TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD.
 

1934 Act Registration No. 1-14700
 
 
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of April 2006
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, 2005 and 2004 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, 2005 and 2004, 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, 2005 and 2004, and the results of its operations and its cash flows for the years then ended in conformity with Guidelines Governing the Preparation of Financial Reports by Securities Issuers and accounting principles generally accepted in the Republic of China.
We have also audited the consolidated financial statements of Taiwan Semiconductor Manufacturing Company Limited and subsidiaries as of and for the years ended December 31, 2005 and 2004, and have expressed an unqualified opinion on such financial statements.
January 12, 2006
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.

- 1 -


 

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED
BALANCE SHEETS
DECEMBER 31, 2005 AND 2004
(In Thousands of New Taiwan Dollars, Except Par Value)
                                 
    2005     2004  
    Amount     %     Amount     %  
ASSETS
                               
 
                               
CURRENT ASSETS
                               
Cash and cash equivalents (Notes 2, 3 and 4)
  $ 85,383,583       17     $ 65,531,818       14  
Short-term investments, net (Notes 2 and 4)
    47,055,347       9       52,979,095       11  
Receivables from related parties (Note 18)
    21,050,604       4       16,136,039       3  
Notes and accounts receivable
    20,591,818       4       15,326,881       3  
Allowance for doubtful receivables (Note 2)
    (976,344 )           (980,461 )      
Allowance for sales returns and others (Note 2)
    (4,269,969 )     (1 )     (3,327,914 )     (1 )
Other receivables from related parties (Note 18)
    1,797,714       1       1,667,383        
Other financial assets (Notes 2 and 22)
    2,403,929       1       2,080,640       1  
Inventories, net (Notes 2 and 5)
    16,257,955       3       14,171,945       3  
Deferred income tax assets (Notes 2 and 12)
    7,013,000       1       8,849,000       2  
Prepaid expenses and other current assets
    1,254,779             1,232,885        
 
                       
 
                               
Total current assets
    197,562,416       39       173,667,311       36  
 
                       
 
                               
LONG-TERM INVESTMENTS (Notes 2, 6, 16 and 22)
                               
Equity method
    51,076,803       10       46,828,322       10  
Cost method
    807,490             772,634        
Long-term bonds
    18,548,308       4       15,170,167       3  
Other investments
    10,227,000       2       10,521,740       2  
 
                       
 
                               
Total long-term investments
    80,659,601       16       73,292,863       15  
 
                       
 
                               
PROPERTY, PLANT AND EQUIPMENT (Notes 2, 7 and 18)
                               
Cost
                               
Buildings
    90,769,622       18       84,299,167       17  
Machinery and equipment
    459,850,773       91       390,719,215       80  
Office equipment
    7,850,035       1       7,041,132       1  
 
                       
 
    558,470,430       110       482,059,514       98  
Accumulated depreciation
    (359,191,829 )     (71 )     (300,006,201 )     (61 )
Advance payments and construction in progress
    14,867,032       3       45,923,087       10  
 
                       
 
                               
Property, plant and equipment, net
    214,145,633       42       227,976,400       47  
 
                       
 
                               
GOODWILL (Note 2)
    1,567,756             1,916,146        
 
                       
 
                               
OTHER ASSETS
                               
Deferred charges, net (Notes 2, 8 and 21)
    6,681,144       1       8,845,144       2  
Deferred income tax assets (Notes 2 and 12)
    6,759,955       2       1,645,003        
Refundable deposits
    83,642             85,413        
Assets leased to others, net (Note 2)
    72,879             78,613        
Idle assets (Note 2)
    6,789             46,317        
 
                       
 
                               
Total other assets
    13,604,409       3       10,700,490       2  
 
                       
 
                               
TOTAL
  $ 507,539,815       100     $ 487,553,210       100  
 
                       
 
                               
LIABILITIES AND SHAREHOLDERS’ EQUITY
                               
 
                               
CURRENT LIABILITIES
                               
Accounts payable
  $ 8,052,106       1     $ 6,488,617       1  
Payables to related parties (Notes 18 and 21)
    3,242,197       1       3,198,490       1  
Income tax payable (Notes 2 and 12)
    3,815,888       1       379,903        
Accrued expenses and other current liabilities (Notes 2, 10, 21 and 22)
    8,214,994       1       8,917,533       2  
Payables to contractors and equipment suppliers
    8,859,230       2       31,154,309       6  
Current portion of long-term bonds payable (Note 9)
                10,500,000       2  
 
                       
 
                               
Total current liabilities
    32,184,415       6       60,638,852       12  
 
                       
 
                               
LONG-TERM LIABILITIES
                               
Bonds payable (Note 9)
    19,500,000       4       19,500,000       4  
Other long-term payables (Notes 10 and 21)
    1,511,100             1,934,968        
Other payables to related parties (Notes 18 and 21)
    1,100,475             2,317,972       1  
 
                       
 
                               
Total long-term liabilities
    22,111,575       4       23,752,940       5  
 
                       
 
                               
OTHER LIABILITIES
                               
Accrued pension cost (Notes 2 and 11)
    3,461,392       1       3,101,196       1  
Guarantee deposits (Note 21)
    2,892,945       1       412,393        
Deferred credits (Notes 2 and 18)
    1,259,139             682,530        
 
                       
 
                               
Total other liabilities
    7,613,476       2       4,196,119       1  
 
                       
 
                               
Total liabilities
    61,909,466       12       88,587,911       18  
 
                       
 
                               
SHAREHOLDERS’ EQUITY (Notes 2, 14, 15 and 16)
                               
Capital stock — $10 par value
                               
Authorized: 27,050,000 thousand shares in 2005 and 24,600,000 thousand shares in 2004
                               
Issued: 24,730,025 thousand shares in 2005 and 23,251,964 thousand shares in 2004
    247,300,246       49       232,519,637       48  
Capital surplus
    57,117,886       11       56,537,259       11  
Retained earnings
                               
Appropriated as legal capital reserve
    34,348,208       7       25,528,007       5  
Appropriated as special capital reserve
    2,226,427                    
Unappropriated earnings
    106,196,399       21       88,202,009       18  
Others
                               
Cumulative translation adjustments
    (640,742 )           (2,226,427 )      
Treasury stock (at cost) — 32,938 thousand shares in 2005 and 45,521 thousand shares in 2004
    (918,075 )           (1,595,186 )      
 
                       
 
                               
Total shareholders’ equity
    445,630,349       88       398,965,299       82  
 
                       
 
                               
TOTAL
  $ 507,539,815       100     $ 487,553,210       100  
 
                       
The accompanying notes are an integral part of the financial statements.

- 2 -


 

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)
                                 
    2005     2004  
    Amount     %     Amount     %  
GROSS SALES (Notes 2 and 18)
  $ 270,315,064             $ 260,726,896          
 
                               
SALES RETURNS AND ALLOWANCES (Note 2)
    5,726,700               4,734,469          
 
                       
 
                               
NET SALES
    264,588,364       100       255,992,427       100  
 
                               
COST OF SALES (Notes 13 and 18)
    149,344,315       56       145,831,843       57  
 
                       
 
                               
GROSS PROFIT
    115,244,049       44       110,160,584       43  
 
                       
 
OPERATING EXPENSES (Notes 13 and 18)
                               
Research and development
    13,395,801       5       12,516,434       5  
General and administrative
    7,485,011       3       9,367,010       3  
Sales and marketing
    1,349,413       1       1,454,362       1  
 
                       
 
                               
Total operating expenses
    22,230,225       9       23,337,806       9  
 
                       
 
                               
INCOME FROM OPERATIONS
    93,013,824       35       86,822,778       34  
 
                       
 
                               
NON-OPERATING INCOME AND GAINS
                               
Interest (Notes 2 and 22)
    2,769,978       1       1,687,681       1  
Settlement income (Note 20)
    950,046       1              
Gain on disposal of property, plant and equipment (Notes 2 and 18)
    494,374             164,147        
Technical service income (Notes 18 and 21)
    491,267             423,804        
Equity in earnings of equity method investees, net (Notes 2 and 6)
                4,040,319       2  
Gain on sales of investments, net (Note 2)
                90,319        
Others (Note 18)
    366,344             378,778        
 
                       
 
                               
Total non-operating income and gains
    5,072,009       2       6,785,048       3  
 
                       
 
                               
NON-OPERATING EXPENSES AND LOSSES
                               
Interest (Notes 2, 7, 9 and 22)
    2,429,568       1       1,278,072       1  
Equity in losses of equity method investees, net (Notes 2 and 6)
    1,052,045       1              
Unrealized valuation loss on short-term investments (Notes 2 and 4)
    337,160             75,212        
Loss on sales of investments, net (Note 2)
    149,498                    
(Continued)

- 3 -


 

                                 
    2005     2004  
    Amount     %     Amount     %  
 
                               
Loss on disposal of property, plant, equipment and idle assets (Note 2)
  $ 59,992           $ 107,722        
Foreign exchange loss, net (Notes 2 and 22)
    34,379             323,080        
Others (Note 2)
    203,768             45,156        
 
                       
 
                               
Total non-operating expenses and losses
    4,266,410       2       1,829,242       1  
 
                       
 
                               
INCOME BEFORE INCOME TAX
    93,819,423       35       91,778,584       36  
 
                               
INCOME TAX BENEFITS (EXPENSES) (Notes 2 and 12)
    (244,388 )           537,531        
 
                       
 
                               
NET INCOME
  $ 93,575,035       35     $ 92,316,115       36  
 
                       
                                 
    2005     2004  
    Before     After     Before     After  
    Income     Income     Income     Income  
    Tax     Tax     Tax     Tax  
EARNINGS PER SHARE (NT$, Note 17)
                               
Basic earnings per share
  $ 3.80     $ 3.79     $ 3.71     $ 3.73  
 
                       
Diluted earnings per share
  $ 3.80     $ 3.79     $ 3.71     $ 3.73  
 
                       
The pro forma net income and earnings per share (after income tax) are shown as follows, and are based on the assumption that the parent company stock held by its subsidiaries is treated as an investment instead of as treasury stock (Notes 2 and 16):
                 
    2005     2004  
NET INCOME
  $ 93,881,698     $ 92,340,760  
 
           
 
               
EARNINGS PER SHARE (NT$)
               
Basic earnings per share
  $ 3.80     $ 3.73  
 
           
Diluted earnings per share
  $ 3.79     $ 3.73  
 
           
 
The accompanying notes are an integral part of the financial statements.   (Concluded)

- 4 -


 

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
(In Thousands of New Taiwan Dollars, Except Dividends Per Share)
                                                                                         
                            Retained Earnings     Unrealized                      
    Capital Stock             Legal     Special                     Loss on     Cumulative             Total  
    Shares (in             Capital     Capital     Capital     Unappropriated             Long-term     Translation     Treasury     Shareholders’  
    Thousands)     Amount     Surplus     Reserve     Reserve     Earnings     Total     Investments     Adjustments     Stock     Equity  
BALANCE, JANUARY 1, 2004
    20,266,619     $ 202,666,189     $ 56,855,885     $ 20,802,137     $ 68,945     $ 50,229,008     $ 71,100,090     $ (35 )   $ 225,408     $ (1,633,228 )   $ 329,214,309  
 
                                                                                       
Appropriations of prior year’s earnings
                                                                                       
Legal capital reserve
                      4,725,870             (4,725,870 )                              
Reversal of special capital reserve
                            (68,945 )     68,945                                
Employees’ profit sharing — in cash
                                    (681,628 )     (681,628 )                       (681,628 )
Employees’ profit sharing — in stock
    272,651       2,726,514                         (2,726,514 )     (2,726,514 )                        
Cash dividends to preferred shareholders
                                  (184,493 )     (184,493 )                       (184,493 )
Cash dividends to common shareholders — NT$0.60 per share
                                  (12,159,971 )     (12,159,971 )                       (12,159,971 )
Stock dividends to common shareholders — NT$1.41 per share
    2,837,327       28,373,267                         (28,373,267 )     (28,373,267 )                        
Bonus to directors and supervisors
                                  (127,805 )     (127,805 )                       (127,805 )
Net income in 2004
                                  92,316,115       92,316,115                         92,316,115  
Adjustment arising from changes of percentage of ownership in investees
                34,059                                                 34,059  
Reversal of unrealized loss on long-term investment of investees
                                              35                   35  
Translation adjustments
                                                    (2,451,835 )           (2,451,835 )
Issuance of stock from exercising stock options
    87       867       2,757                                                 3,624  
Cash dividends received by subsidiaries from the Company
                22,781                                                 22,781  
Treasury stock transactions — sales of the Company’s stock held by subsidiaries
                1,864                                           38,042       39,906  
Treasury stock repurchased by the Company
                                                          (7,059,798 )     (7,059,798 )
Retirement of treasury stock
    (124,720 )     (1,247,200 )     (380,087 )                 (5,432,511 )     (5,432,511 )                 7,059,798        
 
                                                                 
 
                                                                                       
BALANCE, DECEMBER 31, 2004
    23,251,964       232,519,637       56,537,259       25,528,007             88,202,009       113,730,016             (2,226,427 )     (1,595,186 )     398,965,299  
 
                                                                                       
Appropriations of prior year’s earnings
                                                                                       
Legal capital reserve
                      8,820,201             (8,820,201 )                              
Special capital reserve
                            2,226,427       (2,226,427 )                              
Employees’ profit sharing — in cash
                                  (3,086,215 )     (3,086,215 )                       (3,086,215 )
Employees’ profit sharing — in stock
    308,622       3,086,215                         (3,086,215 )     (3,086,215 )                        
Cash dividends to common shareholders — NT$2.00 per share
                                  (46,504,097 )     (46,504,097 )                       (46,504,097 )
Stock dividends to common shareholders — NT$0.50 per share
    1,162,602       11,626,024                         (11,626,024 )     (11,626,024 )                        
Bonus to directors and supervisors
                                  (231,466 )     (231,466 )                       (231,466 )
Net income in 2005
                                  93,575,035       93,575,035                         93,575,035  
Adjustment arising from changes of percentage of ownership in investees
                71,405                                                 71,405  
Translation adjustments
                                                    1,585,685             1,585,685  
Issuance of stock from exercising stock options
    6,837       68,370       202,559                                                 270,929  
Cash dividends received by subsidiaries from the Company
                84,285                                                 84,285  
Treasury stock transactions — sales of the Company’s stock held by subsidiaries
                222,378                                           677,111       899,489  
 
                                                                 
 
                                                                                       
BALANCE, DECEMBER 31, 2005
    24,730,025     $ 247,300,246     $ 57,117,886     $ 34,348,208     $ 2,226,427     $ 106,196,399     $ 142,771,034     $     $ (640,742 )   $ (918,075 )   $ 445,630,349  
 
                                                                 
The accompanying notes are an integral part of the financial statements.

- 5 -


 

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
(In Thousands of New Taiwan Dollars)
                 
    2005     2004  
 
               
CASH FLOWS FROM OPERATING ACTIVITIES
               
Net income
  $ 93,575,035     $ 92,316,115  
Adjustments to reconcile net income to net cash provided by operating activities
               
Depreciation and amortization
    67,991,423       63,072,140  
Deferred income taxes
    (3,278,952 )     (1,101,407 )
Equity in losses (earnings) of equity method investees, net
    1,052,045       (4,040,319 )
Gain on sales of long-term investments, net
    (3,502 )     (2,216 )
Amortization of premium/discount from long-term bond investments, net
    120,872       28,673  
Gain on disposal of property, plant and equipment and idle assets, net
    (434,382 )     (56,425 )
Loss on idle assets
    131,849        
Donation of idle assets
    7,207        
Provision for pension cost
    360,196       500,945  
Dividends received from equity method investees
    668,464        
Changes in operating assets and liabilities:
               
Decrease (increase) in:
               
Receivables from related parties
    (4,914,565 )     (1,301,979 )
Notes and accounts receivable
    (5,264,937 )     (1,409,074 )
Allowance for doubtful receivables
    (4,117 )     (35,561 )
Allowance for sales returns and others
    942,055       1,201,889  
Other receivables from related parties
    (1,243,126 )     (27,938 )
Other financial assets
    (98,854 )     (1,329,634 )
Inventories, net
    (2,086,010 )     (3,264,787 )
Prepaid expenses and other current assets
    (21,280 )     751,383  
Increase (decrease) in:
               
Accounts payable
    1,563,489       404,741  
Payables to related parties
    (1,224,371 )     (1,771,144 )
Income tax payable
    3,435,985       252,800  
Accrued expenses and other liabilities
    (890,473 )     (507,984 )
Deferred credits
    95,744        
 
           
 
               
Net cash provided by operating activities
    150,479,795       143,680,218  
 
           
 
               
CASH FLOWS FROM INVESTING ACTIVITIES
               
Decrease (increase) in short-term investments, net
    5,923,748       (43,822,489 )
Acquisitions of:
               
Long-term investments
    (17,037,788 )     (30,290,982 )
Property, plant and equipment
    (73,659,014 )     (76,171,356 )
Proceeds from disposal of:
               
Long-term investments
    10,474,035       7,822  
Property, plant and equipment and idle assets
    2,087,236       1,713,934  
Increase in deferred charges
    (847,721 )     (2,404,130 )
Decrease in refundable deposits
    1,771       91,966  
 
           
 
               
Net cash used in investing activities
    (73,057,733 )     (150,875,235 )
 
           
(Continued)

- 6 -


 

                 
    2005     2004  
CASH FLOWS FROM FINANCING ACTIVITIES
               
Cash dividends paid for common stock
  $ (46,504,097 )   $ (12,159,971 )
Repayment of long-term bonds payable
    (10,500,000 )     (5,000,000 )
Cash bonus paid to employees
    (3,086,215 )     (681,628 )
Increase (decrease) in guarantee deposits
    2,480,552       (351,096 )
Proceeds from exercise of stock options
    270,929       3,624  
Bonus to directors and supervisors
    (231,466 )     (127,805 )
Repurchase of treasury stock
          (7,059,798 )
Cash dividends paid for preferred stock
          (184,493 )
 
           
 
               
Net cash used in financing activities
    (57,570,297 )     (25,561,167 )
 
           
 
               
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    19,851,765       (32,756,184 )
 
               
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
    65,531,818       98,288,002  
 
           
 
               
CASH AND CASH EQUIVALENTS, END OF YEAR
  $ 85,383,583     $ 65,531,818  
 
           
 
               
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
               
Cash paid for
               
Interest (excluding the amount capitalized of NT$262,109 thousand in 2004, Note 7)
  $ 2,269,666     $ 1,304,621  
 
           
Income tax
  $ 87,351     $ 309,522  
 
           
 
               
Cash paid for acquisition of property, plant and equipment
               
Total acquisitions
  $ 51,363,935     $ 100,207,781  
Decrease (increase) of payables to contractors and equipment suppliers
    22,295,079       (24,036,425 )
 
           
 
  $ 73,659,014     $ 76,171,356  
 
           
 
NONCASH INVESTING AND FINANCING ACTIVITIES
               
Current portion of long-term bonds payable
  $     $ 10,500,000  
 
           
Current portion of other payables to related parties (under payables to related parties)
  $ 693,956     $ 469,494  
 
           
Current portion of other long-term payables (under accrued expenses and other current liabilities)
  $ 869,072     $ 1,505,345  
 
           
Reclassification of short-term investments to long-term investments
  $     $ 3,402,413  
 
           
 
The accompanying notes are an integral part of the financial statements.   (Concluded)

- 7 -


 

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Specified)
1.   GENERAL
 
    Taiwan Semiconductor Manufacturing Company Limited (the Company or TSMC), a Republic of China (R.O.C.) corporation, was incorporated as a venture among the Government of the R.O.C., acting through the Development Fund of the Executive Yuan; Philips Electronics N.V. and certain of its affiliates (Philips); and certain other private investors. On September 5, 1994, its shares were listed on the Taiwan Stock Exchange (TSE). On October 8, 1997, TSMC listed some of its shares of stock on the New York Stock Exchange (NYSE) in the form of American Depositary Shares (ADSs).
 
    The Company is engaged mainly in the manufacturing, selling, packaging, testing and computer-aided designing of integrated circuits and other semiconductor devices and the manufacturing of masks.
 
    As of December 31, 2005 and 2004, the Company had 19,460 and 18,562 employees, respectively.
2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
    The financial statements are presented in conformity with Guidelines Governing the Preparation of Financial Reports by Securities Issuers 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 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 those expected to be converted to cash, sold or consumed within one year from the balance sheet date. Current liabilities are obligations due on demand 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
 
    Government bonds under repurchase agreements and notes acquired with maturities less than three months from the date of purchase are classified as cash equivalents.

