      The export sales information is based on the amounts billed to customers within the areas.
 
  d.   Major customers representing at least 10% of gross sales
                                 
    Years Ended December 31  
    2009     2008  
    Amount     %     Amount     %  
 
                               
Customer A
  $ 161,251,368       54     $ 192,986,719       58  
 
                           

-40-


 

TABLE 1
Taiwan Semiconductor Manufacturing Company Limited and Investees
MARKETABLE SECURITIES HELD
DECEMBER 31, 2009
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
                                                 
                December 31, 2009    
Held           Financial                           Market Value or Net    
Company       Relationship with   Statement   Shares/Units   Carrying Value   Percentage of   Asset Value    
Name   Marketable Securities Type and Name   the Company   Account   (In Thousands)   (US$ in Thousands)   Ownership (%)   (US$ in Thousands)   Note
TSMC  
Corporate bond
                                           
   
Taiwan Mobile Co., Ltd.
    Available-for-sale financial assets         $ 1,046,672       N/A     $ 1,046,672      
   
Formosa Petrochemical Corporation
    Held-to-maturity financial assets           3,178,551       N/A       3,200,302      
   
Taiwan Power Company
              3,004,941       N/A       3,011,743      
   
Nan Ya Plastics Corporation
              2,000,145       N/A       2,029,935      
   
Formosa Plastics Corporation
              1,671,815       N/A       1,685,345      
   
China Steel Corporation
              1,512,130       N/A       1,528,117      
   
CPC Corporation, Taiwan
              500,031       N/A       499,913      
   
Taipei Fubon Commercial Bank Co., Ltd.
              298,884       N/A       298,751      
   
First Commercial Bank Co., Ltd.
              99,814       N/A       99,815      
 
   
Government bond
                                           
   
European Investment Bank Bonds
    Held-to-maturity financial assets           2,003,877       N/A       2,025,500      
   
2003 Asian Development Bank Govt. Bond
              893,710       N/A       875,103      
 
   
Stock
                                           
   
TSMC Global
  Subsidiary   Investments accounted for using
equity method
    1       45,397,256       100       45,397,256      
   
TSMC Partners
  Subsidiary       988,268       32,545,619       100       32,545,619      
   
VIS
  Investee accounted for using
equity method
      628,223       9,365,232       37       10,114,398      
   
SSMC
  Investee accounted for using
equity method
      314       6,157,141       39       5,581,994      
   
TSMC North America
  Subsidiary       11,000       2,723,727       100       2,723,727      
   
Xintec
  Investee with a controlling
financial interest
      93,081       1,475,014       41       1,437,395      
   
GUC
  Investee with a controlling
financial interest
      46,688       983,126       35       7,913,592      
   
TSMC Europe
  Subsidiary             159,467       100       159,467      
   
TSMC Japan
  Subsidiary       6       135,663       100       135,663      
   
TSMC Korea
  Subsidiary       80       18,519       100       18,519      
   
United Industrial Gases Co., Ltd.
    Financial assets carried at cost     16,783       193,584       10       297,655      
   
Shin-Etsu Handotai Taiwan Co., Ltd.
        10,500       105,000       7       332,943      
   
W.K. Technology Fund IV
        4,000       40,000       2       43,975      
 
   
Fund
                                           
   
Horizon Ventures Fund
    Financial assets carried at cost           103,992       12       103,992      
   
Crimson Asia Capital
              59,412       1       59,412      
   
Capital
                                           
   
TSMC China
  Subsidiary   Investments accounted for using
equity method
          2,961,043       100       2,958,707      
   
VTAF III
  Subsidiary             1,309,615       98       1,292,412      
   
VTAF II
  Subsidiary             1,122,810       98       1,117,773      
   
Emerging Alliance
  Subsidiary             305,866       99       305,866      
(Continued)

-41-


 

                                                 
                December 31, 2009    
Held           Financial                           Market Value or Net    
Company   Marketable Securities   Relationship with   Statement   Shares/Units   Carrying Value   Percentage of   Asset Value    
Name   Type and Name   the Company   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$ 20,543       N/A     US$ 21,312      
   
General Elec Cap Corp. Mtn
            US$ 20,219       N/A     US$ 21,182      
   
 
                                           
   
Common stock
                                           
   
TSMC Development, Inc. (TSMC Development)
  Subsidiary   Investments accounted for using equity method     1     US$ 340,387       100     US$ 340,387      
   