- 8 -


 

    Short-term Investments
 
    Short-term investments primarily consist of agency bonds, corporate bonds, asset-backed securities, bond funds, government bonds and others.
 
    Short-term investments are recorded at historical cost and are carried at the lower of cost or market value as of the balance sheet date. An allowance for decline in value is provided and is charged to current income when the aggregate carrying amount of the investments exceeds the aggregate market value. A reversal of the allowance is recorded for a subsequent recovery of the aggregate market value.
 
    The costs of funds and listed stocks sold are accounted for using the weighted-average method; whereas the costs of other securities sold are accounted for using the specific identification method.
 
    The market value of funds is determined using the net asset value of the funds at the end of the year, and the market value of listed stocks is determined using the average-closing prices of the listed stocks for the last month of the year. The market value of other short-term investments is determined using the average of bid and ask prices as of the balance sheet date.
 
    Cash dividends are recorded as investment income in the current year.
 
    Allowance for Doubtful Receivables
 
    An allowance for doubtful receivables is provided based on a review of the collectibility of accounts receivables. The Company determines the amount of the allowance for doubtful receivables by examining the aging analysis of outstanding account receivables and current trends in the credit quality of its customers as well as its internal credit policies.
 
    Revenue Recognition and Allowance for Sales Returns and Others
 
    The Company recognizes revenue when evidence of an arrangement exists, shipment is made, price is fixed or determinable, and collectibility is reasonably assured. Revenues from the design and manufacturing of photo masks, which are used as manufacturing tools in the fabrication process, are recognized when the photo masks are qualified by customers. The Company records a provision for estimated future returns and other allowances in the period the related revenue is recorded. Provisions for estimated sales returns and other allowances are generally made based on historical experience, management’s judgment, and any known factors that would significantly affect the allowance.
 
    Sales are determined using the 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, the fair value of receivables is equivalent to the nominal amount of cash to be received.
 
    Inventories
 
    Inventories are stated at the lower of cost or market value. Inventories are recorded at standard cost and adjusted to the approximate weighted-average cost at the balance sheet date. Market value represents replacement cost for raw materials, supplies and spare parts and net realizable value for finished goods and work in process. The Company assesses the impact of changing technology on its inventories on hand and writes off inventories that are considered obsolete. Year-end inventories are evaluated for estimated excess quantities and obsolescence based on a demand forecast within a specific time horizon, which is generally 180 days or less. Estimated losses on scrap and slow-moving items are recognized and included in the allowance for losses.

- 9 -


 

    Long-term Investments
 
    Investments in companies wherein the Company exercises significant influence on the operating and financial policy decisions are accounted for using the equity method of accounting. The Company’s share of the net income or net loss of investee is recognized in the “equity in earnings/losses of equity method investees, net” account. When equity investments are made, the difference, if any, between the cost of the investment and the Company’s share of investee’s net equity is amortized using the straight-line method over five years and is also recorded in the “equity in earnings/losses of equity method investees, net” account.
 
    When the Company subscribes for additional investee shares at a percentage different from its existing ownership percentage of equity interest, the resulting carrying amount of the investment in the investee differs from the amount of the Company’s share of the investee’s net equity. The Company records such difference as an adjustment to long-term investments with the corresponding amount charged or credited to capital surplus.
 
    Investments in companies wherein the Company does not exercise significant influence are recorded at historical cost. Cash dividends are recognized as investment income in the year received but are accounted for as reductions to the carrying amount of the investments if the dividends are received in the year of acquisition. Stock dividends are recorded as an increase in the number of shares held and do not affect investment income or the carrying amount of the investment.
 
    Investments in mutual funds are stated at the lower of aggregate cost or net asset value. An allowance is recognized when the net asset value of the funds is lower than their cost, with the corresponding amount recorded as a reduction to shareholders’ equity. A reversal of the allowance will result from a subsequent recovery of the net asset value.
 
    The costs of stocks and mutual funds sold are determined using the weighted-average method.
 
    Investments in long-term bonds are stated at amortized cost. The discount or premium is amortized over the duration period using the interest method, and recorded as an adjustment to interest income.
 
    When investments in public-traded securities are reclassified from short-term investments to long-term investments or from long-term investments to short-term investments, the Company recognizes a loss to the extent, if any, that the market value of such investments is lower than the carrying amount and the market value at the time of reclassification becomes the new basis.
 
    If an investee recognizes an unrealized loss on its long-term investments using the lower-of-cost-or-market method, the Company also recognizes a corresponding unrealized loss in proportion to its ownership percentage in the investee and records the amount as a component of shareholders’ equity.
 
    When an indication of impairment is identified in an investment, the carrying amount of the investment is reduced to reflect other-than-temporary decline, with the related impairment loss charged to current income.
 
    Gains or losses on sales from the Company to investees accounted for using the equity method are deferred in proportion to the Company’s ownership percentages in the investees until realized through transactions with third parties. The entire amount of the gains or losses on sales to investees over which the Company has control 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 investees to the Company are deferred in proportion to the Company’s ownership percentages in the investees until realized through transactions with third parties. Gains or losses on sales between investees accounted for using the equity method are deferred in proportion to the Company’s weighted-average ownership percentages in the investees which record such gains or losses until realized through transactions with third parties.

- 10 -


 

    If an investee’s functional currency is a foreign currency, translation adjustments will result from the process of translating the investee’s financial statements into the reporting currency of the Company. Such adjustments are accumulated and reported as a separate component of shareholders’ equity.
 
    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 future 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. Idle assets are stated at the lower of net realizable value or book value. Significant additions, renewals and betterments incurred during the construction period are capitalized. Maintenance and repairs are expensed in the year incurred. Interest expense incurred during the purchase and construction period is also capitalized.
 
    Depreciation is computed using the straight-line method over the following estimated service lives: buildings — 10 to 20 years; machinery and equipment — 5 years; and office equipment — 3 to 5 years.
 
    Upon sale or disposal of property, plant and equipment, the related cost and accumulated depreciation are removed from the corresponding accounts, with any gain or loss credited or charged to non-operating gains or losses in the year of sale or disposal.
 
    Goodwill
 
    Goodwill represents the excess of the consideration paid for acquisition over the fair market value of identifiable net assets acquired and acquisition costs. Goodwill is amortized using the straight-line method over the estimated life of 10 years. If an event occurs or circumstances change that more likely than not reduce the fair value of goodwill below its carrying amount, an impairment loss is charged to current income. Subsequent recovery in the fair value of the goodwill may not be recorded such as to reverse the impairment loss previously recorded.
 
    Deferred Charges
 
    Deferred charges consist of technology license fees, software and system design costs and other charges. The amounts are amortized as follows: 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 future 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 amortization, as if no impairment loss had been recognized.
 
    Pension Costs
 
    For employees under defined contribution pension plans, pension costs are recorded based on the actual contributions made to employees’ individual pension accounts. For employees under defined benefit pension plans, pension costs are recorded based on actuarial calculations.

- 11 -


 

    Income Tax
 
    The Company uses an inter-period tax allocation method for income tax. 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, 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 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 option plans that are amended or have options granted on or after January 1, 2004 must be accounted for by the interpretations issued by the Accounting Research and Development Foundation. The Company adopted the intrinsic value method and any compensation cost determined using this method is charged to expense over the employee vesting period.
 
    Treasury Stock
 
    When the Company repurchases its outstanding common stock, the cost of the reacquired such stock is recorded as treasury stock and deducted from 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 also treated as treasury stock and reclassified from long-term investments to treasury stock. The gains resulted from the disposal of the treasury stock held by the subsidiaries and cash dividends received by the subsidiaries from the Company are recorded under capital surplus — treasury stock transactions.
 
    Foreign-currency Transactions
 
    Foreign currency transactions are recorded in New Taiwan dollars at the rates of exchange in effect when the transactions occur. Exchange gains or losses derived from foreign currency transactions or monetary assets and liabilities denominated in foreign currencies are recognized in current income. At the end of the year, assets and liabilities denominated in foreign currencies are revalued at the prevailing exchange rates with the resulting gains or losses recognized in current income.

- 12 -


 

    Derivative Financial Instruments
 
    The Company enters into foreign currency forward contracts to manage foreign exchange exposures on foreign-currency-denominated assets and liabilities. The contracts are recorded in New Taiwan dollars at the current rate of exchange at the contract date. The differences in the New Taiwan dollar amounts translated using the current rates and the amounts translated using the contracted forward rates are amortized over the terms of the forward contracts using the straight-line method. At the end of the year, the receivables or payables arising from forward contracts are restated using the prevailing exchange rates with the resulting differences credited or charged to income. In addition, the receivables and payables related to the forward contracts are netted with the resulting amount presented as either an asset or a liability. Any resulting gain or loss upon settlement is credited or charged to income in the year of settlement.
 
    The Company enters into cross currency swap contracts to manage currency exposures on foreign-currency-denominated assets and liabilities. The principal amount is recorded using the current rate at the contract date. The differences in the New Taiwan dollar amounts translated using the current rates and the amounts translated using the contracted rates are amortized over the terms of the contracts using the straight-line method. At the end of the year, the receivables or payables arising from cross-currency swap contracts are restated using the prevailing exchange rate with the resulting differences credited or charged to income. In addition, the receivables and payables related to the contracts of the same counter party are netted with the resulting amount presented as either an asset or a liability. The difference in interest computed pursuant to the contracts on each settlement date or the balance sheet date is recorded as an adjustment to the interest income or expense associated with the hedged items. Any resulting gain or loss upon settlement is credited or charged to income in the year of settlement.
 
    The contract amounts of foreign currency option contracts entered into for hedging purposes are not recognized as an asset or liability on the contract dates. Any resulting gain or loss upon settlement is credited or charged to income in the year of settlement.
 
    The Company enters into interest rate swap contracts to manage exposures to changes in interest rates on existing assets or liabilities. The receivable or payable computed pursuant to the contracts on each settlement date or the balance sheet date is recorded as an adjustment to the interest income or expense associated with the hedged items.
 
    Reclassifications
 
    Certain accounts in the financial statements as of and for the year ended December 31, 2004 have been reclassified to conform to the financial statements as of and for the year ended December 31, 2005.
 
3.   CASH AND CASH EQUIVALENTS
                 
    2005     2004  
Government bonds acquired under repurchase agreements
  $ 47,963,226     $ 19,215,153  
Cash and deposits in bank
    37,007,192       45,838,453  
Corporate notes
    413,165       478,212  
 
           
 
 
  $ 85,383,583     $ 65,531,818  
 
           

- 13 -


 

4.   SHORT-TERM INVESTMENTS, NET
                 
    2005     2004  
Agency bonds
  $ 14,607,694     $ 8,633,889  
Corporate bonds
    12,463,688       13,554,598  
Corporate issued asset-backed securities
    11,724,149       11,766,877  
Bond funds
    6,055,578       10,662,758  
Government bonds
    2,087,418       7,346,858  
Corporate notes
    263,249       63,796  
Money market funds
    260,686       673,888  
Public-traded stocks
    5,257       6,528  
Government bonds acquired under repurchase agreements
          249,449  
Commercial papers
          95,666  
 
           
 
    47,467,719       53,054,307  
Allowance for valuation
    (412,372 )     (75,212 )
 
           
 
               
 
  $ 47,055,347     $ 52,979,095  
 
           
 
               
Market value
  $ 47,055,347     $ 52,979,095  
 
           
The Company entered into investment management agreements with three well-known financial institutions (fund managers) to manage its investment portfolios. In accordance with the investment guidelines and terms specified in these agreements, the securities invested by the fund managers cannot be below a pre-defined credit rating. As of December 31, 2005, the Company’s investment portfolios managed by these fund managers aggregated to an original amount of US$1,200,000 thousand. The investment portfolios included securities such as agency bonds, corporate bonds, asset-backed securities, government bonds and others. Securities acquired with maturities less than three months from the date of purchase were reclassified as cash equivalents.
5.   INVENTORIES, NET
                 
    2005     2004  
Finished goods
  $ 2,768,575     $ 3,229,417  
Work in process
    12,407,286       10,713,178  
Raw materials
    1,700,314       808,722  
Supplies and spare parts
    786,772       779,368  
 
           
 
    17,662,947       15,530,685  
Allowance for valuation
    (1,404,992 )     (1,358,740 )
 
           
 
 
  $ 16,257,955     $ 14,171,945  
 
           

- 14 -


 

6.   LONG-TERM INVESTMENTS
                                 
    2005     2004  
            % of             % of  
    Carrying     Owner-     Carrying     Owner-  
    Amount     ship     Amount     ship  
Equity method
                               
TSMC International Investment Ltd. (TSMC International)
  $ 23,912,812       100     $ 23,778,997       100  
TSMC (Shanghai) Company Limited (TSMC-Shanghai)
    9,438,856       100       8,113,511       100  
Vanguard International Semiconductor Corporation (VIS)
    5,419,747       27       5,401,982       28  
Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)
    4,215,200       32       3,290,888       32  
TSMC Partners, Ltd. (TSMC Partners)
    4,091,166       100       3,908,356       100  
TSMC North America (TSMC-North America)
    1,790,186       100       502,242       100  
Emerging Alliance Fund, L.P. (Emerging Alliance)
    850,534       99       823,232       99  
VentureTech Alliance Fund II, L.P. (VTAF II)
    642,479       98       329,968       98  
Global UniChip Corporation (GUC)
    442,233       46       391,626       47  
TSMC Japan K. K. (TSMC-Japan)
    94,949       100       102,572       100  
Chi Cherng Investment Co., Ltd. (Chi Cherng)
    78,139       36       50,570       36  
Hsin Ruey Investment Co., Ltd. (Hsin Ruey)
    77,415       36       49,823       36  
Taiwan Semiconductor Manufacturing Company Europe B.V. (TSMC-Europe)
    23,087       100       25,439       100  
VisEra Technologies Company Ltd. (VisEra)
                59,116       25  
 
                           
 
    51,076,803               46,828,322          
 
                           
 
                               
Cost method
                               
Unquoted stocks
    472,500             482,500        
Funds
    334,990             290,134        
 
                           
 
    807,490               772,634          
 
                           
 
                               
Long-term bonds
                               
Government bonds
    9,922,937               10,260,481          
Corporate bonds
                               
Taiwan Power Company
    3,263,348               915,276          
Nan Ya Plastics Corporation
    2,150,842               407,526          
China Steel Corporation
    1,010,532               2,978,804          
Formosa Petrochemical Corporation
    791,963                        
Chinese Petroleum Corporation
    705,436                        
Far Eastone Telecommunication Co., Ltd.
    300,026                        
Formosa Plastics Corporation
    268,855               405,485          
Formosa Chemical & Fiber Corporation
    134,369               202,595          
 
                           
 
    18,548,308               15,170,167          
 
                           
 
                               
Other investments
    10,227,000               10,521,740          
 
                           
 
 
  $ 80,659,601             $ 73,292,863          
 
                           
For the years ended December 31, 2005 and 2004, net equity in losses and earnings recognized from the equity method investees was NT$1,052,045 thousand and NT$4,040,319 thousand, respectively. The carrying amounts of investments accounted for under the equity method and the related equity in losses or earnings of equity method investees were determined based on the audited financial statements of the investees as of and for the same periods as the Company.

- 15 -


 

In November 2005, the Company transferred all of its shares in VisEra to VisEra Holding Company, an investee of TSMC Partners accounted for using the equity method, due to an investment structuring.
Other investments consisted of the following structured time-deposits:
                                 
    Principal     Interest     Range of        
    Amount     Receivable     Interest Rates     Maturity Date  
December 31, 2005
                               
 
                               
Step-up callable deposits
                               
Foreign banks
  $ 3,000,000     $ 8,145       1.40%-1.50 %   Jun. 2007-Oct. 2007
Callable range accrual deposits
                               
Foreign banks
    7,227,000       9,951     (see below)   Sep. 2009-Jan. 2010
 
                           
 
                               
 
  $ 10,227,000     $ 18,096                  
 
                           
December 31, 2004
                               
 
                               
Step-up callable deposits
                               
Domestic banks
  $ 2,000,000     $ 7,681       2.05%-2.20 %   Jul. 2007-Aug. 2007
Foreign banks
    2,138,340       14,054       1.44%-4.75 %   Jun. 2007-Aug. 2007
Callable range accrual deposits
                               
Foreign banks
    6,383,400       30,751     (see below)   Sep. 2009-Dec.2009
 
                           
 
 
  $ 10,521,740     $ 52,486                  
 
                           
The interest rate of the step-up callable deposits is determined by the Company and the related banks. The amount of interest earned by the Company for the callable range accrual deposits is based on a pre-defined range as determined by the 3-month or 6-month LIBOR plus an agreed upon rate ranging between 2.10% and 3.45%. Based on the terms of the deposits, if the 3-month or 6-month LIBOR moves outside of the pre-defined range, the interest paid to the Company is at a fixed rate between zero and 1.5%. Under the terms of the contracts, the bank has the right to cancel the contracts prior to the maturity date.
As of December 31, 2005 and 2004, deposits that resided in banks located in Hong Kong amounted to NT$2,628,000 thousand and NT$2,553,360 thousand, respectively; those that resided in banks located in Singapore amounted to NT$657,000 thousand and NT$638,340 thousand, respectively.
7.   PROPERTY, PLANT AND EQUIPMENT
 
    Accumulated depreciation at December 31, 2005 and 2004 consisted of the following:
                 
    2005     2004  
Buildings
  $ 42,902,526     $ 35,546,918  
Machinery and equipment
    310,626,317       259,782,721  
Office equipment
    5,662,986       4,676,562  
 
           
 
               
 
  $ 359,191,829     $ 300,006,201  
 
           
There was no capitalized interest for the year ended December 31, 2005. Interest expense for the year ended December 31, 2004 was NT$1,614,847 thousand (before deducting the amount capitalized of NT$262,109 thousand); the rate used for calculating the capitalized interest was 2.80%.

- 16 -


 

8.   DEFERRED CHARGES, NET
 
    Deferred charges, net at December 31, 2005 and 2004 consisted of the following:
                 
    2005     2004  
Technology license fees
  $ 4,985,806     $ 6,534,899  
Software and system design costs
    1,623,276       2,160,636  
Other
    72,062       149,609  
 
           
 
               
 
  $ 6,681,144     $ 8,845,144  
 
           
9.   BONDS PAYABLE
 
    Bonds payable at December 31, 2005 and 2004 consisted of the following:
                 
    2005     2004  
Domestic unsecured bonds:
               
Issued in December 2000 and repayable in December 2005 and 2007 in two equal payments, 5.25% and 5.36% interest payable annually, respectively
  $ 4,500,000     $ 15,000,000  
Issued in January 2002 and repayable in January 2007, 2009 and 2012 in three equal payments, 2.60%, 2.75% and 3.00% interest payable annually, respectively
    15,000,000       15,000,000  
 
           
 
    19,500,000       30,000,000  
Current portion
          (10,500,000 )
 
           
 
 
  $ 19,500,000     $ 19,500,000  
 
           
As of December 31, 2005, future principal repayments for the Company’s bonds were as follows:
         
Year of Repayment   Amount  
2007   $ 7,000,000  
2009     8,000,000  
2010 and thereafter
    4,500,000  
 
     
 
  $ 19,500,000  
 
     
10. OTHER LONG-TERM PAYABLES
Most of the payables resulted from license arrangements related to semiconductor-related patents. Future payments for other long-term payables as of December 31, 2005 were as follows:
         
Year of Payment   Amount  
2006
  $ 869,072  
2007
    459,900  
2008
    262,800  
2009
    262,800  
(Continued)

- 17 -


 

s

         
Year of Payment   Amount  
2010
  $ 262,800  
2011 and thereafter
    262,800  
 
     
 
    2,380,172  
Current portion (under accrued expenses and other current liabilities)
    (869,072 )
 
     
 
 
  $ 1,511,100  
 
     
11.   PENSION PLAN
 
    The Labor Pension Act (the “Act”) became effective on July 1, 2005 and the pension mechanism under the Act is deemed a defined contribution plan. The employees who were subject to the Labor Standards Law prior to July 1, 2005 were allowed to choose to be subject to the pension mechanism under the Act or continue to be subject to the pension mechanism under the Labor Standards Law. For those employees who were subject to the Labor Standards Law prior to July 1, 2005 and still work for the same company after July 1, 2005 and have chosen to be subject to the pension mechanism under the Act, their seniority as of July 1, 2005 shall be maintained. The Act prescribes that the rate of contribution by an employer to employees’ pension accounts per month shall not be less than 6% of each employee’s monthly salary. Pursuant to the Act, the Company has made monthly contributions to employees’ pension accounts starting from July 1, 2005, and recognized pension costs of NT$261,096 thousand for the second half of 2005.
 
    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). The Fund is administered by a pension fund monitoring committee (the Committee) and deposited in the Committee’s name in the Central Trust of China.
 
    Pension information on the defined benefit plan is summarized as follows:
  a.   Components of net periodic pension cost for the year
                 
    2005     2004  
Service costs
  $ 468,044     $ 632,594  
Interest costs
    163,294       128,315  
Projected return on plan assets
    (49,627 )     (41,925 )
Amortization
    8,300       8,300  
 
           
 
Net periodic pension costs
  $ 590,011     $ 727,284  
 
           
  b.   Reconciliation of the funded status of the plan and accrued pension cost at December 31, 2005 and 2004
                 
    2005     2004  
Benefit obligation
               
Vested benefit obligation
  $ 62,302     $ 67,104  
Nonvested benefit obligation
    3,356,213       2,704,251  
 
           
Accumulated benefit obligation
    3,418,515       2,771,355  
Additional benefits based on future salaries
    2,546,186       2,132,721  
 
           
Projected benefit obligation
    5,964,701       4,904,076  
Fair value of plan assets
    (1,681,365 )     (1,447,540 )
 
           
Funded status
    4,283,336       3,456,536  
(Continued)

- 18 -


 

                 
    2005     2004  
Unrecognized net transitional obligation
  $ (124,491 )   $ (132,791 )
Unrecognized net loss
    (697,453 )     (222,549 )
 
           
 
Accrued pension cost
  $ 3,461,392     $ 3,101,196  
 
           
 
Vested benefits
  $ 67,752     $ 76,003  
 
           
c.   Actuarial assumptions
GAINSCO, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2005, 2004 and 2003
                 
    2005     2004  
Discount rated used in determining present values
    2.75 %     3.25 %
Future salary increase rate
    3.00 %     3.00 %
Expected rate of return on plan assets
    2.75 %     3.25 %
 
d.           Contributions to the Fund for the year
  $ 223,654     $ 226,339  
 
           
 
               
e.           Payments from the Fund for the year
  $ 8,419     $ 1,446  
 
           
12.   INCOME TAX
  a.   A reconciliation of income tax expense based on “income before income tax” at statutory rate and current income tax expense before tax credits was as follows:
                 
    2005     2004  
Income tax expense based on “income before income tax” at statutory rate (25%)
  $ 23,454,856     $ 22,944,646  
Tax-exempt income
    (12,243,435 )     (15,372,913 )
Temporary and permanent differences
    860,918       2,077,362  
 
           
 
               
Current income tax expense before tax credits
  $ 12,072,339     $ 9,649,095  
 
           
  b.   Income tax expense (benefit) consisted of the following:
                 
Current income tax expense before tax credits
  $ 12,072,339     $ 9,649,095  
Additional tax at 10% on unappropriated earnings
    1,489,709       821,767  
Income tax credits
    (10,110,561 )     (10,470,862 )
Other income tax adjustments
    71,853       563,876  
Net change in deferred income tax assets
               
Investment tax credits
    2,018,813       (234,690 )
Temporary differences
    (1,768,265 )     (1,034,916 )
Adjustment in valuation allowance
    (3,529,500 )     168,199  
 
           
 
               
Income tax expense (benefit)
  $ 244,388     $ (537,531 )
 
           
  c.   Net deferred income tax assets consisted of the following:
                 
Current deferred income tax assets
               
Investment tax credits
  $ 7,013,000     $ 8,849,000  
 
           
(Continued)

- 19 -


 

                 
    2005     2004  
Non-current deferred income tax assets, net
               
Investment tax credits
  $ 16,852,771     $ 17,035,584  
Temporary differences
    (682,270 )     (2,450,535 )
Valuation allowances
    (9,410,546 )     (12,940,046 )
 
           
 
  $ 6,759,955     $ 1,645,003  
 
           
  d.   Integrated income tax information:
 
      The balance of the imputation credit account as of December 31, 2005 and 2004 was NT$20,087 thousand and zero, respectively.
 
      The expected and actual creditable ratios for distribution of earnings of 2005 and 2004 were 0.02% and 0.11%, respectively.
 
      The imputation credit allocated to the shareholders is based on its balance as of the date of dividend distribution. The expected creditable ratio may change when the actual allocation of the imputation credits is made.
 
  e.   All earnings generated prior to December 31, 1997 have been appropriated.
 
  f.   As of December 31, 2005, investment tax credits consisted of the following:
                                 
            Total     Remaining        
            Creditable     Creditable     Expiry  
Law     Item   Amounts     Amounts     Year  
Statute for Upgrading Industries  
Purchase of machinery and equipment
  $ 134,467     $       2005  
          4,886,421             2006  
       
 
    4,138,857       4,054,072       2007  
       
 
    11,001,460       11,001,460       2008  
       
 
    4,160,396       4,160,396       2009  
       
 
                   
       
 
                       
       
 
  $ 24,321,601     $ 19,215,928          
       
 
                   
       
 
                       
Statute for Upgrading Industries  
Research and development expenditures
  $ 3,127,586     $       2005  
          1,789,437             2006  
       
 
    1,382,993       1,382,993       2007  
       
 
    1,605,567       1,605,567       2008  
       
 
    1,597,296       1,597,296       2009  
       
 
                   
 
       
 
  $ 9,502,879     $ 4,585,856          
       
 
                   
       
 
                       
Statute for Upgrading Industries  
Personnel training
  $ 29,448     $       2005  
   
 
    20,381             2006  
       
 
    26,780       26,780       2007  
       
 
    37,207       37,207       2008  
       
 
                   
 
       
 
  $ 113,816     $ 63,987          
       
 
                   
       
 
                       
Statute for Upgrading Industries  
Investments in important technology-based enterprises
  $ 38,036     $       2005  
       
 
                   
                             

- 20 -


 

  g.   The profits generated from the following expansion and construction projects are exempt from income tax:
         
    Tax-Exemption Period  
Construction of Fab 8 — module B
    2002 to 2005  
Expansion of Fab 2 — modules A and B, Fab 3, Fab 4, Fab 5 and Fab 6
    2003 to 2006  
Construction of Fab 12
    2004 to 2007  
  h.   The tax authorities have examined income tax returns of the Company through 2001.
13.   LABOR COST, DEPRECIATION AND AMORTIZATION EXPENSES
                                                 
    Year Ended December 31, 2005     Year Ended December 31, 2004  
            Classified as                     Classified as        
    Classified as     Operating             Classified as     Operating        
    Cost of Sales     Expenses     Total     Cost of Sales     Expenses     Total  
Labor cost
                                               
Salary
  $ 9,160,576     $ 3,682,390     $ 12,842,966     $ 8,546,255     $ 4,068,927     $ 12,615,182  
Labor and health insurance
    625,744       297,483       923,227       571,853       309,585       881,438  
Pension
    576,776       274,280       851,056       471,646       255,482       727,128  
Meal
    429,307       141,259       570,566       391,834       150,297       542,131  
Welfare benefit
    167,218       95,208       262,426       150,754       90,611       241,365  
Other
    159,724       44,783       204,507       141,909       207,909       349,818  
 
                                   
 
                                               
 
  $ 11,119,345     $ 4,535,403     $ 15,654,748     $ 10,274,251     $ 5,082,811     $ 15,357,062  
 
                                   
 
                                               
Depreciation
  $ 61,576,001     $ 3,031,796     $ 64,607,797     $ 56,001,719     $ 2,429,967     $ 58,431,686  
 
                                   
Amortization
  $ 1,763,527     $ 1,603,496     $ 3,367,023     $ 2,496,827     $ 2,137,893     $ 4,634,720  
 
                                   
14.   SHAREHOLDERS’ EQUITY
 
    The Company has issued a total of 864,194 thousand ADSs which are traded on the NYSE as of December 31, 2005. The number of common shares represented by the ADSs is 4,320,969 thousand (one ADS represents five common shares).
 
    Capital surplus can only be used to offset a deficit under the Company Law. However, the capital surplus generated from donations and the excess of the issue 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 restricted to a certain percentage of the paid-in capital of the Company.
 
    As of December 31, 2005 and 2004, the capital surplus consisted of the following:
                 
    2005     2004  
From merger
  $ 24,003,546     $ 24,003,546  
Additional paid-in capital
    23,254,234       23,051,675  
From convertible bonds
    9,360,424       9,360,424  
From treasury stock transactions
    306,868       205  
From long-term investments
    192,759       121,354  
Donations
    55       55  
 
           
 
 
  $ 57,117,886     $ 56,537,259  
 
           

- 21 -


 

The Company’s Articles of Incorporation as revised on May 10, 2005 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 net profits left over, until the accumulated legal capital reserve has equaled the Company’s paid-in capital;
 
  b.   Special capital reserve in accordance with relevant laws or regulations or as requested by the authorities in charge;
 
  c.   Bonus to directors and supervisors and bonus to employees of the Company equal to 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 and supervisors. The Company may issue stock bonuses to employees of an affiliated company meeting the conditions set by the Board of Directors or, by the person duly authorized by the Board of Directors;
 
  d.   Any balance left over shall be allocated according to the resolution of the shareholders’ meeting.
The Company’s Articles of Incorporation also stipulate 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, however, the ratio for stock dividend shall not exceed 50% of total distribution.
Any appropriations of the net profits are recorded in the financial statement in the year of shareholder approval.
The appropriation for legal capital reserve shall be made until the reserve equals the Company’s paid-in capital. The reserve can 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 shareholder’s equity (for example, unrealized loss on long-term investments and cumulative translation adjustments, 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 2004 and 2003 had been approved in the shareholders’ meetings held on May 10, 2005 and May 11, 2004, 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 2004     Year 2003     Year 2004     Year 2003  
Legal capital reserve
  $ 8,820,201     $ 4,725,870                  
Special capital reserve
    2,226,427       (68,945 )                
Employees’ profit sharing — in cash
    3,086,215       681,628                  
Employees’ profit sharing — in stock
    3,086,215       2,726,514                  
(Continued)

- 22 -


 

                                 
                    Dividends Per Share  
    Appropriation of Earnings     (NT$)  
    For Fiscal     For Fiscal     For Fiscal     For Fiscal  
    Year 2004     Year 2003     Year 2004     Year 2003  
Cash dividends to preferred shareholders
  $     $ 184,493     $     $ 0.35  
Cash dividends to common shareholders
    46,504,097       12,159,971       2.00       0.60  
Stock dividends to common shareholders
    11,626,024       28,373,267       0.50       1.41  
Bonus to directors and supervisors
    231,466       127,805                  
 
                           
 
 
  $ 75,580,645     $ 48,910,603                  
 
                           
The amounts of the above appropriations of earnings for 2004 and 2003 are consistent with the resolutions of the meetings of the Board of Directors held on February 22, 2005 and February 17, 2004, respectively. However, the Company Law prescribes that TSMC, as a holder of treasury stock, shall not participate in the appropriation of earnings. Therefore, the actual cash dividend per share and stock dividend per share are slightly more than those in the aforementioned resolutions. If the above bonus to employees, directors and supervisors had been paid entirely in cash and charged against earnings for 2004 and 2003, the after income tax basic earnings per share for the years ended December 31, 2004 and 2003 would have decreased from NT$3.97 to NT$3.70 and NT$2.33 to NT$2.15, respectively. The shares distributed as a bonus to employees represented 1.33% and 1.35% of the Company’s total outstanding common shares as of December 31, 2004 and 2003, respectively.
As of January 12, 2006, the board of directors have not resolved the appropriation for earnings of 2005.
The above information about the appropriations of bonus to employees, directors and supervisors is available at Market Observation Post System website.
Under the Integrated Income Tax System that became effective on January 1, 1998, the R.O.C. resident shareholders are allowed a tax credit for their proportionate share of the income tax paid by the Company on earnings generated since January 1, 1998.
 
15.   STOCK-BASED COMPENSATION PLANS
 
    The Company’s Employee Stock Option Plans under the 2005 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 2005 Plan, the 2003 Plan and the 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 that had never been granted or had been granted and subsequently cancelled under the 2003 Plan and the 2002 Plan were expired as of December 31, 2005.

- 23 -


 

    Information about outstanding stock options for the years ended December 31, 2005 and 2004 was as follows:
                 
            Weighted-
            average
    Number of   Exercise
    Options   Price
    (in Thousands)   (NT$)
Year ended December 31, 2005
               
 
               
Balance, beginning of year
    64,367     $ 40.5  
Options granted
    14,864       48.4  
Options exercised
    (6,837 )     39.6  
Options cancelled
    (4,636 )     44.1  
 
               
 
               
Balance, end of year
    67,758       42.1  
 
               
 
               
Year ended December 31, 2004
               
 
               
Balance, beginning of year
    49,357     $ 43.0  
Options granted
    20,400       47.3  
Options exercised
    (87 )     41.8  
Options cancelled
    (5,303 )     45.9  
 
               
 
               
Balance, end of year
    64,367       44.1  
 
               
    The numbers of outstanding options and exercise prices have been adjusted to reflect the appropriations of dividends in accordance with the plans.
 
    As of December 31, 2005, information about outstanding and exercisable options was as follows:
                                         
    Options Outstanding   Options Exercisable
            Weighted-                  
            average   Weighted-           Weighted-
Range of   Number of   Remaining   average   Number of   average
Exercise   Options (in   Contractual   Exercise   Options (in   Exercise
Price (NT$)   Thousands)   Life (Years)   Price (NT$)   Thousands)   Price (NT$)
$29.9 - $42.1
    45,787       7.10     $ 38.73       27,143     $ 38.59  
47.0 - 54.5
    21,971       8.82       49.20       327       54.50  
 
                                   
 
 
    67,758                       27,470          
 
                                   
    No compensation cost was recognized under the intrinsic value method for the years ended December 31, 2005 and 2004. Had the Company used the fair value based method (based on the Black-Scholes model) to evaluate the options granted after January 1, 2004, the assumptions and pro forma results of the Company for the years ended December 31, 2005 and 2004 would have been as follows:
                 
    2005   2004
Assumptions:
               
Expected dividend yield
    1.00%-3.44 %     1.00 %
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
(Continued)

- 24 -


 

                 
    2005   2004
Net income:
               
Net income as reported
  $ 93,575,035     $ 92,316,115  
Pro forma net income
    93,458,191       92,257,355  
 
               
Earnings per share (EPS) — after income tax (NT$):
               
Basic EPS as reported
  $ 3.79     $ 3.73  
Pro forma basic EPS
    3.79       3.73  
Diluted EPS as reported
    3.79       3.73  
Pro forma diluted EPS
    3.78       3.73  
    The estimated weighted average fair value per unit for the options granted during the years ended December 31, 2005 and 2004 was NT$17.69 and NT$19.73, respectively.
 
16.   TREASURY STOCK (COMMON STOCK)
(Shares in Thousands)
                                 
            Increase/            
    Beginning   Stock           Ending
    Shares   Dividends   Disposal   Shares
Year ended December 31, 2005
                               
 
                               
Reclassification of parent company stock held by subsidiaries from long-term investment
    45,521       2,242       14,825       32,938  
 
                               
 
                               
Year ended December 31, 2004
                               
 
                               
Reclassification of parent company stock held by subsidiaries from long-term investment
    40,597       5,676       752       45,521  
Repurchase under share buyback plan
          124,720       124,720        
 
                               
 
 
    40,597       130,396       125,472       45,521  
 
                               
    Proceeds from disposal of treasury stock for the years ended December 31, 2005 and 2004 were NT$899,489 thousand and NT$39,906 thousand, respectively. As of December 31, 2005 and 2004, the book value of the treasury stock was NT$918,075 thousand and NT$1,595,186 thousand, respectively; the market value was NT$2,047,126 thousand and NT$2,241,009 thousand, respectively. The Company’s stocks held by its subsidiaries are treated as treasury stock and the holders are entitled to the rights of shareholders, except that starting from June 24, 2005, pursuant to the revised Company Law, the holders are no longer entitled to the right to vote.
 
    The Company held a special meeting of the Board of Directors and approved a share buyback plan to repurchase the Company’s common shares listed on the TSE during the period from March 24, 2004 to May 23, 2004. The Company repurchased 124,720 thousand common shares for a total cost of NT$7,059,798 thousand. All the treasury stock repurchased under the buyback plan was retired on August 16, 2004.

- 25 -


 

17.   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, 2005
                                       
 
                                       
Basic EPS
                                       
Income available to common shareholders
  $ 93,819,423     $ 93,575,035       24,679,947     $ 3.80     $ 3.79  
 
                                   
Effect of dilutive potential common stock — stock options
                13,165                  
 
                                 
 
                                       
Diluted EPS
                                       
Income available to common shareholders (including effect of dilutive potential common stock)
  $ 93,819,423     $ 93,575,035       24,693,112     $ 3.80     $ 3.79  
 
                             
 
                                       
Year ended December 31, 2004
                                       
 
                                       
Basic EPS
                                       
Income available to common shareholders
  $ 91,778,584     $ 92,316,115       24,717,531     $ 3.71     $ 3.73  
 
                                   
Effect of dilutive potential common stock — stock options
                6,484                  
 
                                 
 
                                       
Diluted EPS
                                       
Income available to common shareholders (including effect of dilutive potential common stock)
  $ 91,778,584     $ 92,316,115       24,724,015     $ 3.71     $ 3.73  
 
                             
18.   RELATED PARTY TRANSACTIONS
 
The Company engages in business transactions with the following related parties:
  a.   Industrial Technology Research Institute (ITRI); the chairman of the Company is one of its directors.
 
  b.   Philips, a major shareholder of the Company.
 
  c.   Subsidiaries
 
      TSMC-North America
TSMC-Europe
TSMC-Japan
TSMC-Shanghai
 
  d.   Investees
 
      VIS (accounted for using equity method)
SSMC (accounted for using equity method)
GUC (with controlling financial interest)
 
  e.   Indirect subsidiaries
 
      WaferTech, LLC (WaferTech)
TSMC Technology, Inc. (TSMC Technology)
 
  f.   Indirect investee
 
      VisEra, originally an investee over which the Company has control; starting from November 2005, VisEra became an indirect investee accounted for using the equity method after an investment structuring.

- 26 -


 

      Transactions with the aforementioned parties, excluding those disclosed in other notes, are summarized as follows:
                                 
    2005     2004  
    Amount     %     Amount     %  
For the year
                               
 
                               
Sales
                               
TSMC-North America
  $ 153,618,916       57     $ 142,271,732       55  
Philips
    3,298,770       1       5,463,565       2  
Others
    650,239             466,345        
 
                       
 
                               
 
  $ 157,567,925       58     $ 148,201,642       57  
 
                       
 
                               
Purchases
                               
WaferTech
  $ 11,137,313       28     $ 15,203,047       34  
SSMC
    5,729,672       15       5,869,123       13  
VIS
    4,142,457       10       9,169,602       21  
TSMC-Shanghai
    1,405,030       4       12,752        
 
                       
 
                               
 
  $ 22,414,472       57     $ 30,254,524       68  
 
                       
 
                               
Manufacturing expenses — technical assistance fee (Note 21a)
                               
Philips
  $ 581,059           $ 907,047       1  
 
                       
 
                               
Marketing expenses — commission
                               
TSMC-Japan
  $ 243,646       18     $ 253,341       17  
TSMC-Europe
    221,164       16       202,678       14  
 
                       
 
                               
 
  $ 464,810       34     $ 456,019       31  
 
                       
 
                               
General and administrative expense — rental expenses
                               
GUC
  $ 16,744           $ 13,186        
 
                       
 
                               
Research and development expenses
                               
GUC
  $ 19,467           $ 11,688        
 
                       
 
                               
Proceeds from sales of property, plant and equipment
                               
VisEra
  $ 534,279       52     $        
TSMC-Shanghai
    125,381       13       2,969,347       96  
VIS
                33,974       1  
 
                       
 
                               
 
  $ 659,660       65     $ 3,003,321       97  
 
                       
 
                               
Non-operating income and gains
                               
SSMC (primarily for technical service income, Note 21e)
  $ 316,243       6     $ 364,505       5  
VisEra
    308,071       6       28,917       1  
VIS (primarily for technical service income, Note 21j)
    210,720       4       117,760       2  
TSMC-Shanghai
    180,234       4              
WaferTech
                3,267        
 
                       
 
                               
 
  $ 1,015,268       20     $ 514,449       8  
 
                       
(Continued)

- 27 -


 

                                 
    2005     2004  
    Amount     %     Amount     %  
At end of year
                               
Receivables
                               
TSMC-North America
  $ 20,407,621       97     $ 15,476,920       96  
Philips
    573,565       3       581,487       4  
Others
    69,418             77,632        
 
                       
 
                               
 
  $ 21,050,604       100     $ 16,136,039       100  
 
                       
 
                               
Other receivables
                               
TSMC Technology
  $ 972,563       54     $ 2,880        
VisEra
    374,202       21       30,279       2  
TSMC-North America
    198,505       11       50,044       3  
SSMC
    149,251       8       63,701       4  
VIS
    74,457       4       47,599       3  
TSMC-Shanghai
    28,593       2       1,472,880       88  
Others
    143                    
 
                       
 
                               
 
  $ 1,797,714       100     $ 1,667,383       100  
 
                       
 
                               
Payables
                               
WaferTech
  $ 1,133,217       35     $ 913,107       29  
Philips
    693,956       21       469,494       15  
VIS
    563,240       17       1,533,938       48  
SSMC
    485,873       15       207,794       6  
TSMC-Shanghai
    274,820       9       12,591        
Others
    91,091       3       61,566       2  
 
                       
 
                               
 
  $ 3,242,197       100     $ 3,198,490       100  
 
                       
 
                               
Other long-term payables
                               
Philips (Note 21a)
  $ 1,100,475       100     $ 2,317,972       100  
 
                       
 
                               
Deferred credits
                               
TSMC-Shanghai
  $ 641,762       51     $ 682,530       100  
VisEra
    186,525       15              
 
                       
 
                               
 
  $ 828,287       66     $ 682,530       100  
 
                       
    The terms of sales to related parties were not significantly different from those to third parties. For other related party transactions, prices were determined in accordance with related contractual agreements.
 