 
                                           
   
VisEra Holding Company
  Investee accounted
for using equity
method
      43,000     US$ 70,967       49     US$ 70,967      
   
 
                                           
   
InveStar Semiconductor Development Fund, Inc. (II) LDC. (ISDF II)
  Subsidiary       21,415     US$ 13,741       97     US$ 13,741      
   
TSMC Technology
  Subsidiary       1     US$ 9,071       100     US$ 9,071      
   
 
                                           
   
InveStar Semiconductor Development Fund, Inc. (ISDF)
  Subsidiary       7,680     US$ 7,336       97     US$ 7,336      
   
 
                                           
   
TSMC Canada
  Subsidiary       2,300     US$ 3,193       100     US$ 3,193      
   
 
                                           
   
Mcube Inc.
  Investee accounted
for using equity
method
      5,333     US$ 800       70     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$ 20,334       N/A     US$ 21,182      
   
JP Morgan Chase & Co.
            US$ 15,000       N/A     US$ 15,000      
   
 
                                           
   
Stock
                                           
   
WaferTech
  Subsidiary   Investments accounted for using equity method     293,637     US$ 154,432       100     US$ 154,432      
   
 
                                           
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.
        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.         1,000     US$ 24       1     US$ 24      
   
 
                                           
   
Mosaic Systems, Inc.
        2,481     US$ 12       6     US$ 12      
   
 
                                           
   
Next IO, Inc.
        800     US$ 500       1     US$ 500      
   
 
                                           
   
Optichron, Inc.
        1,281     US$ 1,072       2     US$ 1,072      
   
 
                                           
   
Pixim, Inc.
        4,641     US$ 1,137       2     US$ 1,137      
   
 
                                           
   
QST Holdings, LLC
            US$ 131       4     US$ 131      
   
 
                                           
   
Teknovus, Inc.
        6,977     US$ 1,327       2     US$ 1,327      
   
 
                                           
   
Capital
                                           
   
VentureTech Alliance Holdings, LLC (VTA Holdings)
  Subsidiary   Investments accounted for using equity method                 7            
   
 
                                           
VTAF II  
Common stock
                                           
   
Leadtrend
    Available-for-sale financial assets     1,515     US$ 9,721       4     US$ 9,721      
   
RichWave Technology Corp.
    Financial assets carried at cost     1,043     US$ 730       1     US$ 730      
   
Sentelic
        1,200     US$ 2,040       15     US$ 2,040      
   
 
                                           
   
Preferred stock
                                           
   
5V Technologies, Inc.
    Financial assets carried at cost     2,890     US$ 2,168       4     US$ 2,168      
   
Aquantia
        3,974     US$ 3,816       5     US$ 3,816      
   
Audience, Inc.
        7,956     US$ 1,838       2     US$ 1,838      
   
Axiom Microdevices, Inc.
        759     US$ 650       13     US$ 650      
(Continued)

-42-


 

                                                 
                December 31, 2009    
Held           Financial                           Market Value or Net    
Company   Marketable Securities   Relationship with   Statement   Shares/Units   Carrying Value   Percentage of   Asset Value    
Name   Type and Name   the Company   Account   (In Thousands)   (US$ in Thousands)   Ownership (%)   (US$ in Thousands)   Note
 
   
Beceem Communications
    Financial assets carried at cost     834     US$ 1,701       1     US$ 1,701      
   
Impinj, Inc.
        475     US$ 1,000           US$ 1,000      
   
Next IO, Inc.
        3,795     US$ 953       2     US$ 953      
   
Optichron, Inc.
        2,784     US$ 2,664       4     US$ 2,664      
   
Pixim, Inc.
        33,347     US$ 1,878       2     US$ 1,878      
   
Power Analog Microelectronics
        7,027     US$ 3,383       19     US$ 3,383      
   
QST Holdings, LLC
            US$ 593       13     US$ 593      
   
Teknovus, Inc.
        1,599     US$ 454           US$ 454      
   
Xceive
        3,936     US$ 1,516       2     US$ 1,516      
   
 
                                           
   
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
    9,180     US$ 2,112       59     US$ 2,112      
   
Acionn Technology Corporation
  Investee accounted
for using equity
method
      4,500     US$ 566       42     US$ 566      
   
 
                                           
   
Preferred stock
                                           
   
Auramicro, Inc.
    Financial assets carried at cost     4,694     US$ 1,408       20     US$ 1,408      
   