    The Company deferred the gains (classified under the deferred credits) derived from sales of property, plant and equipment to TSMC-Shanghai and VisEra, and then recognized such gains (classified under the non-operating income and gains) over the depreciable lives of the disposed assets.

- 28 -


 

19.   SIGNIFICANT LONG-TERM LEASES
 
    The Company leases land from the Science-Based Industrial Park Administration. These operating lease agreements expire on various dates from March 2008 to December 2020 and can be renewed upon their expiration.
 
    As of December 31, 2005, future lease payments were as follows:
         
Year   Amount  
2006
  $ 258,069  
2007
    248,185  
2008
    222,450  
2009
    213,872  
2010
    166,803  
2011 and thereafter
    1,103,708  
 
     
 
       
 
  $ 2,213,087  
 
     
20.   SETTLEMENT INCOME
 
    TSMC, TSMC-North America and WaferTech filed a series of lawsuits in late 2003 and 2004 against Semiconductor Manufacturing International Corporation (“SMIC”), SMIC (Shanghai) and SMIC Americas. The lawsuits alleged that SMIC companies infringed multiple TSMC patents and misappropriated TSMC’s trade secrets. These suits were settled out of court on January 30, 2005. As part of the settlement, SMIC shall pay TSMC US$175 million over six years to resolve TSMC’s claims.
 
21.   SIGNIFICANT COMMITMENTS AND CONTINGENCIES
 
    The significant commitments and contingencies of the Company as of December 31, 2005 were as follows:
  a.   On June 20, 2004, the Company and Philips amended the Technical Cooperation Agreement, which was originally signed on May 12, 1997. The amended Technical Cooperation Agreement is for five years beginning from January 1, 2004. Upon expiration, this amended Technical Cooperation Agreement will be terminated and will not be automatically renewed; however, the patent cross license arrangement between the Company and Philips will survive the expiration of the amended Technical Cooperation Agreement. Under this amended Technical Cooperation Agreement, the Company will pay Philips royalties based on a fixed amount mutually agreed-on, rather than under certain percentage of the Company’s annual net sales. The Company and Philips agreed to cross license the patents owned by each party. The Company also obtained through Philips a number of cross patent licenses.
 
  b.   Under a technical cooperation agreement with ITRI, the Company shall reserve and allocate up to 35% of certain of its production capacity for use by the Ministry of Economic Affairs (MOEA) or any other party designated by the MOEA. The term of this agreement is for five years beginning from January 1, 1987 and is automatically renewed for successive periods of five years unless otherwise terminated by either party with one year prior notice. The agreement was automatically renewed in 1992 and 1997 and on January 1, 2002.
 
  c.   Under several foundry agreements, the Company shall reserve a portion of its production capacity for certain major customers that have guarantee deposits with the Company. As of December 31, 2005, the Company had a total of US$87,660 thousand of guarantee deposits.

- 29 -


 

  d.   Under a Shareholders Agreement entered into with Philips and EDB Investments Pte Ltd. on March 30, 1999, the parties formed a joint venture company, SSMC, for the purpose of constructing an integrated circuit foundry in Singapore. The Company’s equity interest in SSMC was 32%. The Company and Philips committed to buy specific percentages of the production capacity of SSMC. The Company and Philips are required, in the aggregate, to purchase up to 70% of SSMC’s full capacity, but the Company alone is not required to purchase more than 28% of the annual installed capacity. If any party defaults on the commitment and the capacity utilization of SSMC falls below a specific percentage of its total capacity, the defaulting party is required to compensate SSMC for all related unavoidable costs.
 
  e.   The Company provides technical services to SSMC under a Technology Cooperation Agreement (the Agreement) entered into on May 12, 1999. The Company receives compensation for such services computed at a specific percentage of net selling price of all products sold by SSMC. The Agreement shall remain in force for ten years and may be automatically renewed for successive periods of five years each unless pre-terminated by either party under certain conditions.
 
  f.   Under a Technology Transfer Agreement (TTA) with National Semiconductor Corporation (National) entered into on June 27, 2000, the Company shall receive payments for the licensing of certain technology to National. The agreement was to remain in force for ten years and could be automatically renewed for successive periods of two years thereafter unless either party gives notice for early termination under certain conditions. In January 2003, the Company and National entered into a Termination Agreement whereby the TTA was terminated for convenience. Under the Termination Agreement, the Company will be relieved of any further obligation to transfer any additional technology. In addition, the Company granted National an option to request the transfer of certain technologies under the same terms and conditions as the terminated TTA. The option will expire in January 2008.
 
  g.   Beginning in 2001, the Company entered into several licensing arrangements for certain semiconductor patents. The terms of the contracts vary with payments to be made in the form of royalties. The Company has recorded the related amounts as a liability with the corresponding amounts recorded as deferred charges which are amortized and charged to cost of sales on a straight-line basis over the estimated life of the technology or the term of the contract, whichever is shorter.
 
  h.   In November 2002, the Company entered into an Amended and Restated Joint Technology Cooperation Agreement with Philips, Freescale Semiconductor, Inc. and STMicroelectronics to jointly develop 90-nm to 65-nm advanced CMOS Logic and e-DRAM technologies. The Company also agreed to align 0.12 micron CMOS Logic technology to enhance its foundry business opportunities. The Company will contribute process technologies and share a portion of the costs associated with this joint development project. This agreement expired on December 31, 2005.
 
  i.   In December 2003, the Company entered into a Technology Development and License Agreement with Freescale Semiconductor, Inc. to jointly develop 65-nm SOI (silicon on insulator) technology. The Company will also license related 90-nm SOI technology from Freescale Semiconductor, Inc. Any intellectual properties arising out of the co-development project shall be jointly owned by the parties. In accordance with the agreement, the Company will pay royalties to Freescale Semiconductor, Inc. and will share a portion of the costs associated with the joint development project.
 
  j.   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.
 
  k.   Amounts available under unused letters of credit as of December 31, 2005 were NT$6,480 thousand.
 
  l.   The Company provided guarantees on loans amounting to US$40,000 thousand for TSMC-North America.

- 30 -


 

22.   ADDITIONAL DISCLOSURES
 
    Following are the additional disclosures required by the SFB for the Company and its investees:
  a.   Financing provided: Please see Table 1 attached;
 
  b.   Endorsement/guarantee provided: Please see Table 2 attached;
 
  c.   Marketable securities held: Please see Table 3 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 4 attached;
 
  e.   Acquisition of real estate properties at costs of at least NT$100 million or 20% of the paid-in capital: None;
 
  f.   Disposal of 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 5 attached;
 
  h.   Receivable from related parties amounting to at least NT$100 million or 20% of the paid-in capital: Please see Table 6 attached;
 
  i.   Names, locations, and related information of investees on which the Company exercises significant influence: Please see Table 7 attached;
 
  j.   Financial instrument transactions:
  1)   Derivative financial instruments
 
      The Company and TSMC-Shanghai entered into derivative financial instrument transactions during the years ended December 31, 2005 and 2004 to manage exposures related to foreign exchange rate and interest rate fluctuations. Certain information on these contracts was as follows:
  a)   Outstanding forward exchange contracts as of December 31, 2005 and 2004:
  i)   The Company
             
            Contract
Financial           Amount
Instruments   Currency   Maturity   (in Thousands)
December 31, 2005
           
 
           
Sell
  US$/NT$   Jan. 2006   US$ 60,000
 
           
December 31, 2004
           
 
           
Sell
  US$/NT$   Jan. 2005 to Mar. 2005   US$ 733,000
Sell
  US$/EUR   Jan. 2005   US$ 159,081

- 31 -


 

      As of December 31, 2005 and 2004, receivables resulted from forward exchange contracts (classified under current assets) aggregated NT$26,720 thousand, and NT$392,534 thousand, respectively. As of December 31, 2004, payables resulted from forward exchange contracts (classified under current liabilities) aggregated NT$559 thousand.
 
  ii)   As of December 31, 2005, TSMC-Shanghai did not have any outstanding forward exchange contract. TSMC-Shanghai did not enter into any derivative financial instrument transaction during the year ended December 31, 2004.
  b)   Cross currency swaps
 
      Outstanding cross currency swap contracts as of December 31, 2005 and 2004 were as follows:
                         
                    Range of  
    Contract Amount     Range of     Interest Rate  
Maturity Date   (in Thousands)     Interest Rate Paid     Received  
December 31, 2005
                       
 
                       
Jan. 2006 to Mar. 2006
  US$ 2,089,000       4.15%-4.54 %     0.02%-2.12 %
 
                       
December 31, 2004
                       
 
                       
Jan. 2005 to Jun. 2005
  US$ 1,420,000       1.28%-2.72 %     0.49%-1.17 %
      As of December 31, 2005 and 2004, receivables resulted from cross currency swap contracts (classified under current assets) were NT$1,119,905 thousand and NT$761,030 thousand, respectively.
 
  c)   Option contracts
 
      As of December 31, 2005, the Company did not have any outstanding foreign currency option contract. The Company did not enter into any foreign currency option contract for the year ended December 31, 2004.
 
      During the years ended December 31, 2005 and 2004, the net exchange gain or loss arising from forward exchange contracts, cross currency swap contracts and foreign currency option contracts was recognized in the “foreign exchange gain/loss, net” account and the difference in interest was recorded in interest income/expense.
 
  d)   Interest rate swap contracts
 
      The Company rescinded all interest rate swap contracts in the first quarter of 2005 before their original maturities. The rescission loss of NT$28,295 thousand was recognized in the “interest expense” account. There was no outstanding contract as of December 31, 2005.

- 32 -


 

Outstanding contracts as of December 31, 2004 were as follows:
                 
            Contract  
            Amount  
Contract Date   Period     (in Thousands)  
Sep. 2003
  Sep. 2003 to Dec. 2005   NT$500,000  
Oct. 2003
  Oct. 2003 to Dec. 2005     500,000  
Oct. 2003
  Oct. 2003 to Dec. 2005     500,000  
Oct. 2003
  Oct. 2003 to Dec. 2005     500,000  
Oct. 2003
  Oct. 2003 to Dec. 2005     500,000  
Nov. 2003
  Nov. 2003 to Dec. 2005     500,000  
  e)   Transaction risk
  i)   Credit risk. Credit risk represents the positive net settlement amount of those contracts with positive fair values at the balance sheet date. The positive net settlement amount represents the loss to be incurred by the Company if the counter-parties breached the contracts. The banks, which are the counter-parties to the foregoing derivative financial instruments, are reputable financial institutions. Management believes its exposure related to the potential default by those counter-parties is low.
 
  ii)   Market price risk. All derivative financial instruments are intended as hedges for fluctuations in foreign exchange rates and interest rates. Gains or losses from these hedging instruments are likely to be offset by gains or losses from the hedged items. Thus, market price risk is believed to be low.
 
  iii)   Cash flow risk and the amount and period of future cash needs.
 
      As of December 31, 2005, the Company’s future cash needs for outstanding forward exchange contracts and cross currency swap contracts were as follows:
                 
Term   Inflow     Outflow  
    (In Thousands)     (In Thousands)  
Within one year
  NT$71,820,892   US$ 2,149,000  
      The Company has sufficient operating capital to meet the above cash needs. In addition, there will be corresponding cash inflow for the cash outflow. Therefore, the cash flow risk is low.
  2)   Fair values of financial instruments were as follows:
                                 
    2005     2004  
    Carrying             Carrying        
    Amount     Fair Value     Amount     Fair Value  
Non-derivative financial instruments
                               
 
                               
Assets
                               
Short-term investments, net
  $ 47,055,347     $ 47,055,347     $ 52,979,095     $ 52,979,095  
Long-term investments (securities with market price)
    34,213,151       39,470,482       20,572,150       23,657,754  
Liabilities
                               
Bonds payable (including current portion)
    19,500,000       19,924,923       30,000,000       30,607,341  
(Continued)

- 33 -


 

                                 
    2005     2004  
    Carrying             Carrying        
    Amount     Fair Value     Amount     Fair Value  
Derivative financial instruments
                               
 
                               
Assets (liabilities)
                               
Forward exchange contracts (sell)
  $ 26,720     $ 28,474     $ 391,975     $ 317,090  
Cross currency swap contracts
    1,119,905       789,903       761,030       760,012  
Interest rate swap contracts
                4,361       (22,714 )
      The above financial instruments do not include cash and cash equivalents, receivables, other financial assets, payables, and payable to contractors and equipment suppliers. The carrying amounts of the aforementioned financial instruments reported in the balance sheet approximate their fair values.
 
      The above financial instruments also exclude refundable deposits, guarantee deposits, long-term investments that do not have quoted market prices as well as other long-term payables. The future cash inflow and outflow of the deposits approximate their fair values. Some of the long-term investments do not have quoted market prices; therefore, fair values for those long-term investments are not shown above. The fair value of other long-term payables is determined using the discounted value of expected cash flows, which approximates their carrying amount.
 
      Fair values of financial instruments were determined as follows:
  a)   Fair value of short-term and publicly traded long-term investments is based on quoted market prices.
 
  b)   Fair value of bonds payable is based on their quoted market price.
 
  c)   Fair value of derivative financial instruments is the amount receivable from or payable to the counter-party if the contracts were terminated on the balance sheet date.
      The fair values of some financial and non-financial instruments were not included in the fair values disclosed above. Accordingly, the sum of the fair values of the financial instruments listed above does not represent the fair value of the Company as a whole.
  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 investment: Please see Table 8 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 statements: Please see Note 18.
23.   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.

- 34 -


 

  b.   Export sales
                 
Area   2005     2004  
Americas
  $ 119,838,520     $ 113,948,320  
Asia and others
    101,698,615       91,057,215  
Europe
    17,937,376       19,084,530  
 
           
 
               
 
  $ 239,474,511     $ 224,090,065  
 
           
      The export sales information is based on amounts billed to customers within the areas.
 
  c.   Major customers representing at least 10% of total net sales
The Company only has one customer that accounts for at least 10% of its total net sales in the year ended December 31, 2005. The net sales to such customer amounted to $29,258,338 thousand and $25,299,856 thousand in the years ended December 31, 2005 and 2004, representing 11% and 10% of its total net sales, respectively.

- 35 -


 

TABLE 1
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED AND INVESTEES
FINANCING PROVIDED
FOR THE YEAR ENDED DECEMBER 31, 2005
(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Specified)
                                                                                                                 
                            Maximum                                                                                
                            Balance for the                                                                             Financing Company’s  
                            Period     Ending Balance             Type of             Reasons for                             Financing Limit for     Financing Amount  
                    Financial Statement     (US$ in     (US$ in             Financing     Transaction     Short-term     Allowance for     Collateral     Each Borrowing     Limits  
No.   Financing Name     Counter-party     Account     Thousands)     Thousands)     Interest Rate     (Note 1)     Amounts     Financing     Bad Debt     Item   Value   Company     (US$ in Thousands)  
 
                                                                                                       
1
  TSMC International   TSMC Development   Other receivables        $ 1,971,000          $ 1,149,750       1.50 %     2     $     Operating capital   $           $       N/A          $ 32,454,757  
 
                          US$ (60,000 )   US$ (35,000 )                                                                     (US$  987,968 )  
 
                                                                                                          (Note 2)
 
                                                                                                               
2
  TSMC Partners   TSMC Development   Other receivables     2,628,000             1.50 %     2           Operating capital                       N/A     (Note 3)
 
                          US$ (80,000 )                                                                                  
 
     
Note 1:
  The type No. 2 represents necessary for short-term financing.
 
   
Note 2:
  Not exceeding the issued capital of the Company.
 
   
Note 3:
  Generally not exceeding the issued capital of the Company, unless approved by all members of the board.

- 36 -


 

TABLE 2
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED
ENDORSEMENT/GUARANTEE PROVIDED
FOR THE YEAR ENDED DECEMBER 31, 2005
(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Specified)
                                                                         
                                                            Ratio of        
                                                            Accumulated Amount        
            Counter-party                                     of Collateral to     Maximum  
                    Nature of     Limits on Each Counter-party’s     Maximum             Value of Collateral     Net Equity of the     Collateral/Guarantee  
    Endorsement/             Relationship     Endorsement/     Balance for the Period     Ending Balance     Property, Plant and     Latest Financial     Amounts Allowable  
No.   Guarantee Provider     Name     (Note 2)     Guarantee Amounts     (US$ in Thousands)     (US$ in Thousands)     Equipment     Statement     (Note 1)  
0
  The Company   TSMC-North America     2     Not exceed 10% of the net   $ 1,314,000     $ 1,314,000     $       0.29 %   $ 111,407,587  
 
                         
     worth of the Company, and be also limited to the paid-in capital of the
  US$ (40,000 )   US$ (40,000 )                        
 
          TSMC Development     3    
endorsement/guarantee company, unless otherwise approved by Board of Directors.
    1,971,000                                
 
                                  US$ (60,000 )                                
 
     
Note 1:
  25% of the net worth of the Company as of December 31, 2005.
 
   
Note 2:
  The No. 2 represents a subsidiary in which the Company holds directly over 50% of the equity interest.
 
   
 
  The No. 3 represents an investee in which the Company holds directly and indirectly over 50% of the equity interest.

- 37 -


 

TABLE 3
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED AND INVESTEES
MARKETABLE SECURITIES HELD
DECEMBER 31, 2005
(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Specified)
                                                 
                December 31, 2005    
                        Carrying Value           Market Value or    
        Relationship with the   Financial Statement   Shares/Units   (US$ in   Percentage of   Net Asset Value    
Held Company Name   Marketable Securities Type and Name   Company   Account   (In Thousands)   Thousands)   Ownership   (US$ in Thousands)   Note
The Company
  Government bonds                                            
 
  United States Treas Nts     Short-term investment         US$ 47,516       N/A     US$ 47,233      
 
  Kreditanstal Fur Wiederaufbau     Short-term investment         US$ 6,881       N/A     US$ 6,839      
 
  2004 Government Bond Series E     Short-term investment         $ 300,472       N/A     $ 300,563      
 
  2002 Government Bond Series B     Long-term investment           355,936       N/A       354,832      
 
  2002 Government Bond Series F     Long-term investment           149,441       N/A       149,256      
 
  2004 Government Bond Series A     Long-term investment           2,349,973       N/A       2,349,857      
 
  2004 Government Bond Series E     Long-term investment           3,898,610       N/A       3,896,739      
 
  2004 Kaohsiung Municipal Bond Series A     Long-term investment           620,000       N/A       618,160      
 
  2005 Government Bond Series A     Long-term investment           2,548,977       N/A       2,544,964      
 
                                               
 
  Bond funds                                            
 
  JF Taiwan First Bond Fund     Short-term investment     63,131       856,359       N/A       875,416      
 
  ABN AMRO Bond Fund     Short-term investment     134,906       1,956,175       N/A       2,004,862      
 
  JF Taiwan Bond Fund     Short-term investment     62,009       908,656       N/A       933,430      
 
  Dresdner Bond DAM Fund     Short-term investment     69,303       771,617       N/A       792,068      
 
  Shinkong Chi Shin Bond Fund     Short-term investment     55,063       762,771       N/A       778,482      
 
  NITC Bond Fund     Short-term investment     3,764       600,000       N/A       610,864      
 
  ABN AMRO Select Bond Fund     Short-term investment     18,235       200,000       N/A       203,860      
 
                                               
 
  Stock                                            
 
  Taiwan Mask Corp.     Short-term investment     1,439       5,257             21,280      
 
  TSMC International   Subsidiary   Long-term investment     987,968       23,912,812       100       23,912,812      
 
  VIS   Investee accounted
for using equity
method
  Long-term investment     437,891       5,419,747       27       10,991,064      
 
  SSMC   Investee accounted
for using equity
method
  Long-term investment     382       4,215,200       32       4,215,200      
 
  TSMC Partners   Subsidiary   Long-term investment     300       4,091,166       100       4,091,166      
 
  TSMC-North America   Subsidiary   Long-term investment     11,000       1,790,186       100       1,790,186      
 
  GUC   Investee with
controlling
financial interest
  Long-term investment     40,147       442,233       46       465,258      
 
  TSMC-Japan   Subsidiary   Long-term investment     6       94,949       100       94,949      
 
  TSMC-Europe   Subsidiary   Long-term investment           23,087       100       23,087      
 
  United Industrial Gases Co., Ltd.     Long-term investment     16,783       193,584       10       295,606      
 
  Shin-Etsu Handotai Taiwan Co., Ltd.     Long-term investment     10,500       105,000       7       186,387      
(Continued)

- 38 -


 

                                                 
                December 31, 2005    
                        Carrying Value           Market Value or    
        Relationship with the   Financial Statement   Shares/Units   (US$ in   Percentage of   Net Asset Value    
Held Company Name   Marketable Securities Type and Name   Company   Account   (In Thousands)   Thousands)   Ownership   (US$ in Thousands)   Note
 
  Hontung Venture Capital Co., Ltd.     Long-term investment       $ 8,392       83,916       10           $ 46,801      
 
  Gobaltop Partner I Venture Capital Corp.     Long-term investment     5,000       50,000       1       49,947      
 
  W.K. Technology Fund IV     Long-term investment     4,000       40,000       2       43,645      
 
                                               
 
  Capital                                            
 
  TSMC-Shanghai   Subsidiary   Long-term investment           9,438,856       100       9,438,856      
 
  Emerging Alliance   Subsidiary   Long-term investment           850,534       99       850,534      
 
  VTAF II   Subsidiary   Long-term investment           642,479       98       642,479      
 
  Chi Cherng   Subsidiary   Long-term investment           78,139       36       536,703     Treasury stock of NT$458,564 thousand is deducted from the carrying value
 
  Hsin Ruey   Subsidiary   Long-term investment           77,415       36       536,926     Treasury stock of NT$459,511 thousand is deducted from the carrying value
 
                                               
 
  Corporate bonds                                            
 
  Abbott Labs     Short-term investment         US$ 1,581       N/A     US$ 1,526      
 
  Abbott Labs     Short-term investment         US$ 2,732       N/A     US$ 2,595      
 
  Ace Ltd.     Short-term investment         US$ 1,046       N/A     US$ 1,011      
 
  AIG Sunamerica Global Fing Ix     Short-term investment         US$ 1,032       N/A     US$ 1,001      
 
  Allstate Life Global Fdg Secd     Short-term investment         US$ 2,998       N/A     US$ 2,948      
 
  Alltel Corp.     Short-term investment         US$ 609       N/A     US$ 598      
 
  American Express Co.     Short-term investment         US$ 3,550       N/A     US$ 3,435      
 
  American Gen Fin Corp.     Short-term investment         US$ 1,768       N/A     US$ 1,670      
 
  American Gen Fin Corp. Mtn     Short-term investment         US$ 1,058       N/A     US$ 1,011      
 
  American Gen Fin Corp. Mtn     Short-term investment         US$ 3,130       N/A     US$ 2,998      
 
  American Honda Fin Corp. Mtn     Short-term investment         US$ 3,800       N/A     US$ 3,808      
 
  Ameritech Capital Funding Co.     Short-term investment         US$ 510       N/A     US$ 491      
 
  Amgen Inc.     Short-term investment         US$ 3,005       N/A     US$ 2,907      
 
  Amsouth Bk Birmingham Ala     Short-term investment         US$ 1,972       N/A     US$ 1,967      
 
  Anz Cap Tr I     Short-term investment         US$ 1,012       N/A     US$ 968      
 
  Associates Corp. North Amer     Short-term investment         US$ 2,700       N/A     US$ 2,582      
 
  Bank New York Inc.     Short-term investment         US$ 1,972       N/A     US$ 1,984      
 
  Bank New York Inc.     Short-term investment         US$ 1,525       N/A     US$ 1,485      
 
  Bank Scotland Treas Svcs Plc     Short-term investment         US$ 2,715       N/A     US$ 2,729      
 
  Bank Utd Houston Tx Mtbn     Short-term investment         US$ 580       N/A     US$ 544      
 
  Bear Stearns Cos Inc.     Short-term investment         US$ 3,329       N/A     US$ 3,337      
 
  Bear Stearns Cos Inc.     Short-term investment         US$ 3,757       N/A     US$ 3,662      
 
  Beneficial Corp. Mtn Bk Entry     Short-term investment         US$ 2,434       N/A     US$ 2,340      
 
  Berkshire Hathaway Fin Corp.     Short-term investment         US$ 1,498       N/A     US$ 1,472      
 
  Cargill Inc.     Short-term investment         US$ 2,120       N/A     US$ 2,012      
 
  Caterpillar Finl Svcs Mtn     Short-term investment         US$ 5,721       N/A     US$ 5,724      
 
  Chase Manhattan Corp. New     Short-term investment         US$ 1,628       N/A     US$ 1,546      
 
  Chase Manhattan Corp. New       Short-term investment         US$ 2,246       N/A     US$ 2,155      
 
  Chubb Corp.     Short-term investment         US$ 2,138       N/A     US$ 2,125      
(Continued)

- 39 -


 

                                         
                December 31, 2005    
                    Carrying Value       Market Value or    
        Relationship with the   Financial Statement   Shares/Units   (US$ in   Percentage of   Net Asset Value    
Held Company Name   Marketable Securities Type and Name   Company   Account   (In Thousands)   Thousands)   Ownership   (US$ in Thousands)   Note
 
  Cit Group Hldgs Inc.     Short-term investment     US$ 3,203     N/A   US$ 3,068      
 
  Citicorp     Short-term investment     US$ 1,473     N/A   US$ 1,407      
 
  Cogentrix Energy Inc.     Short-term investment     US$ 2,885     N/A   US$ 2,739      
 
  Colonial Pipeline Co.     Short-term investment     US$ 1,625     N/A   US$ 1,536      
 
  Corestates Cap Corp.     Short-term investment     US$ 1,062     N/A   US$ 1,018      
 
  Countrywide Fdg Corp. Mtn     Short-term investment     US$ 2,100     N/A   US$ 2,066      
 
  Countrywide Home Lns Inc.     Short-term investment     US$ 5,210     N/A   US$ 5,020      
 
  Credit Suisse Fb USA Inc.     Short-term investment     US$ 4,141     N/A   US$ 4,029      
 
  Credit Suisse Fincl Products     Short-term investment     US$ 1,507     N/A   US$ 1,508      
 
  Credit Suisse First Boston     Short-term investment     US$ 786     N/A   US$ 748      
 
  Credit Suisse First Boston USA     Short-term investment     US$ 2,249     N/A   US$ 2,175      
 
  Daimlerchrysler North Amer     Short-term investment     US$ 997     N/A   US$ 972      
 
  Daimlerchrysler North Amer Hld     Short-term investment     US$ 749     N/A   US$ 751      
 
  Dayton Hudson Corp.     Short-term investment     US$ 2,104     N/A   US$ 2,056      
 
  Deere John Cap Corp.     Short-term investment     US$ 5,079     N/A   US$ 5,020      
 
  Dell Computer Corp.     Short-term investment     US$ 3,054     N/A   US$ 2,874      
 
  Den Danske Bk Aktieselskab     Short-term investment     US$ 2,192     N/A   US$ 2,067      
 
  Diageo Plc     Short-term investment     US$ 3,459     N/A   US$ 3,419      
 
  Dow Chem Co.     Short-term investment     US$ 921     N/A   US$ 863      
 
  European Invt Bk     Short-term investment     US$ 3,918     N/A   US$ 3,910      
 
  European Invt Bk     Short-term investment     US$ 8,315     N/A   US$ 8,023      
 
  Fifth Third Bk Cincinnati OH     Short-term investment     US$ 2,419     N/A   US$ 2,414      
 
  First Data Corp.     Short-term investment     US$ 3,013     N/A   US$ 2,860      
 
  Fleet Boston Corp.     Short-term investment     US$ 2,850     N/A   US$ 2,718      
 
  Fleet Finl Group Inc. New     Short-term investment     US$ 975     N/A   US$ 923      
 
  Fleet Finl Group Inc. New     Short-term investment     US$ 494     N/A   US$ 474      
 
  Fpl Group Cap Inc.     Short-term investment     US$ 1,001     N/A   US$ 997      
 
  Fpl Group Cap Inc.     Short-term investment     US$ 860     N/A   US$ 845      
 
  Gannett Co Inc.     Short-term investment     US$ 2,999     N/A   US$ 2,930      
 
  General Elec Cap Corp. Mtn     Short-term investment     US$ 3,989     N/A   US$ 3,894      
 
  General Elec Cap Corp. Mtn     Short-term investment     US$ 8,862     N/A   US$ 8,755      
 
  General Re Corp.     Short-term investment     US$ 3,500     N/A   US$ 3,430      
 
  Genworth Finl Inc.     Short-term investment     US$ 3,412     N/A   US$ 3,419      
 
  Goldman Sachs Group Inc.     Short-term investment     US$ 4,981     N/A   US$ 4,970      
 
  Goldman Sachs Group Inc.     Short-term investment     US$ 3,477     N/A   US$ 3,452      
 
  Goldman Sachs Group LP     Short-term investment     US$ 1,637     N/A   US$ 1,530      
 
  Greenpoint Finl Corp.     Short-term investment     US$ 974     N/A   US$ 959      
 
  Gte Corp.     Short-term investment     US$ 2,134     N/A   US$ 2,041      
 
  Hancock John Global Fdg II Mtn     Short-term investment     US$ 3,566     N/A   US$ 3,512      
 
  Hancock John Global Fdg Mtn     Short-term investment     US$ 1,003     N/A   US$ 970      
 
  Hartford Finl Svcs Group Inc.     Short-term investment     US$ 296     N/A   US$ 297      
 
  Hartford Finl Svcs Group Inc.     Short-term investment     US$ 1,435     N/A   US$ 1,371      
 
  Hbos Plc Medium Term Sr Nts     Short-term investment     US$ 3,201     N/A   US$ 3,181      
 
  Hbos Plc Meduim Term Sr Nts     Short-term investment     US$ 2,977     N/A   US$ 2,940      
 
  Heller Finl Inc.     Short-term investment     US$ 2,071     N/A   US$ 1,984      
(Continued)

- 40 -


 

                                         
                December 31, 2005    
                    Carrying Value       Market Value or    
        Relationship with the   Financial Statement   Shares/Units   (US$ in   Percentage of   Net Asset Value    
Held Company Name   Marketable Securities Type and Name   Company   Account   (In Thousands)   Thousands)   Ownership   (US$ in Thousands)   Note
 
  Hershey Foods Corp.     Short-term investment     US$ 1,627     N/A   US$ 1,537      
 
  Hewlett Packard Co.     Short-term investment     US$ 3,373     N/A   US$ 3,204      
 
  Honeywell Inc.     Short-term investment     US$ 3,284     N/A   US$ 3,081      
 
  Household Fin Corp.     Short-term investment     US$ 2,993     N/A   US$ 2,908      
 
  Household Fin Corp.     Short-term investment     US$ 532     N/A   US$ 512      
 
  Household Intl Inc     Short-term investment     US$ 2,878     N/A   US$ 2,892      
 
  HSBC Fin Corp Mtn     Short-term investment     US$ 5,097     N/A   US$ 5,066      
 
  HSBC USA Inc. New     Short-term investment     US$ 1,154     N/A   US$ 1,091      
 
  Huntington Natl Bk Columbus OH     Short-term investment     US$ 2,954     N/A   US$ 2,954      
 
  ING Bank     Short-term investment     US$ 2,114     N/A   US$ 2,024      
 
  ING Sec Life Instl Fdg     Short-term investment     US$ 2,544     N/A   US$ 2,485      
 
  International Business Machs     Short-term investment     US$ 2,249     N/A   US$ 2,208      
 
  International Lease Fin Corp.     Short-term investment     US$ 2,031     N/A   US$ 2,005      
 
  Intl Lease Fin Corp. Mtn     Short-term investment     US$ 3,028     N/A   US$ 2,943      
 
  Intl Lease Fin Corp. Mtn     Short-term investment     US$ 2,471     N/A   US$ 2,481      
 
  JP Morgan Chase + Co.     Short-term investment     US$ 3,406     N/A   US$ 3,353      
 
  Jackson Natl Life Global Fdg     Short-term investment     US$ 1,036     N/A   US$ 1,006      
 
  Jackson Natl Life Global Fdg S     Short-term investment     US$ 1,999     N/A   US$ 2,004      
 
  JP Morgan Chase + Co.     Short-term investment     US$ 3,663     N/A   US$ 3,522      
 
  Key Bk Na Med Term Nts Bk Entr     Short-term investment     US$ 4,450     N/A   US$ 4,409      
 
  Keycorp Mtn Book Entry     Short-term investment     US$ 3,500     N/A   US$ 3,512      
 
  Kraft Foods Inc.     Short-term investment     US$ 773     N/A   US$ 749      
 
  Kraft Foods Inc.     Short-term investment     US$ 1,037     N/A   US$ 1,006      
 
  Lehman Brothers Hldgs Inc.     Short-term investment     US$ 1,668     N/A   US$ 1,631      
 
  Lehman Brothers Hldgs Inc.     Short-term investment     US$ 499     N/A   US$ 489      
 
  Lehman Brothers Hldgs Inc.     Short-term investment     US$ 1,163     N/A   US$ 1,105      
 
  Lincoln Natl Corp. In     Short-term investment     US$ 519     N/A   US$ 503      
 
  Merita Bk Ltd. Ny Brh     Short-term investment     US$ 538     N/A   US$ 513      
 
  Merrill Lynch + Co. Inc.     Short-term investment     US$ 3,486     N/A   US$ 3,421      
 
  Merrill Lynch + Co. Inc.     Short-term investment     US$ 1,992     N/A   US$ 1,983      
 
  Merrill Lynch + Co. Inc.     Short-term investment     US$ 4,900     N/A   US$ 4,891      
 
  Metropolitan Life Global Mtn     Short-term investment     US$ 1,907     N/A   US$ 1,894      
 
  Monumental Global Fdg II     Short-term investment     US$ 1,534     N/A   US$ 1,476      
 
  Monumental Global Fdg II 2002A     Short-term investment     US$ 1,045     N/A   US$ 1,005      
 
  Morgan Stanley     Short-term investment     US$ 2,144     N/A   US$ 2,142      
 
  Morgan Stanley Group Inc.     Short-term investment     US$ 4,507     N/A   US$ 4,432      
 
  National City Corp.     Short-term investment     US$ 3,426     N/A   US$ 3,378      
 
  National Westminster Bk Plc     Short-term investment     US$ 1,433     N/A   US$ 1,355      
 
  Nationwide Bldg Soc     Short-term investment     US$ 3,457     N/A   US$ 3,463      
 
  Nationwide Bldg Soc Mtn     Short-term investment     US$ 3,000     N/A   US$ 3,001      
 
  Nationwide Life Global Mtn     Short-term investment     US$ 1,463     N/A   US$ 1,459      
 
  Pepsico Inc. Mtn Book Entry     Short-term investment     US$ 3,818     N/A   US$ 3,678      
 
  Pnc Fdg Corp.     Short-term investment     US$ 1,080     N/A   US$ 1,029      
 
  Popular North Amer Inc. Mtn     Short-term investment     US$ 3,042     N/A   US$ 2,931      
 
  Premark Intl Inc.     Short-term investment     US$ 2,954     N/A   US$ 2,789      
(Continued)

- 41 -


 

                                         
                December 31, 2005    
                    Carrying Value       Market Value or    
        Relationship with the   Financial Statement   Shares/Units   (US$ in   Percentage of   Net Asset Value    
Held Company Name   Marketable Securities Type and Name   Company   Account   (In Thousands)   Thousands)   Ownership   (US$ in Thousands)   Note
 
  Pricoa Global Fdg 1 Mtn     Short-term investment     US$ 3,500     N/A   US$ 3,502      
 
  Protective Life Secd Trs     Short-term investment     US$ 2,920     N/A   US$ 2,903      
 
  Prudential Ins Co. Amer     Short-term investment     US$ 2,648     N/A   US$ 2,523      
 
  Prudential Ins Co. Amer     Short-term investment     US$ 2,774     N/A   US$ 2,704      
 
  Public Svc Elec Gas Co.     Short-term investment     US$ 3,225     N/A   US$ 3,184      
 
  Regions Finl Corp. New     Short-term investment     US$ 2,397     N/A   US$ 2,378      
 
  Reinsurance Group Amer Inc.     Short-term investment     US$ 2,091     N/A   US$ 2,012      
 
  Royal Bk Scotland Group Plc     Short-term investment     US$ 1,563     N/A   US$ 1,489      
 
  Safeco Corp.     Short-term investment     US$ 765     N/A   US$ 730      
 
  Santander US Debt S A Uniperso     Short-term investment     US$ 4,998     N/A   US$ 4,974      
 
  Sara Lee Corp.     Short-term investment     US$ 1,596     N/A   US$ 1,527      
 
  Sbc Communications Inc.     Short-term investment     US$ 1,776     N/A   US$ 1,713      
 
  Sbc Communications Inc.     Short-term investment     US$ 3,681     N/A   US$ 3,515      
 
  Scotland Intl Fin B V 144a     Short-term investment     US$ 1,533     N/A   US$ 1,446      
 
  Slm Corp.     Short-term investment     US$ 500     N/A   US$ 496      
 
  Slm Corp. Medium Term Nts     Short-term investment     US$ 2,950     N/A   US$ 2,922      
 
  Sp Powerassests Ltd. Global     Short-term investment     US$ 991     N/A   US$ 971      
 
  St Paul Cos Inc. Mtn Bk Ent     Short-term investment     US$ 2,661     N/A   US$ 2,593      
 
  Suntrust Bks Inc.     Short-term investment     US$ 1,062     N/A   US$ 1,014      
 
  Swedbank Sparbanken Svenge Ab     Short-term investment     US$ 1,084     N/A   US$ 1,021      
 
  Tiaa Global Mkts Inc.     Short-term investment     US$ 519     N/A   US$ 501      
 
  Tribune Co. Med Trm Nts     Short-term investment     US$ 2,943     N/A   US$ 2,838      
 
  Unitedhealth Group Inc.     Short-term investment     US$ 3,119     N/A   US$ 3,015      
 
  US Bk Natl Assn Cincinnati Oh     Short-term investment     US$ 2,669     N/A   US$ 2,678      
 
  Virginia Elec + Pwr Co.     Short-term investment     US$ 2,884     N/A   US$ 2,702      
 
  Vodafone Group Plc New     Short-term investment     US$ 2,559     N/A   US$ 2,505      
 
  Wal Mart Cda Venture Corp.     Short-term investment     US$ 3,670     N/A   US$ 3,511      
 
  Washington Mut Fin Corp.     Short-term investment     US$ 1,043     N/A   US$ 1,007      
 
  Washington Mut Inc.     Short-term investment     US$ 4,735     N/A   US$ 4,539      
 
  Washington Post Co.     Short-term investment     US$ 3,182     N/A   US$ 3,023      
 
  Wells Fargo + Co. New     Short-term investment     US$ 3,697     N/A   US$ 3,520      
 
  Westfield Cap Corp. Ltd.     Short-term investment     US$ 1,999     N/A   US$ 2,007      
 