BridgeLux, Inc.
        4,955     US$ 6,391       4     US$ 6,391      
   
Exclara, Inc.
        21,708     US$ 4,568       18     US$ 4,568      
   
GTBF, Inc.
        1,154     US$ 1,500       N/A     US$ 1,500      
   
InvenSense, Inc.
        816     US$ 1,000       1     US$ 1,000      
   
LiquidLeds Lighting Corp.
        1,600     US$ 800       11     US$ 800      
   
M2000, Inc.
        3,000     US$ 3,000       5     US$ 3,000      
   
Neoconix, Inc.
        3,283     US$ 4,608       6     US$ 4,608      
   
Powervation, Ltd.
        310     US$ 4,678       16     US$ 4,678      
   
Quellan, Inc.
        3,106     US$ 457       6     US$ 457      
   
Silicon Technical Services, LLC
        1,055     US$ 1,208       1     US$ 1,208      
   
Tilera, Inc.
        3,222     US$ 2,781       3     US$ 2,781      
   
Validity Sensors, Inc.
        8,070     US$ 3,089       3     US$ 3,089      
   
 
                                           
   
Capital
                                           
   
Growth Fund Limited (Growth Fund)
  Subsidiary   Investments accounted for using
equity method
        US$ 823       100     US$ 823      
   
 
                                           
   
VTA Holdings
  Subsidiary                   62            
   
 
                                           
Growth Fund  
Common stock
                                           
   
Staccato
    Financial assets carried at cost     10     US$ 25           US$ 25      
   
SiliconBlue Technologies, Inc.
        5,107     US$ 762       2     US$ 762      
   
 
                                           
ISDF  
Common stock
                                           
   
Memsic, Inc.
    Available-for-sale financial assets     1,364     US$ 4,472       6     US$ 4,472      
   
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.
        1,008     US$ 290       1     US$ 290      
   
Sonics, Inc.
        230     US$ 497       2     US$ 497      
(Continued)

-43-


 

                                                 
                December 31, 2009    
Held           Financial                           Market Value or Net    
Company   Marketable Securities   Relationship with   Statement   Shares/Units   Carrying Value   Percentage of   Asset Value    
Name   Type and Name   the Company   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$ 3,754       5     US$ 3,754      
   
Sonics, Inc.
    Financial assets carried at cost     278     US$ 10       3     US$ 10      
   
Epic Communication, Inc.
        50     US$ 23           US$ 23      
   
EON Technology, Corp.
        2,368     US$ 656       3     US$ 656      
   
Goyatek Technology, Corp.
        932     US$ 545       6     US$ 545      
   
Capella Microsystems (Taiwan), Inc.
        561     US$ 210       2     US$ 210      
   
Auden Technology MFG. Co., Ltd.
        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.
        1,032     US$ 686       6     US$ 686      
   
Kilopass Technology, Inc.
        3,887     US$ 500       5     US$ 500      
   
Sonics, Inc.
        264     US$ 456       3     US$ 456      
   
 
                                           
GUC  
Open-end mutual fund
                                           
   
Jih Sun Bond Fund
    Available-for-sale financial assets     5,668     US$ 80,008           US$ 80,008      
   
FSITC Taiwan Bond Fund
        352       60,005             60,005      
   
Cathay Bond Fund
        2,509       30,001             30,001      
   
 
                                           
   
Common stock
                                           
   
GUC-NA
  Subsidiary   Investments accounted for using
equity method
    800       38,617       100       38,617      
   
GUC-Japan
  Subsidiary       1       12,899       100       12,899      
   
GUC-Europe
  Subsidiary             5,213       100       5,213      
   
GUC-BVI
  Subsidiary       550       17,466       100       17,466      
   
 
                                           
Xintec  
Capital
                                           
   
Compositech Ltd.
    Financial assets carried at cost     587             3            
   
 
                                           
TSMC Global  
Corporate bond
                                           
   
Ab Svensk Exportkredit Swedish
    Available-for-sale financial assets     5,000     US$ 5,144       N/A     US$ 5,144      
   