  Wps Resources Corp.     Short-term investment     US$ 1,107     N/A   US$ 1,074      
 
  Formosa Petrochemical Corporation       Short -term investment     $ 311,568     N/A   $ 301,946      
 
  Taiwan Power Company       Long term investment       3,263,348     N/A     3,263,232      
 
  Nan Ya Plastics Corporation       Long term investment       2,150,842     N/A     2,152,156      
 
  China Steel Corporation       Long term investment       1,010,532     N/A     1,010,657      
 
  Formosa Petrochemical Corporation       Long term investment       791,963     N/A     791,771      
 
  Chinese Petroleum Corporation       Long term investment       705,436     N/A     704,878      
 
  Far Eastone Telecommunications Co. Ltd.       Long term investment       300,026     N/A     300,001      
 
  Formosa Plastics Corporation       Long term investment       268,855     N/A     270,086      
 
  Formosa Chemicals & Fiber Corporation       Long term investment       134,369     N/A     137,529      
(Continued)

- 42 -


 

                                         
                December 31, 2005    
                    Carrying Value       Market Value or    
        Relationship with the   Financial Statement   Shares/Units   (US$ in   Percentage of   Net Asset Value    
Held Company Name   Marketable Securities Type and Name   Company   Account   (In Thousands)   Thousands)   Ownership   (US$ in Thousands)   Note
 
  Agency bonds                                    
 
  Fed Hm Ln Pc Pool 1H2520     Short-term investment     US$ 3,753     N/A   US$ 3,743      
 
  Fed Hm Ln Pc Pool 1H2524     Short-term investment     US$ 2,861     N/A   US$ 2,838      
 
  Fed Hm Ln Pc Pool 781959       Short-term investment       US$ 7,112     N/A   US$ 7,123      
 
  Fed Hm Ln Pc Pool E89857     Short-term investment     US$ 1,980     N/A   US$ 1,923      
 
  Fed Hm Ln Pc Pool G11295     Short-term investment     US$ 1,753     N/A   US$ 1,703      
 
  Federal Home Ln Mtg       Short-term investment       US$ 3,848     N/A   US$ 3,834      
 
  Federal Home Ln Mtg Corp.     Short-term investment     US$ 887     N/A   US$ 882      
 
  Federal Home Ln Mtg Corp.     Short-term investment     US$ 3,454     N/A   US$ 3,406      
 
  Federal Home Ln Mtg Corp.     Short-term investment     US$ 3,954     N/A   US$ 3,945      
 
  Federal Home Ln Mtg Corp.     Short-term investment     US$ 6,096     N/A   US$ 5,977      
 
  Federal Home Ln Mtg Corp.     Short-term investment     US$ 3,280     N/A   US$ 3,185      
 
  Federal Home Ln Mtg Corp.     Short-term investment     US$ 4,098     N/A   US$ 4,102      
 
  Federal Home Ln Mtg Corp.     Short-term investment     US$ 9,905     N/A   US$ 9,898      
 
  Federal Home Ln Mtg Corp.     Short-term investment     US$ 4,902     N/A   US$ 4,843      
 
  Federal Home Ln Mtg Corp.     Short-term investment     US$ 3,755     N/A   US$ 3,735      
 
  Federal Natl Mtg Assn     Short-term investment     US$ 3,696     N/A   US$ 3,668      
 
  Federal Natl Mtg Assn     Short-term investment     US$ 110     N/A   US$ 109      
 
  Federal Natl Mtg Assn     Short-term investment     US$ 1,930     N/A   US$ 1,887      
 
  Federal Natl Mtg Assn     Short-term investment     US$ 4,030     N/A   US$ 3,992      
 
  Federal Natl Mtg Assn     Short-term investment     US$ 4,051     N/A   US$ 4,000      
 
  Federal Natl Mtg Assn     Short-term investment     US$ 1,668     N/A   US$ 1,626      
 
  Federal Natl Mtg Assn Gtd     Short-term investment     US$ 3,659     N/A   US$ 3,655      
 
  Federal Natl Mtg Assn Gtd     Short-term investment     US$ 445     N/A   US$ 432      
 
  Fnma Pool 254507     Short-term investment     US$ 2,286     N/A   US$ 2,240      
 
  Fnma Pool 254834     Short-term investment     US$ 1,750     N/A   US$ 1,729      
 
  Fnma Pool 255883     Short-term investment     US$ 3,771     N/A   US$ 3,762      
 
  Fnma Pool 685116     Short-term investment     US$ 842     N/A   US$ 817      
 
  Fnma Pool 687863     Short-term investment     US$ 3,570     N/A   US$ 3,565      
 
  Fnma Pool 696485     Short-term investment     US$ 4,175     N/A   US$ 4,167      
 
  Fnma Pool 725095     Short-term investment     US$ 1,562     N/A   US$ 1,516      
 
  Fnma Pool 730033     Short-term investment     US$ 1,793     N/A   US$ 1,771      
 
  Fnma Pool 740934     Short-term investment     US$ 1,775     N/A   US$ 1,753      
 
  Fnma Pool 790828     Short-term investment     US$ 3,504     N/A   US$ 3,407      
 
  Fnma Pool 793025     Short-term investment     US$ 3,306     N/A   US$ 3,245      
 
  Fnma Pool 793932     Short-term investment     US$ 764     N/A   US$ 742      
 
  Fnma Pool 794040     Short-term investment     US$ 940     N/A   US$ 912      
 
  Fnma Pool 795548     Short-term investment     US$ 623     N/A   US$ 610      
 
  Fnma Pool 806642     Short-term investment     US$ 1,573     N/A   US$ 1,544      
 
  Fnma Pool 815626     Short-term investment     US$ 3,622     N/A   US$ 3,625      
 
  Fnma Pool 816594     Short-term investment     US$ 2,657     N/A   US$ 2,630      
 
  Fnma Pool 825395     Short-term investment     US$ 3,265     N/A   US$ 3,229      
 
  Fnma Pool 825398     Short-term investment     US$ 4,949     N/A   US$ 4,889      
 
  Fnma Pool 841069     Short-term investment     US$ 3,673     N/A   US$ 3,649      
(Continued)

- 43 -


 

                                         
                December 31, 2005    
                    Carrying Value       Market Value or    
        Relationship with the   Financial Statement   Shares/Units   (US$ in   Percentage of   Net Asset Value    
Held Company Name   Marketable Securities Type and Name   Company   Account   (In Thousands)   Thousands)   Ownership   (US$ in Thousands)   Note
 
  Gnma II Pool 081150     Short-term investment     US$ 813     N/A   US$ 796      
 
  Gnma II Pool 081153     Short-term investment     US$ 2,956     N/A   US$ 2,884      
 
  Federal Farm Cr Bks     Short-term investment     US$ 3,985     N/A   US$ 3,936      
 
  Federal Home Ln Bank     Short-term investment     US$ 3,962     N/A   US$ 3,962      
 
  Federal Home Ln Bks     Short-term investment     US$ 6,110     N/A   US$ 6,083      
 
  Federal Home Ln Bks     Short-term investment     US$ 2,454     N/A   US$ 2,483      
 
  Federal Home Ln Bks     Short-term investment     US$ 2,990     N/A   US$ 2,991      
 
  Federal Home Ln Bks     Short-term investment     US$ 3,932     N/A   US$ 3,929      
 
  Federal Home Ln Bks     Short-term investment     US$ 4,997     N/A   US$ 4,966      
 
  Federal Home Ln Bks     Short-term investment     US$ 2,962     N/A   US$ 2,949      
 
  Federal Home Ln Bks     Short-term investment     US$ 4,927     N/A   US$ 4,896      
 
  Federal Home Ln Bks     Short-term investment     US$ 3,976     N/A   US$ 3,951      
 
  Federal Home Ln Bks     Short-term investment     US$ 4,136     N/A   US$ 4,103      
 
  Federal Home Ln Bks     Short-term investment     US$ 4,939     N/A   US$ 4,865      
 
  Federal Home Ln Bks     Short-term investment     US$ 7,886     N/A   US$ 7,977      
 
  Federal Home Ln Bks     Short-term investment     US$ 2,233     N/A   US$ 2,217      
 
  Federal Home Ln Bks     Short-term investment     US$ 8,672     N/A   US$ 8,672      
 
  Federal Home Ln Bks     Short-term investment     US$ 4,965     N/A   US$ 4,926      
 
  Federal Home Ln Bks     Short-term investment     US$ 4,808     N/A   US$ 4,816      
 
  Federal Home Ln Bks     Short-term investment     US$ 7,558     N/A   US$ 7,499      
 
  Federal Home Ln Bks     Short-term investment     US$ 8,594     N/A   US$ 8,524      
 
  Federal Home Ln Bks     Short-term investment     US$ 3,024     N/A   US$ 2,980      
 
  Federal Home Ln Bks     Short-term investment     US$ 3,972     N/A   US$ 3,949      
 
  Federal Home Ln Bks     Short-term investment     US$ 7,887     N/A   US$ 7,759      
 
  Federal Home Ln Bks     Short-term investment     US$ 19,846     N/A   US$ 19,832      
 
  Federal Home Ln Bks     Short-term investment     US$ 6,908     N/A   US$ 6,901      
 
  Federal Home Ln Bks     Short-term investment     US$ 6,098     N/A   US$ 5,895      
 
  Federal Home Ln Bks     Short-term investment     US$ 9,134     N/A   US$ 9,008      
 
  Federal Home Ln Bks     Short-term investment     US$ 3,379     N/A   US$ 3,304      
 
  Federal Home Ln Bks     Short-term investment     US$ 1,042     N/A   US$ 1,001      
 
  Federal Home Ln Bks     Short-term investment     US$ 2,532     N/A   US$ 2,419      
 
  Federal Home Ln Mtg Corp.     Short-term investment     US$ 3,388     N/A   US$ 3,412      
 
  Federal Home Ln Mtg Corp.     Short-term investment     US$ 9,997     N/A   US$ 9,778      
 
  Federal Home Ln Mtg Corp.     Short-term investment     US$ 6,980     N/A   US$ 6,935      
 
  Federal Home Ln Mtg Corp.     Short-term investment     US$ 5,929     N/A   US$ 5,941      
 
  Federal Home Ln Mtg Corp. Mtn     Short-term investment     US$ 4,930     N/A   US$ 4,883      
 
  Federal Home Loan Bank     Short-term investment     US$ 3,475     N/A   US$ 3,462      
 
  Federal Home Loan Mtg Assn     Short-term investment     US$ 4,847     N/A   US$ 4,859      
 
  Federal Home Loan Mtg Corp.     Short-term investment     US$ 4,903     N/A   US$ 4,893      
 
  Federal Natl Mtg Assn     Short-term investment     US$ 4,921     N/A   US$ 4,897      
 
  Federal Natl Mtg Assn     Short-term investment     US$ 7,892     N/A   US$ 7,889      
 
  Federal Natl Mtg Assn     Short-term investment     US$ 4,943     N/A   US$ 4,936      
 
  Federal Natl Mtg Assn     Short-term investment     US$ 8,971     N/A   US$ 8,935      
 
  Federal Natl Mtg Assn     Short-term investment     US$ 4,430     N/A   US$ 4,339      
(Continued)

- 44 -


 

                                         
                December 31, 2005    
                    Carrying Value       Market Value or    
        Relationship with the   Financial Statement   Shares/Units   (US$ in   Percentage of   Net Asset Value    
Held Company Name   Marketable Securities Type and Name   Company   Account   (In Thousands)   Thousands)   Ownership   (US$ in Thousands)   Note
 
  Federal Natl Mtg Assn     Short-term investment     US$ 17,888     N/A   US$ 17,753      
 
  Federal Natl Mtg Assn     Short-term investment     US$ 5,928     N/A   US$ 5,873      
 
  Federal Natl Mtg Assn     Short-term investment     US$ 7,926     N/A   US$ 7,852      
 
  Federal Natl Mtg Assn Mtn     Short-term investment     US$ 9,758     N/A   US$ 9,772      
 
  Federal Natl Mtg Assn Mtn     Short-term investment     US$ 15,787     N/A   US$ 15,791      
 
  Federal Natl Mtg Assn Mtn     Short-term investment     US$ 7,000     N/A   US$ 6,919      
 
  Federal Natl Mtg Assn Mtn     Short-term investment     US$ 2,876     N/A   US$ 2,888      
 
  Federal Natl Mtg Assn Mtn     Short-term investment     US$ 2,866     N/A   US$ 2,870      
 
  Federal Natl Mtg Assn Mtn     Short-term investment     US$ 5,740     N/A   US$ 5,643      
 
                                       
 
  Corporate issued asset-backed securities                                    
 
  American Home Mtg Invt Tr     Short-term investment     US$ 411     N/A   US$ 411      
 
  Americredit Automobile Rec Tr     Short-term investment     US$ 1,034     N/A   US$ 1,014      
 
  Americredit Automobile Rec Tr     Short-term investment     US$ 2,000     N/A   US$ 1,977      
 
  Americredit Automobile Receiva     Short-term investment     US$ 5,000     N/A   US$ 4,971      
 
  Americredit Automobile Receivb     Short-term investment     US$ 4,949     N/A   US$ 4,894      
 
  Atlantic City Elc Trns Fdg LLC     Short-term investment     US$ 680     N/A   US$ 668      
 
  Banc Amer Coml Mtg Inc.     Short-term investment     US$ 4,462     N/A   US$ 4,362      
 
  Banc Amer Mtg Secs Inc.     Short-term investment     US$ 4,030     N/A   US$ 3,990      
 
  Bank Of Amer Lease Equip Tr     Short-term investment     US$ 2,986     N/A   US$ 2,932      
 
  Bear Stearns Alt A Tr     Short-term investment     US$ 958     N/A   US$ 958      
 
  Bear Stearns Arm Tr     Short-term investment     US$ 1,947     N/A   US$ 1,952      
 
  Bear Stearns Coml Mtg Secs Inc     Short-term investment     US$ 6,350     N/A   US$ 6,350      
 
  California Infrastructure Dev     Short-term investment     US$ 864     N/A   US$ 839      
 
  Capital Auto Receivables Asset     Short-term investment     US$ 1,588     N/A   US$ 1,566      
 
  Capital One Auto Fin Tr     Short-term investment     US$ 2,650     N/A   US$ 2,612      
 
  Capital One Auto Fin Tr     Short-term investment     US$ 3,000     N/A   US$ 2,999      
 
  Capital One Multi Asset Execut     Short-term investment     US$ 4,957     N/A   US$ 4,863      
 
  Capital One Multi Asset Execut     Short-term investment     US$ 3,974     N/A   US$ 3,941      
 
  Capital One Multi Asset Execut     Short-term investment     US$ 2,999     N/A   US$ 2,974      
 
  Capital One Prime Auto Receiv     Short-term investment     US$ 2,800     N/A   US$ 2,781      
 
  Caterpillar Finl Asset Tr     Short-term investment     US$ 4,453     N/A   US$ 4,390      
 
  Caterpillar Finl Asset Tr     Short-term investment     US$ 8,219     N/A   US$ 8,142      
 
  Cendant Rent Car Fdg Aesop LLC     Short-term investment     US$ 11,626     N/A   US$ 11,400      
 
  Centex Home Equity Ln Tr     Short-term investment     US$ 3,500     N/A   US$ 3,476      
 
  Cit Equip Coll Tr     Short-term investment     US$ 4,999     N/A   US$ 4,941      
 
  Citibank Cr Card Issuance Tr     Short-term investment     US$ 9,782     N/A   US$ 9,753      
 
  Citicorp Mtg Secs     Short-term investment     US$ 1,025     N/A   US$ 1,017      
 
  Cnh Equip Tr     Short-term investment     US$ 5,000     N/A   US$ 4,922      
 
  Comm     Short-term investment     US$ 1,383     N/A   US$ 1,384      
 
  Credit Suisse First Boston Mtg     Short-term investment     US$ 1,296     N/A   US$ 1,282      
 
  Credit Suisse First Boston Mtg     Short-term investment     US$ 1,480     N/A   US$ 1,470      
 
  Cwabs Inc.     Short-term investment     US$ 636     N/A   US$ 636      
 
  Cwabs Inc.     Short-term investment     US$ 2,005     N/A   US$ 2,007      
 
  Cwabs Inc.     Short-term investment     US$ 4,287     N/A   US$ 4,289      
(Continued)

- 45 -


 

                                         
                December 31, 2005    
                    Carrying Value       Market Value or    
        Relationship with the   Financial Statement   Shares/Units   (US$ in   Percentage of   Net Asset Value    
Held Company Name   Marketable Securities Type and Name   Company   Account   (In Thousands)   Thousands)   Ownership   (US$ in Thousands)   Note
 
  Cwalt Inc.     Short-term investment     US$ 1,143     N/A   US$ 1,133      
 
  Cwmbs Inc.     Short-term investment     US$ 1,255     N/A   US$ 1,230      
 
  Daimlerchrysler Auto Tr     Short-term investment     US$ 1,261     N/A   US$ 1,260      
 
  Daimlerchrysler Auto Tr     Short-term investment     US$ 4,709     N/A   US$ 4,658      
 
  Deere John Owner Tr     Short-term investment     US$ 2,501     N/A   US$ 2,460      
 
  Drive Auto Receivables Tr       Short-term investment     US$ 3,200     N/A   US$ 3,214      
 
  Fifth Third Auto Tr     Short-term investment     US$ 3,000     N/A   US$ 2,976      
 
  First Horizon Abs Tr     Short-term investment     US$ 999     N/A   US$ 1,001      
 
  First Union Lehman Bros Mtg Tr     Short-term investment     US$ 2,710     N/A   US$ 2,580      
 
  Ford Cr Auto Owner Tr     Short-term investment     US$ 10,908     N/A   US$ 10,789      
 
  Granite Mtgs Plc     Short-term investment     US$ 4,447     N/A   US$ 4,447      
 
  Gs Auto Ln Tr     Short-term investment     US$ 1,899     N/A   US$ 1,913      
 
  Harley Davidson Motorcycle Tr     Short-term investment     US$ 1,533     N/A   US$ 1,515      
 
  Harley Davidson Motorcycle Tr     Short-term investment     US$ 5,999     N/A   US$ 5,811      
 
  Hertz Vehicle Financing LLC     Short-term investment     US$ 5,350     N/A   US$ 5,350      
 
  Holmes Fing No 8 Plc     Short-term investment     US$ 5,001     N/A   US$ 5,003      
 
  Household Automotive Tr     Short-term investment     US$ 5,872     N/A   US$ 5,843      
 
  Hsbc Automotive Tr       Short-term investment     US$ 2,999     N/A   US$ 2,993      
 
  Hyundai Auto Receivables Tr     Short-term investment     US$ 6,442     N/A   US$ 6,330      
 
  Hyundai Auto Receivables Tr     Short-term investment     US$ 3,250     N/A   US$ 3,204      
 
  Hyundai Auto Receivables Tr     Short-term investment     US$ 3,999     N/A   US$ 3,926      
 
  Impac Cmb Tr     Short-term investment     US$ 638     N/A   US$ 638      
 
  Impac Cmb Tr     Short-term investment     US$ 534     N/A   US$ 534      
 
  Impac Secd Assets Corp.     Short-term investment     US$ 880     N/A   US$ 880      
 
  Lb Ubs Coml Mtg Tr     Short-term investment     US$ 4,001     N/A   US$ 3,955      
 
  Long Beach Accep Auto Receivab     Short-term investment     US$ 2,526     N/A   US$ 2,477      
 
  Massachusetts Rrb Spl Purp Tr     Short-term investment     US$ 3,900     N/A   US$ 3,837      
 
  Mastr Asset Backed Secs Tr     Short-term investment     US$ 206     N/A   US$ 206      
 
  Mastr Asset Backed Secs Tr     Short-term investment     US$ 3,499     N/A   US$ 3,503      
 
  Mbna Master Cr Card Tr II     Short-term investment     US$ 8,108     N/A   US$ 7,818      
 
  Monumentl Global Fdg II     Short-term investment     US$ 1,000     N/A   US$ 1,002      
 
  National City Auto Receivables     Short-term investment     US$ 914     N/A   US$ 916      
 
  Navistar Finl 2003 A Owner Tr     Short-term investment     US$ 4,928     N/A   US$ 4,863      
 
  Nissan Auto Receivables     Short-term investment     US$ 7,000     N/A   US$ 6,918      
 
  Onyx Accep Owner Tr     Short-term investment     US$ 4,913     N/A   US$ 4,866      
 
  Pg+E Energy Recovery Fdg LLC     Short-term investment     US$ 4,749     N/A   US$ 4,663      
 
  Providian Gateway Owner Tr     Short-term investment     US$ 2,202     N/A   US$ 2,207      
 
  Providian Gateway Owner Tr     Short-term investment     US$ 3,992     N/A   US$ 3,918      
 
  Reliant Energy Transition Bd     Short-term investment     US$ 4,973     N/A   US$ 4,793      
 
  Residential Asset Mtg Prods     Short-term investment     US$ 2,967     N/A   US$ 2,855      
 
  Residential Asset Sec Mtg Pass     Short-term investment     US$ 3,000     N/A   US$ 2,948      
 
  Residential Asset Sec Mtg Pass     Short-term investment     US$ 3,780     N/A   US$ 3,704      
 
  Residential Fdg Mtg Secs I Inc.     Short-term investment     US$ 2,550     N/A   US$ 2,496      
 
  Residential Fdg Mtg Secs I Inc.     Short-term investment     US$ 4,817     N/A   US$ 4,737      
 
  Revolving Home Equity Ln Tr     Short-term investment     US$ 3,234     N/A   US$ 3,235      
(Continued)

- 46 -


 

                                             
                December 31, 2005    
                        Carrying Value       Market Value or    
        Relationship with the   Financial Statement   Shares/Units   (US$ in   Percentage of   Net Asset Value    
Held Company Name   Marketable Securities Type and Name   Company   Account   (In Thousands)   Thousands)   Ownership   (US$ in Thousands)   Note
 
  Sequoia Mtg Tr     Short-term investment         US$ 1,209     N/A   US$ 1,209      
 
  Sequoia Mtg Tr     Short-term investment         US$ 1,450     N/A   US$ 1,455      
 
  Sequoia Mtg Tr     Short-term investment         US$ 1,070     N/A   US$ 1,070      
 
  Structured Adj Rate Mtg Ln Tr     Short-term investment         US$ 2,059     N/A   US$ 2,012      
 
  Structured Adj Rate Mtg Ln Tr     Short-term investment         US$ 746     N/A   US$ 735      
 
  Structured Asset Invt Ln Tr     Short-term investment         US$ 856     N/A   US$ 855      
 
  Toyota Auto Receivables 2003 B     Short-term investment         US$ 4,970     N/A   US$ 4,892      
 
  Triad Auto Receivables Tr     Short-term investment         US$ 3,339     N/A   US$ 3,287      
 
  TW Hotel Fdg 2005 Lc       Short-term investment         US$ 8,197     N/A   US$ 8,197      
 
  Txu Elec Delivery Transition     Short-term investment         US$ 3,103     N/A   US$ 3,004      
 
  Usaa Auto Owner Tr     Short-term investment         US$ 3,718     N/A   US$ 3,682      
 
  Wachovia Auto Owner Tr     Short-term investment         US$ 38     N/A   US$ 38      
 
  Wachovia Auto Owner Tr     Short-term investment         US$ 4,999     N/A   US$ 4,955      
 
  Washington Mut Mtg Secs Corp.     Short-term investment         US$ 4,067     N/A   US$ 4,026      
 
  Wells Fargo Finl Auto Owner Tr     Short-term investment         US$ 5,299     N/A   US$ 5,269      
 
  Wells Fargo Mtg Bkd Secs     Short-term investment         US$ 3,661     N/A   US$ 3,632      
 
  WFS Financial Owner Trust     Short-term investment         US$ 4,133     N/A   US$ 4,069      
 
  WFS Finl     Short-term investment         US$ 1,311     N/A   US$ 1,308      
 
  WFS Finl 2004 2 Owner Tr     Short-term investment         US$ 4,994     N/A   US$ 4,905      
 
  WFS Finl 2004 4 Owner Tr     Short-term investment         US$ 5,399     N/A   US$ 5,320      
 
  WFS Finl 2005 2 Oner Tr     Short-term investment         US$ 2,250     N/A   US$ 2,229      
 
  Whole Auto Ln Tr     Short-term investment         US$ 1,954     N/A   US$ 1,968      
 
  Whole Auto Ln Tr     Short-term investment         US$ 4,000     N/A   US$ 3,941      
 
  Whole Auto Ln Tr     Short-term investment         US$ 3,000     N/A   US$ 2,927      
 
  World Omni Auto Receivables Tr     Short-term investment         US$ 5,963     N/A   US$ 5,839      
 
                                           
 
  Corporate issued notes                                        
 
  Canadian Imperial BK     Short-term investment         US$ 1,999     N/A   US$ 1,999      
 
  Canadian Imperial BK     Short-term investment         US$ 3,015     N/A   US$ 3,015      
 
  Washington Mutual     Short-term investment         US$ 3,000     N/A   US$ 3,000      
 
  Money market funds                                        
 
                                           
 
  SSGA Cash Mgmt Global Offshore     Short-term investment         US$ 7,936     N/A   US$ 7,936      
 
                                           
 
  Equity                                        
 
  Horizon Venture Fund I, L.P.     Long-term investment         $ 280,179     N/A   $ 280,179      
 
  Crimson Asia Capital Ltd., L.P.     Long-term investment           54,811     N/A     54,811      
 
                                           
Chi Cherng
  TSMC stock   Parent company   Short-term investment     16,454       458,564    
    1,022,605      
 
                                           
Hsin Ruey
  TSMC stock   Parent company   Short-term investment     16,484       459,511    
    1,024,521      
(Continued)

- 47 -


 

                                                 
                December 31, 2005    
                        Carrying Value           Market Value or    
        Relationship with the   Financial Statement   Shares/Units   (US$ in   Percentage of   Net Asset Value    
Held Company Name   Marketable Securities Type and Name   Company   Account   (In Thousands)   Thousands)   Ownership   (US$ in Thousands)   Note
TSMC International
  Stock                                            
 
  TSMC Development   Subsidiary   Long-term investment     1     US$ 588,685       100     US$ 588,685      
 
  TSMC Technology   Subsidiary   Long-term investment     1     US$ 5,647       100     US$ 5,647      
 
  InveStar   Subsidiary   Long-term investment     18,505     US$ 21,833       97     US$ 21,833      
 
  InveStar II   Subsidiary   Long-term investment     51,300     US$ 33,451       97     US$ 33,451      
 
                                               
TSMC Development
  WaferTech stock   Subsidiary   Long-term investment         US$ 368,886       99     US$ 368,886      
 
                                               
InveStar
  Common stock                                            
 
  RichTek Technology Corp.     Short-term investment     838     US$ 71           US$ 3,168      
 
  Advanced Power Electronics Corp.     Short-term investment     525     US$ 210       2     US$ 670      
 
  SiRF Technology Holdings, Inc.     Short-term investment     10     US$ 44           US$ 294      
 
  Broadtek Electronics Corp.     Short-term investment     29     US$ 9           US$ 12      
 
  Monolithic Power Systems, Inc.     Short-term investment     1,975     US$ 1,567       7     US$ 28,256      
 
  Global Testing Corp.     Short-term investment     58,044     US$ 4,961       8     US$ 9,161      
 
  Capella Microsystems (Taiwan), Inc.     Long-term investment     530     US$ 154       4     US$ 154      
 
  Signia Technologies, Inc.     Long-term investment     701     US$ 201       3     US$ 201      
 
  Advanced Power Electronics Corp.     Long-term investment     674     US$ 270       2     US$ 860      
 
  Broadtek Electronics Corp.     Long-term investment     116     US$ 37           US$ 47      
 
  RichTek Technology Corp.     Long-term investment     421     US$ 36           US$ 1,591      
 
                                               
 
  Preferred stock                                            
 
  Integrated Memory Logic, Inc.     Long-term investment     1,831     US$ 1,220       9     US$ 1,220      
 
  Sensory, Inc.     Long-term investment     1,404     US$ 125       6     US$ 125      
 
  IP Unity, Inc.     Long-term investment     1,008     US$ 494       3     US$ 494      
 
  Sonics, Inc.     Long-term investment     2,686     US$ 3,530       4     US$ 3,530      
 
  NanoAmp Solutions, Inc.     Long-term investment     541     US$ 853       2     US$ 853      
 
  Memsic, Inc.     Long-term investment     2,727     US$ 1,500       10     US$ 1,500      
 
  Reflectivity, Inc.     Long-term investment     1,064     US$ 741       2     US$ 741      
 
                                               
InveStar II
  Common stock                                            
 
  Monolithic Power Systems, Inc.     Short-term investment     864     US$ 2,081       3     US$ 12,370      
 
  GeoVision, Inc.     Short-term investment     336     US$ 74       1     US$ 1,023      
 
  Advanced Analogic Technology, Inc.     Short-term investment     484     US$ 1,261       1     US$ 6,969      
 
  RichTek Technology Corp.     Short-term investment     386     US$ 192           US$ 1,458      
 
  Signia Technologies, Inc.     Long-term investment     351     US$ 101       1     US$ 101      
 
  Ralink Technology (Taiwan), Inc.     Long-term investment     1,833     US$ 791       3     US$ 791      
 
  Procoat Technology, Inc.     Long-term investment     5,123     US$ 1,940       10     US$ 1,940      
 
  Capella Microsystems (Taiwan), Inc.     Long-term investment     419     US$ 122       2     US$ 122      
 
  Auden Technology MFG. Co., Ltd.     Long-term investment     953     US$ 410       4     US$ 410      
 
  EoNEX Technologies, Inc.     Long-term investment     55     US$ 3,048       5     US$ 3,048      
 
  Conwise Technology Corporation, Ltd.     Long-term investment     2,800     US$ 204       9     US$ 204      
 
  Goyatek Technology, Corp.     Long-term investment     2,088     US$ 545       7     US$ 545      
 
  Trendchip Technologies Corp.     Long-term investment     2,000     US$ 574       5     US$ 574      
 
  EON Technology, Corp.     Long-term investment     3,264     US$ 1,175       8     US$ 1,175      
(Continued)

- 48 -


 

                                                 
                December 31, 2005    
                        Carrying Value           Market Value or    
        Relationship with the   Financial Statement   Shares/Units   (US$ in   Percentage of   Net Asset Value    
Held Company Name   Marketable Securities Type and Name   Company   Account   (In Thousands)   Thousands)   Ownership   (US$ in Thousands)   Note
 
  eChannelOpen Holding, Inc.     Long-term investment     358     US$ 251       4     US$ 251      
 
  eLCOS Microdisplay Technology, Ltd.     Long-term investment     270     US$ 27       1     US$ 27      
 
  Epic Communications, Inc.     Long-term investment     302     US$ 37       1     US$ 37      
 
  RichTek Technology Corp.     Long-term investment     198     US$ 98           US$ 872      
 
  GeoVision, Inc.     Long-term investment     15     US$ 3           US$ 50      
 
                                               
 
  Preferred stock                                            
 
  Memsic, Inc.     Long-term investment     2,289     US$ 1,560       8     US$ 1,560      
 
  NanoAmp Solutions, Inc.     Long-term investment     375     US$ 1,500       1     US$ 1,500      
 
  Sonics, Inc.     Long-term investment     3,082     US$ 3,082       5     US$ 3,082      
 
  Reflectivity, Inc.     Long-term investment     4,255     US$ 2,205       5     US$ 2,205      
 
  Kilopass Technologies, Inc.     Long-term investment     3,887     US$ 2,000       9     US$ 2,000      
 
  FangTek, Inc.     Long-term investment     6,806     US$ 3,250       28     US$ 3,250      
 
  eLCOS Microdisplay Technology, Ltd.     Long-term investment     2,667     US$ 3,500       15     US$ 3,500      
 
  Alchip Technologies Limited     Long-term investment     2,597     US$ 2,950       18     US$ 2,950      
 
                                               
Emerging Alliance
  Common stock                                            
 
  Global Investment Holding, Inc.     Long-term investment     10,800     $ 100,000       6     $ 100,000      
 
  RichWave Technology Corp.     Long-term investment     3,380     US$ 1,247       13     US$ 1,247      
 
  NetLogic Microsystems, Inc.     Long-term investment     113     US$ 1,388       1     US$ 3,051      
 
  Quake Technologies, Inc.     Long-term investment     46     US$ 35           US$ 35      
 
  Pixim, Inc.     Long-term investment     1,924     US$ 512       4     US$ 512      
 
                                               
 
  Preferred stock                                            
 
  Quake Technologies, Inc.     Long-term investment     555     US$ 415       1     US$ 415      
 
  Pixim, Inc.     Long-term investment     2,193     US$ 583           US$ 583      
 
  Ikanos Communication, Inc.     Long-term investment     7,446     US$ 3,125       3     US$ 3,125      
 
  Quicksilver Technology, Inc.     Long-term investment     1,049     US$       4     US$      
 
  Mosaic Systems, Inc.     Long-term investment     2,481     US$ 12       6     US$ 12      
 
  Zenesis Technologies, Inc.     Long-term investment     1,204     US$ 699       4     US$ 699      
 
  Reflectivity, Inc.     Long-term investment     4,848     US$ 2,479       4     US$ 2,479      
 
  Miradia, Inc.     Long-term investment     3,040     US$ 1,000       4     US$ 1,000      
 
  Axiom Microdevices, Inc.     Long-term investment     1,000     US$ 1,000       3     US$ 1,000      
 
  Optichron, Inc.     Long-term investment     714     US$ 1,000       4     US$ 1,000      
 
  NuCORE Technology Inc.     Long-term investment     2,254     US$ 1,455       2     US$ 1,455      
 
  Next IO, Inc.     Long-term investment     800     US$ 500       2     US$ 500      
 
  Audience, Inc.     Long-term investment     1,654     US$ 250       2     US$ 250      
 
  Centrality Communications, Inc.     Long-term investment     1,325     US$ 1,800       3     US$ 1,800      
 
  Britestream Networks, Inc. (Layer N Networks, Inc.)     Long-term investment     2,444     US$ 1,172       2     US$ 1,172      
 
  Teknovus, Inc.     Long-term investment     6,977     US$ 1,327       3     US$ 1,327      
 
  Optimal Corporation     Long-term investment     485     US$ 500       6     US$ 500      
 
  Mobilygen Corporation     Long-term investment     1,415     US$ 750       1     US$ 750      
(Continued)

- 49 -


 

                                                 
                December 31, 2005    
                        Carrying Value           Market Value or    
        Relationship with the   Financial Statement   Shares/Units   (US$ in   Percentage of   Net Asset Value    
Held Company Name   Marketable Securities Type and Name   Company   Account   (In Thousands)   Thousands)   Ownership   (US$ in Thousands)   Note
 
  Warrants                                            
 
  Pixim, Inc.     Long-term investment     242                        
 
                                               
Partners
  Common stock                                            
 
  VisEra Holding Company     Long-term investment     18,931     US$ 19,862       50     US$ 19,862      
 
                                               
VTAF II
  Common stock                                            
 
  Yobon Technologies, Inc.     Long-term investment     1,675     US$ 787       17     US$ 787      
 
  Sentelic, Corp.     Long-term investment     600     US$ 1,022       15     US$ 1,022      
 
                                               
 
  Preferred stock                                            
 
  Powerprecise Solutions, Inc.     Long-term investment     1,032     US$ 1,000       8     US$ 1,000      
 
  Tzero Technologies, Inc.     Long-term investment     244     US$ 500       2     US$ 500      
 
  Miradia, Inc.     Long-term investment     1,809     US$ 1,600       2     US$ 1,600      
 
  Axiom Microdevices, Inc.     Long-term investment     761     US$ 776       2     US$ 776      
 
  Next IO, Inc.     Long-term investment     216     US$ 182           US$ 182      
 
  Ageia Technologies, Inc.     Long-term investment     1,969     US$ 2,000       2     US$ 2,000      
 
  Audience, Inc.     Long-term investment     531     US$ 102       1     US$ 102      
 
  GemFire Corporation     Long-term investment     600     US$ 600       1     US$ 600      
 
  Optichron, Inc.     Long-term investment     353     US$ 869       2     US$ 869      
 
  Leadtrend Technology, Inc.     Long-term investment     900     US$ 431       5     US$ 431      
 
  Aquantia Corporation     Long-term investment     1,401     US$ 1,150       5     US$ 1,150      
 
  Xceive Corporation     Long-term investment     714     US$ 1,000       2     US$ 1,000      
 
  5V Technologies,Inc     Long-term investment     1,333     US$ 1,000           US$ 1,000      
 
  Power Analog Microelectronics     Long-term investment     2,000     US$ 1,500       7     US$ 1,500      
 
  Impinj,Inc     Long-term investment     257     US$ 500           US$ 500      
 
                                               
 
  Warrants                                            
 
  Aquantia Corporation     Long-term investment     46     $           $      
 
                                               
GUC
  Stock                                            
 
  Global Unichip Corporation — NA   Subsidiary   Long-term investment     100       4,715       100       4,715      
 
  Global Unichip Japan   Subsidiary   Long-term investment           2,153       100       2,153      

- 50 -


 

TABLE 4
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED AND INVESTEES
MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
FOR THE YEAR END DECEMBER 31, 2005
(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Specified)
                                                                                             
                    Beginning Balance Acquisition Disposal (Note 1) Ending Balance
                                                                Carrying   Gain (Loss)           Amount
                    Shares/Units   Amount   Shares/Units   Amount   Shares/Units   Amount   Value   on Disposal   Shares/Units   (US$ in
    Marketable Securities Type and   Financial Statement       Nature of   (In   (US$ in   (In   (US$ In   (In   (US$ in   (US$ in   (US$ in   (In   Thousands)
Company Name   Name   Account   Counter-party   Relationship   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   (Note 2)
The Company
  Bond funds                                                                                        
 
  JF Taiwan Bond Fund   Short-term investment   JF Asset Management (Taiwan) Ltd.       78,698     $ 1,153,209       $       16,689     $ 250,000     $ 244,553     $ 5,447       62,009     $ 908,656  
 
  JF Taiwan First Bond Fund   Short-term investment   JF Asset Management (Taiwan) Ltd.       84,886       1,151,463               21,755       300,000       295,104       4,896       63,131       856,359  
 
  Invesco R.O.C. Bond Fund   Short-term investment   INVESCO Asset Management Taiwan       76,705       1,101,911               76,705       1,121,779       1,101,911       19,868            
 
  Dresdner Bond DAM Fund   Short-term investment   Allianz Dresdner Securities Investment Consulting Co., Ltd.       80,833       900,000               11,530       130,000       128,383       1,617       69,303       771,617  
 
  Barits Bond Fund   Short-term investment   Barits Securities Investment Trust Co., Ltd.       76,640       900,000               76,640       915,204       900,000       15,204            
 
  Shinkong Chi-Shin Fund   Short-term investment   Shinkong Investment Trust Co., Ltd.       151,594       2,100,000               96,531       1,360,000       1,337,229       22,771       55,063       762,771  
 
  Bonds under repurchase agreement   Short-term investment   Chung Shing Bills Finance Corp. and several financial institutions             249,449                     251,784       249,449       2,335            
 
  Government bonds                                                                                        
 
  2003 Government Bond Series A   Short-term investment   BNP and several financial institutions             1,207,409                     1,216,500       1,207,409       9,091            
 
  2004 Government Bond Series E   Short-term investment   Chung Shing Bills Finance Corp. and several financial institutions                     300,472                                     300,472  
 
  2002 Government Bond Series B   Long-term investment   China Bills Finance Corp. and several financial institutions                     360,608                                     355,936  
 
  2002 Government Bond Series F   Long-term investment   China Bills Finance Corp. and several financial institutions                     149,440                                     149,441  
 
  2005 Government Bond Series A   Long-term investment   China Bills Finance Corp. and several financial institutions                     2,548,689                                     2,548,977  
 
  Kreditanstalt Fur Wiederaufbau   Short-term investment                     US$ 6,881                                   US$ 6,881  
 
  United States Treas NTS   Short-term investment             US$ 192,357       US$ 494,515           US$ 637,301     US$ 639,356     US$ (2,055 )         US$ 47,516  
 
  Corporate bonds                                                                                        
 
  Taiwan Power Company   Short-term investment   China Bills Finance Corp.           $ 2,777,798       $           $ 2,807,500     $ 2,777,798     $ 29,702           $  
 
  Formosa Petrochemical Corporation   Short-term investment   China Bills Finance Corp.                     311,568                                     311,568  
 
  Allstate Finl Global Fdg LLC   Short-term investment             US$ 3,171                   US$ 3,086     US$ 3,171     US$ (85 )          
 
  American Intl Group Inc. Mtnf   Short-term investment             US$ 3,795                   US$ 3,793     US$ 3,795     US$ (2 )          
 
  Bear Stearns Cos Inc.   Short-term investment                     US$ 3,329                                   US$ 3,329  
 