African Development Bank
        2,600     US$ 2,622       N/A     US$ 2,622      
   
Allstate Life Global Fdg
        220     US$ 221       N/A     US$ 221      
   
Asian Development Bank
        2,500     US$ 2,497       N/A     US$ 2,497      
   
Astrazeneca Plc
        2,150     US$ 2,349       N/A     US$ 2,349      
   
Australia + New Zealand Bkg
        2,000     US$ 2,054       N/A     US$ 2,054      
   
Banco Bilbao Vizcaya P R
        3,250     US$ 3,248       N/A     US$ 3,248      
   
Bank New York Inc. Medium
        2,100     US$ 2,262       N/A     US$ 2,262      
   
Bank of New York Mellon
        2,200     US$ 2,208       N/A     US$ 2,208      
   
Bear Stearns Cos Inc.
        5,000     US$ 4,974       N/A     US$ 4,974      
   
Bear Stearns Cos Inc.
        3,500     US$ 3,391       N/A     US$ 3,391      
   
Bhp Billiton Fin USA Ltd.
        2,000     US$ 2,129       N/A     US$ 2,129      
   
Bnp Paribas SA
        2,310     US$ 2,339       N/A     US$ 2,339      
   
Boeing Co.
        450     US$ 445       N/A     US$ 445      
   
Bsch Issuances Ltd.
        2,250     US$ 2,359       N/A     US$ 2,359      
   
Cello Part/Veri Wirelss
        2,000     US$ 2,068       N/A     US$ 2,068      

-44-


 

                                                 
                December 31, 2009    
Held           Financial                           Market Value or Net    
Company   Marketable Securities   Relationship with   Statement   Shares/Units   Carrying Value   Percentage of   Asset Value    
Name   Type and Name   the Company   Account   (In Thousands)   (US$ in Thousands)   Ownership (%)   (US$ in Thousands)   Note
   
Citibank NA
        5,000     US$ 4,996       N/A     US$ 4,996      
   
Citigroup funding Inc.
        2,000     US$ 2,016       N/A     US$ 2,016      
   
Credit Suisse New York
        2,000     US$ 2,057       N/A     US$ 2,057      
   
European Investment Bank
        2,250     US$ 2,243       N/A     US$ 2,243      
   
Federal Farm Cr Bks
        2,250     US$ 2,254       N/A     US$ 2,254      
   
Finance for Danish Ind
        1,900     US$ 1,900       N/A     US$ 1,900      
   
General Elec Cap Corp.
        1,000     US$ 978       N/A     US$ 978      
   
General Elec Cap Corp.
        7,000     US$ 7,001       N/A     US$ 7,001      
   
General Elec Cap Corp. Fdic Gtd
        2,500     US$ 2,547       N/A     US$ 2,547      
(Continued)

-45-


 

                                             
                December 31, 2009    
Held           Financial                       Market Value or Net    
Company   Marketable Securities   Relationship with   Statement   Shares/Units   Carrying Value   Percentage of   Asset Value    
Name   Type and Name   the Company   Account   (In Thousands)   (US$ in Thousands)   Ownership (%)   (US$ in Thousands)   Note
 
   
Goldman Sachs Group Inc.
    Available-for-sale financial assets     2,000     US$ 1,939     N/A   US$ 1,939      
   
Goldman Sachs Group Incser 2
        3,000     US$ 3,012     N/A   US$ 3,012      
   
Hewlett Packard Co.
        3,000     US$ 3,000     N/A   US$ 3,000      
   
HSBC Fin Corp.
        2,315     US$ 2,233     N/A   US$ 2,233      
   
HSBC USA Inc. Fdic Gtd Tlgp
        2,200     US$ 2,277     N/A   US$ 2,277      
   
IBM Corp.
        1,800     US$ 1,796     N/A   US$ 1,796      
   
International Business Machs
        3,000     US$ 3,027     N/A   US$ 3,027      
   
Intl Bk Recon + Develop
        2,000     US$ 2,069     N/A   US$ 2,069      
   
JP Morgan Chase + Co.
        2,500     US$ 2,523     N/A   US$ 2,523      
   
JP Morgan Chase + Co. Fdic Gtd Tlg
        3,000     US$ 3,030     N/A   US$ 3,030      
   
Kfw
        2,230     US$ 2,236     N/A   US$ 2,236      
   
Kfw Medium Term Nts Book Entry
        1,950     US$ 1,953     N/A   US$ 1,953      
   
Kreditanstalt Fur Wiederaufbau
        650     US$ 673     N/A   US$ 673      
   
Lloyds Tsb Bank Plc Ser 144A
        5,950     US$ 6,049     N/A   US$ 6,049      
   
Mellon Fdg Corp.
        3,500     US$ 3,419     N/A   US$ 3,419      
   
Met Life Glob Funding I
        2,100     US$ 2,142     N/A   US$ 2,142      
   
Met Life Glob Funding I
        500     US$ 502     N/A   US$ 502      
   
Metlife Inc.
        2,000     US$ 2,017     N/A   US$ 2,017      
   
Metropolitan Life Global Fdg
        750     US$ 739     N/A   US$ 739      
   
Metropolitan Life Global Fdg I
        3,340     US$ 3,278     N/A   US$ 3,278      
   
Morgan Stanley
        2,200     US$ 2,212     N/A   US$ 2,212      
   
Morgan Stanley
        2,000     US$ 2,032     N/A   US$ 2,032      
   
Morgan Stanley Fdic Gtd Tlgp
        2,210     US$ 2,244     N/A   US$ 2,244      
   
Morgan Stanley for Equity
        2,000     US$ 1,943     N/A   US$ 1,943      
   
Nordea Bank Fld Plc
        2,250     US$ 2,240     N/A   US$ 2,240      
   
Oesterreichische Kontrollbank
        2,000     US$ 2,059     N/A   US$ 2,059      
   
Ontario (Province of)
        2,000     US$ 1,980     N/A   US$ 1,980      
   
Paccar Finl Corp. Mtn Bk Ent
        1,000     US$ 1,007     N/A   US$ 1,007      
   
Pricoa Global Fdg I Med Term
        1,750     US$ 1,638     N/A   US$ 1,638      
   
Pricoa Global Funding 1
        1,200     US$ 1,167     N/A   US$ 1,167      
   
Pricoa Global Fdg I Medium
        2,200     US$ 2,130     N/A   US$ 2,130      
   
Royal Bk of Scotland Plc
        5,000     US$ 5,078     N/A   US$ 5,078      
   
Royal Bk Scotlnd Grp Plc 144A
        9,450     US$ 9,578     N/A   US$ 9,578      
   
Southern Co.
        600     US$ 602     N/A   US$ 602      
   
Sovereign Bancorp Fdic Gtd Tlg
        2,200     US$ 2,246     N/A   US$ 2,246      
   
State Str Corp.
        1,940     US$ 1,920     N/A   US$ 1,920      
   
Suncorp Metway Ltd.
        2,000     US$ 2,004     N/A   US$ 2,004      
   
Suncorp Metway Ltd.
        5,000     US$ 5,170     N/A   US$ 5,170      
   
Svenska Handelsbanken Ab
        2,200     US$ 2,214     N/A   US$ 2,214      
   
Swedbank Ab
        2,000     US$ 1,994     N/A   US$ 1,994      
   
Swedbank Foreningssparbanken A
        1,500     US$ 1,537     N/A   US$ 1,537      

-46-


 

                                             
                December 31, 2009    
Held           Financial                       Market Value or Net    
Company   Marketable Securities   Relationship with   Statement   Shares/Units   Carrying Value   Percentage of   Asset Value    
Name   Type and Name   the Company   Account   (In Thousands)   (US$ in Thousands)   Ownership (%)   (US$ in Thousands)   Note
 
   
Ubs Ag Stamford
        1,300     US$ 1,300     N/A   US$ 1,300      
   
US Central Federal Cred
        4,800     US$ 4,799     N/A   US$ 4,799      
   
Verizon Communications Inc.
        2,200     US$ 2,294     N/A   US$ 2,294      
   
Verizon Global Fdg Corp.
        500     US$ 528     N/A   US$ 528      
   
Wachovia Corp. New
        4,000     US$ 4,246     N/A   US$ 4,246      
   
Wells Fargo + Company
        2,000     US$ 2,013     N/A   US$ 2,013      
   
Westfield Cap Corp. Ltd.
        500     US$ 514     N/A   US$ 514      
   
Westpac Banking Corp.
        2,100     US$ 2,112     N/A   US$ 2,112      
   
Westpac Banking Corp.
        2,170     US$ 2,168     N/A   US$ 2,168      
   
Nationwide Building Society
    Held-to-maturity financial assets     8,000     US$ 8,000     N/A   US$ 8,008      
   
Westpac Banking Corp. 12/12 Frn
        5,000     US$ 5,000     N/A   US$ 4,999      
(Continued)

-47-


 

                                             
                December 31, 2009    
Held           Financial                       Market Value or Net    
Company   Marketable Securities   Relationship with   Statement   Shares/Units   Carrying Value   Percentage of   Asset Value    
Name   Type and Name   the Company   Account   (In Thousands)   (US$ in Thousands)   Ownership (%)   (US$ in Thousands)   Note
 
   
Agency bond
                                       
   
Fannif Mae
    Available-for-sale financial assets     2,820     US$ 2,814     N/A   US$ 2,814      
   
Fed Hm Ln Pc Pool 1b2830
        2,554     US$ 2,635     N/A   US$ 2,635      
   
Fed Hm Ln Pc Pool 1g0115
        2,271     US$ 2,315     N/A   US$ 2,315      
   
Fed Hm Ln Pc Pool 1k1210
        2,053     US$ 2,121     N/A   US$ 2,121      
   
Fed Hm Ln Pc Pool 780741
        2,121     US$ 2,181     N/A   US$ 2,181      
   
Federal Farm Cr Bks
        2,000     US$ 2,117     N/A   US$ 2,117      
   
Federal Farm Credit Bank
        3,000     US$ 2,990     N/A   US$ 2,990      
   
Federal Farm Credit Bank
        2,200     US$ 2,258     N/A   US$ 2,258      
   
Federal Home Ln Bank
        11,000     US$ 11,028     N/A   US$ 11,028      
   
Federal Home Ln Mtg Corp.
        1,350     US$ 1,352     N/A   US$ 1,352      
   
Federal Home Ln Mtg Corp.
        3,421     US$ 3,533     N/A   US$ 3,533      
   
Federal Home Ln Mtg Corp.
        2,662     US$ 2,763     N/A   US$ 2,763      
   
Federal Home Ln Mtg Corp.
        2,469     US$ 2,521     N/A   US$ 2,521      
   
Federal Home Ln Mtg Corp.
        2,309     US$ 2,350     N/A   US$ 2,350      
   
Federal Home Ln Mtg Corp.
        2,358     US$ 2,448     N/A   US$ 2,448      
   
Federal Home Loan Bank
        10,000     US$ 9,987     N/A   US$ 9,987      
   
Federal Home Loan Bank
        8,000     US$ 7,992     N/A   US$ 7,992      
   
Federal Home Loan Bank
        10,000     US$ 10,012     N/A   US$ 10,012      
   
Federal Home Loan Bank
        4,700     US$ 4,715     N/A   US$ 4,715      
   
Federal Home Loan Bank
        11,200     US$ 11,186     N/A   US$ 11,186      
   
Federal Home Loan Bank
        3,310     US$ 3,319     N/A   US$ 3,319      
   
Federal Home Loan Bank
        3,000     US$ 2,989     N/A   US$ 2,989      
   
Federal Home Loan Bank
        3,000     US$ 2,983     N/A   US$ 2,983      
   
Federal Home Loan Bank
        3,000     US$ 2,984     N/A   US$ 2,984      
   
Federal Home Loan Mtg Corp.
        1,411     US$ 1,441     N/A   US$ 1,441      
   
Federal Home Loan Mtg Corp.
        1,940     US$ 2,012     N/A   US$ 2,012      
   
Federal National Mort Assoc
        2,117     US$ 2,176     N/A   US$ 2,176      
   
Federal National Mort Assoc
        1,752     US$ 1,782     N/A   US$ 1,782      
   
Federal Natl Mtg Assn Gtd Remi
        2,854     US$ 2,926     N/A   US$ 2,926      
   
Federal Natl Mtg Assn Mtn
        2,669     US$ 2,765     N/A   US$ 2,765      
   
Federal Natl Mtg Assn Remic
        2,871     US$ 2,953     N/A   US$ 2,953      
   
Federal Natl Mtg Assn
        4,000     US$ 4,228     N/A   US$ 4,228      
   
Federal Natl Mtge Assn
        2,039     US$ 2,126     N/A   US$ 2,126      
   
Fhr 3087 Jb
        2,540     US$ 2,656     N/A   US$ 2,656      
   
Fnma Pool 745688
        2,272     US$ 2,336     N/A   US$ 2,336      
   
Fnma Pool 790772
        1,527     US$ 1,568     N/A   US$ 1,568      
   
Fnma Pool 819649
        2,318     US$ 2,383     N/A   US$ 2,383      
   
Fnma Pool 829989
        2,146     US$ 2,221     N/A   US$ 2,221      
   
Fnma Pool 846233
        2,288