  Bear Stearns Cos Inc.   Short-term investment             US$ 3,518                   US$ 3,484     US$ 3,518     US$ (34 )          
 
  Bear Stearns Cos Inc.   Short-term investment                     US$ 3,757                                   US$ 3,757  
 
  Bear Stearns Cos Inc. Medium Te   Short-term investment             US$ 3,105                   US$ 3,106     US$ 3,105     US$ 1            
 
  Caterpillar Finl Svcs Mtn   Short-term investment                     US$ 5,721                                   US$ 5,721  
 
  Citigroup Inc.   Short-term investment             US$ 3,583                   US$ 3,512     US$ 3,583     US$ (71 )          
 
  Countrywide Fdg Corp. Mtn   Short-term investment                     US$ 3,500           US$ 3,500     US$ 3,500                  
 
  Countrywide Finl Corp.   Short-term investment                     US$ 3,000           US$ 3,000     US$ 3,000                  
 
  Credit Suisse Fb USA Inc.   Short-term investment             US$ 2,645       US$ 4,141           US$ 2,593     US$ 2,645     US$ (52 )         US$ 4,141  
 
  Credit Suisse First Boston USA   Short-term investment                     US$ 3,832           US$ 3,780     US$ 3,832     US$ (52 )          
 
  Deere John Cap Corp.   Short-term investment                     US$ 5,079                                   US$ 5,079  
 
  European Invt BK   Short-term investment                     US$ 3,918                                   US$ 3,918  
 
  General Elec Cap Corp. Mtn   Short-term investment             US$ 3,467                   US$ 3,432     US$ 3,467     US$ (35 )          
 
  General Elec Cap Corp. Mtn   Short-term investment                     US$ 3,989                                   US$ 3,989  
 
  General Elec Cap Corp. Mtn   Short-term investment                     US$ 8,862                                   US$ 8,862  
(Continued)

-51-


 

                                                                             
                    Beginning Balance   Acquisition Disposal (Note 1) Ending Balance
                                                        Carrying   Gain (Loss)       Amount
                    Shares/Units   Amount   Shares/Units   Amount   Shares/Units   Amount   Value   on Disposal   Shares/Units   (US$ in
    Marketable Securities Type and   Financial Statement       Nature of   (In   (US$ in   (In   (US$ In   (In   (US$ in   (US$ in   (US$ in   (In   Thousands)
Company Name   Name   Account   Counter-party   Relationship   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   (Note 2)
 
  General Elec Cap Corp. Mtn   Short-term investment         US$ 3,886       US$       US$ 3,823     US$ 3,886     US$(63 )   US$  
 
  General Re Corp.   Short-term investment                 US$ 3,500                       US$ 3,500  
 
  Goldman Sachs Group Inc.   Short-term investment                 US$ 4,981                       US$ 4,981  
 
  Goldman Sachs Group Inc.   Short-term investment                 US$ 3,477                       US$ 3,477  
 
  Goldman Sachs Group Inc. Mtn   Short-term investment         US$ 3,505               US$ 3,506     US$ 3,505     US$1      
 
  Hancock John Global Fdg II Mtn   Short-term investment                 US$ 3,566                       US$ 3,566  
 
  Hbos Plc Medium Term Sr Nts   Short-term investment                 US$ 3,201                   $—     US$ 3,201  
 
  Household Fin Corp. Mtn Bk Ent   Short-term investment         US$ 3,542               US$ 3,488     US$ 3,542     US$(54 )    
 
  HSBC Fin Corp. Mtn   Short-term investment                 US$ 7,894       US$ 2,780     US$ 2,797     US$(17 )   US$ 5,097  
 
  ING Sec Life Ins Ingslf   Short-term investment         US$ 3,012               US$ 3,008     US$ 3,012     US$(4 )    
 
  International Business Machs   Short-term investment                 US$ 7,247       US$ 4,994     US$ 4,998     US$(4 )   US$ 2,249  
 
  Intl Lease Fin Corp. Mtn   Short-term investment                 US$ 3,028                       US$ 3,028  
 
  JP Morgan Chase + Co.   Short-term investment                 US$ 3,406                       US$ 3,406  
 
  Key Bk Na Med Term Nts Bk Entr   Short-term investment                 US$ 4,450                       US$ 4,450  
 
  Lehman Brothers Hldgs Inc.   Short-term investment         US$ 3,705               US$ 3,511     US$ 3,705     US$(194 )    
 
  Merrill Lynch + Co. Inc.   Short-term investment                 US$ 4,900                       US$ 4,900  
 
  Morgan Stanley Group Inc.   Short-term investment         US$ 1,050       US$ 4,507       US$ 1,022     US$ 1,050     US$(28 )   US$ 4,507  
 
  Morgan Stanley Group Inc.   Short-term investment         US$ 3,638               US$ 3,571     US$ 3,638     US$(67 )    
 
  National City Corp.   Short-term investment                 US$ 3,426                       US$ 3,426  
 
  Nationsbank Corp.   Short-term investment         US$ 3,644               US$ 3,522     US$ 3,644     US$(122 )    
 
  Nationwide Bldg Soc Mtn   Short-term investment                 US$ 3,000                       US$ 3,000  
 
  Ppg Inds Inc.   Short-term investment                 US$ 3,571                        
 
  Pricoa Global Fdg 1 Mtn   Short-term investment                 US$ 3,500                       US$ 3,500  
 
  Pricoa Global Fdg I Mtn   Short-term investment         US$ 3,050               US$ 3,052     US$ 3,050     US$2      
 
  Pricoa Global Fdg I Mtn   Short-term investment         US$ 3,507               US$ 3,510     US$ 3,507     US$3      
 
  Principal Life Global Fdg I Gl   Short-term investment         US$ 3,168               US$ 3,049     US$ 3,168     US$(119 )    
 
  Public Svc Elec Gas Co.   Short-term investment                 US$ 3,225                       US$ 3,225  
 
  Salomon Smith Barney Hldgs Inc.   Short-term investment         US$ 3,160               US$ 3,046     US$ 3,160     US$(114 )    
 
  Santander Us Debt S A Uniperso   Short-term investment                 US$ 4,998                       US$ 4,998  
 
  Wachovia Corp.   Short-term investment         US$ 3,720               US$ 3,568     US$ 3,720     US$(152 )    
 
  Washington Mut Fin Corp.   Short-term investment         US$ 4,768               US$ 3,591     US$ 3,725     US$(134 )   US$ 1,043  
 
  Taiwan Power Company   Long-term investment   China Bills Finance Corp. and several financial institutions       $ 915,276       $ 2,967,681       $ 600,000     $ 600,000     $—     $ 3,263,348  
 
  Nan Ya Plastics Corporation   Long-term investment   China Bills Finance Corp. and several financial institutions         407,526         1,883,901         132,000       132,000           2,150,842  
 
  Agency bonds                                                                        
 
  Federal Farm Cr Bks   Short-term investment                 US$ 3,985                       US$ 3,985  
 
  Federal Home Ln Bank   Short-term investment                 US$ 3,962                       US$ 3,962  
 
  Federal Home Ln Bks   Short-term investment                 US$ 6,110                       US$ 6,110  
 
  Federal Home Ln Bks   Short-term investment         US$ 4,948               US$ 4,947     US$ 4,948     US$(1 )    
 
  Federal Home Ln Bks   Short-term investment         US$ 7,962               US$ 4,954     US$ 4,972     US$(18 )   US$ 2,990  
 
  Federal Home Ln Bks   Short-term investment         US$ 13,953               US$ 13,888     US$ 13,953     US$(65 )    
 
  Federal Home Ln Bks   Short-term investment                 US$ 3,932                       US$ 3,932  
 
  Federal Home Ln Bks   Short-term investment         US$ 13,981               US$ 13,906     US$ 13,981     US$(75 )    
 
  Federal Home Ln Bks   Short-term investment         US$ 13,983               US$ 13,865     US$ 13,983     US$(118 )    
 
  Federal Home Ln Bks   Short-term investment         US$ 7,042               US$ 6,946     US$ 7,042     US$(96 )    
 
  Federal Home Ln Bks   Short-term investment         US$ 7,014               US$ 6,883     US$ 7,014     US$(131 )    
 
  Federal Home Ln Bks   Short-term investment                 US$ 4,136                     US$ 4,136  
 
  Federal Home Ln Bks   Short-term investment                 US$ 4,939                       US$ 4,939  
 
  Federal Home Ln Bks   Short-term investment                 US$ 7,886                       US$ 7,886  
 
  Federal Home Ln Bks   Short-term investment                 US$ 8,672                       US$ 8,672  
 
  Federal Home Ln Bks   Short-term investment         US$ 7,018       US$ 3,960       US$ 10,863     US$ 10,978     US$(115 )    
 
  Federal Home Ln Bks   Short-term investment                 US$ 4,965                       US$ 4,965  
(Continued)

-52-


 

                                                         
                    Beginning Balance Acquisition Disposal (Note 1) Ending Balance
                                            Carrying   Gain (Loss)       Amount
                    Shares/Units   Amount   Shares/Units   Amount   Shares/Units   Amount   Value   on Disposal   Shares/Units   (US$ in
    Marketable Securities Type and   Financial Statement       Nature of   (In   (US$ in   (In   (US$ In   (In   (US$ in   (US$ in   (US$ in   (In   Thousands)
Company Name   Name   Account   Counter-party   Relationship   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   (Note 2)
 
  Federal Home Ln Bks   Short-term investment         US$—     US$4,808     US$—   US$—   US$—     US$4,808
 
  Federal Home Ln Bks   Short-term investment             US$7,558             US$7,558
 
  Federal Home Ln Bks   Short-term investment             US$8,594             US$8,594
 
  Federal Home Ln Bks   Short-term investment             US$3,024             US$3,024
 
  Federal Home Ln Bks   Short-term investment             US$3,972             US$3,972
 
  Federal Home Ln Bks   Short-term investment             US$7,887             US$7,887
 
  Federal Home Ln Bks   Short-term investment             US$19,846             US$19,846
 
  Federal Home Ln Bks   Short-term investment             US$6,908             US$6,908
 
  Federal Home Ln Bks   Short-term investment             US$9,134             US$9,134
 
  Federal Home Ln Bks   Short-term investment             US$3,379             US$3,379
 
  Federal Home Ln Mtg Corp.   Short-term investment         US$4,933         US$4,960   US$4,933   US$27    
 
  Federal Home Ln Mtg Corp.   Short-term investment         US$4,953         US$4,938   US$4,953   US$(15 )  
 
  Federal Home Ln Mtg Corp.   Short-term investment             US$6,925     US$6,931   US$6,925   US$6    
 
  Federal Home Ln Mtg Corp.   Short-term investment         US$6,978         US$6,926   US$6,978   US$(52 )  
 
  Federal Home Ln Mtg Corp.   Short-term investment             US$6,980             US$6,980
 
  Federal Home Ln Mtg Corp.   Short-term investment             US$5,929             US$5,929
 
  Federal Home Loan Bank   Short-term investment             US$3,475             US$3,475
 
  Federal Home Loan Corp.   Short-term investment             US$7,989     US$7,928   US$7,989   US$(61 )  
 
  Federal Home Loan Mtg Corp.   Short-term investment         US$4,903     US$9,819     US$9,798   US$9,819   US$(21 )   US$4,903
 
  Federal Natl Mtg Assn   Short-term investment         US$3,466         US$3,485   US$3,466   US$19    
 
  Federal Natl Mtg Assn   Short-term investment         US$6,903         US$6,943   US$6,903   US$40    
 
  Federal Natl Mtg Assn   Short-term investment         US$5,270         US$5,247   US$5,270   US$(23 )  
 
  Federal Natl Mtg Assn   Short-term investment         US$6,940         US$6,937   US$6,940   US$(3 )  
 
  Federal Natl Mtg Assn   Short-term investment         US$4,981         US$4,953   US$4,981   US$(28 )  
 
  Federal Natl Mtg Assn   Short-term investment             US$4,921             US$4,921
 
  Federal Natl Mtg Assn   Short-term investment             US$7,892             US$7,892
 
  Federal Natl Mtg Assn   Short-term investment             US$5,337     US$5,300   US$5,337   US$(37 )  
 
  Federal Natl Mtg Assn   Short-term investment         US$6,997         US$6,956   US$6,997   US$(41 )  
 
  Federal Natl Mtg Assn   Short-term investment             US$4,943             US$4,943
 
  Federal Natl Mtg Assn   Short-term investment             US$14,952     US$5,964   US$5,981   US$(17 )   US$8,971
 
  Federal Natl Mtg Assn   Short-term investment             US$4,430             US$4,430
 
  Federal Natl Mtg Assn   Short-term investment             US$4,061     US$4,041   US$4,061   US$(20 )  
 
  Federal Natl Mtg Assn   Short-term investment             US$17,888             US$17,888
 
  Federal Natl Mtg Assn   Short-term investment             US$5,928             US$5,928
 
  Federal Natl Mtg Assn   Short-term investment             US$7,926             US$7,926
 
  Federal Natl Mtg Assn Mtn   Short-term investment             US$9,758             US$9,758
 
  Federal Natl Mtg Assn Mtn   Short-term investment             US$5,740             US$5,740
 
  Freddie Mac   Short-term investment         US$4,929         US$4,931   US$4,929   US$2    
 
  Fed Hm Ln Pc Pool 1H2520   Short-term investment             US$3,961             US$3,753
 
  Fed Hm Ln Pc Pool 781959   Short-term investment             US$7,913             US$7,112
 
  Fed Hm Ln Pc Pool 847290   Short-term investment             US$4,173     US$4,170   US$4,173   US$(3 )  
 
  Federal Home Ln Mtg   Short-term investment             US$3,958             US$3,848
 
  Federal Home Ln Mtg Corp.   Short-term investment             US$3,954             US$3,954
 
  Federal Home Ln Mtg Corp.   Short-term investment             US$4,154             US$4,098
 
  Federal Home Ln Mtg Corp.   Short-term investment             US$9,955             US$9,905
 
  Federal Home Ln Mtg Corp.   Short-term investment             US$5,389             US$4,902
 
  Federal Home Ln Mtg Corp.   Short-term investment             US$3,930             US$3,755
 
  Federal Natl Mtg Assn   Short-term investment             US$3,918             US$3,696
 
  Federal Natl Mtg Assn   Short-term investment             US$4,030             US$4,030
 
  Federal Natl Mtg Assn   Short-term investment             US$4,051             US$4,051
 
  Federal Natl Mtg Assn Gtd   Short-term investment             US$3,892             US$3,659
 
  Fnma Pool 255883   Short-term investment             US$3,827             US$3,771
 
  Fnma Pool 687863   Short-term investment             US$3,848             US$3,570
 
  Fnma Pool 696485   Short-term investment             US$4,345             US$4,175
 
  Fnma Pool 793025   Short-term investment             US$3,915             US$3,306
 
  Fnma Pool 815626   Short-term investment             US$3,663             US$3,622
(Continued)

-53-


 

                                                                 
                    Beginning Balance   Acquisition       Disposal (Note 1)       Ending Balance
                                                Carrying   Gain (Loss)           Amount
                    Shares/Units   Amount   Shares/Units   Amount   Shares/Units   Amount   Value   on Disposal   Shares/Units   (US$ in
    Marketable Securities Type and   Financial Statement       Nature of   (In   (US$ in   (In   (US$ In   (In   (US$ in   (US$ in   (US$ in   (In   Thousands)
Company Name   Name   Account   Counter-party   Relationship   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   (Note 2)
 
  Fnma Pool 825395   Short-term investment                 US$3,417                 US$3,265
 
  Fnma Pool 825398   Short-term investment                 US$5,246                 US$4,949
 
  Fnma Pool 841069   Short-term investment                 US$3,966                 US$3,673
 
 
  Corporate issued asset — backed securities                                                            
 
  Aesop Fdg II LLC   Short-term investment         US$4,955             US$4,958   US$4,955   US$3        
 
  American Express Cr Account Ma   Short-term investment         US$3,445             US$3,428   US$3,445   US$(17 )      
 
  Americredit Automobile Receiv   Short-term investment                 US$5,000                 US$5,000
 
  Bear Stearns Coml Mtg Secs Inc.   Short-term investment                 US$6,350                 US$6,350
 
  BMW Ven Owner Tr   Short-term investment         US$4,978             US$4,874   US$4,907   US$(33 )      
 
  California Infr + Economic Dev   Short-term investment         US$4,298             US$4,153   US$4,298   US$(145 )      
 
  California Infras + Economic   Short-term investment         US$6,126             US$5,103   US$5,228   US$(125 )      
 
  Capital One Multi Asset Execut   Short-term investment                 US$3,974                 US$3,974
 
  Caterpillar Finl Asset Tr   Short-term investment         US$10,008             US$4,943   US$5,009   US$(66 )       US$4,453
 
  Caterpillar Finl Asset Tr   Short-term investment                 US$8,219                 US$8,219
 
  Cendant Rent Car Fdg Aesop LLC   Short-term investment                 US$11,626                 US$11,626
 
  Citibank Cr Card Issuance Tr   Short-term investment         US$4,959             US$4,948   US$4,959   US$(11 )      
 
  Citibank Cr Card Issuance Tr   Short-term investment                 US$9,782                 US$9,782
 
  Cwabs Inc.   Short-term investment         US$1,903         US$1,865     US$3,440   US$3,435   US$5        
 
  Cwmbs Inc.   Short-term investment         US$4,040             US$3,479   US$3,492   US$(13 )      
 
  Cwmbs Inc.   Short-term investment                 US$4,040     US$3,842   US$3,823   US$(19 )      
 
  Daimlerchrysler Auto Tr   Short-term investment         US$4,897             US$4,873   US$4,897   US$(24 )      
 
  Drive Auto Receivables Tr   Short-term investment                 US$3,200                 US$3,200
 
  First USA Credit Cr Master Tr   Short-term investment         US$5,011             US$5,007   US$5,011   US$(4 )      
 
  Hertz Vehicle Financing LLC   Short-term investment                 US$5,350                 US$5,350
 
  Honda Auto Receivables   Short-term investment         US$5,000             US$4,984   US$5,000   US$(16 )      
 
  Household Automotive Tr   Short-term investment                 US$8,352                 US$5,872
 
  Hyundai Auto Receivables Tr   Short-term investment                 US$3,250                 US$3,250
 
  Hyundai Auto Receivables Tr   Short-term investment                 US$3,999                 US$3,999
 
  Lb Ubs Coml Mtg Tr   Short-term investment                 US$4,243                 US$4,001
 
  Massachusetts Rrb Spl Purp Tr   Short-term investment                 US$3,900                 US$3,900
 
  Mastr Asset Backed Secs Tr   Short-term investment                 US$3,825                 US$206
 
  Mastr Asset Backed Secs Tr   Short-term investment                 US$3,499                 US$3,499
 
  Mbna Cr Card Master Nt Tr   Short-term investment                 US$5,018     US$5,015   US$5,018   US$(3 )      
 
  Mbna Master Cr Card Tr II   Short-term investment                 US$8,108                 US$8,108
 
  Nissan Auto Receivables Own Tr   Short-term investment         US$4,999             US$4,989   US$4,999   US$(10 )      
 
  Nissan Auto Receivables Owner   Short-term investment         US$4,853             US$4,880   US$4,853   US$27        
 
  Pg+E Energy Recovery Fdg LLC   Short-term investment                 US$4,749                 US$4,749
 
  Prime Cr Card Master Tr   Short-term investment                 US$4,080                
 
  Residential Asset Sec Mtg Pass   Short-term investment                 US$3,780                 US$3,780
 
  Residential Fdg Mtg Secs I Inc.   Short-term investment                 US$5,589                 US$4,817
 
  Revolving Home Equity Ln Tr   Short-term investment                 US$5,000                 US$3,234
 
  Sequoia Mtg Tr   Short-term investment                 US$4,560     US$4,026   US$4,026          
 
  Sequoia Mtg Tr   Short-term investment                 US$3,500     US$2,813   US$2,810   US$3        
 
  TW Hotel Fdg 2005 LLC   Short-term investment                 US$8,197                 US$8,197
 
  Txu Elec Delivery Transition   Short-term investment         US$7,736             US$3,470   US$3,491   US$(21 )       US$3,103
 
  Usaa Auto Owner Tr   Short-term investment                 US$3,718                 US$3,718
 
  Usaa Auto Owner Tr   Short-term investment         US$4,000             US$3,995   US$4,000   US$(5 )      
 
  Washington Mut Mtg Secs Corp.   Short-term investment         US$-         US$4,365     US$-   US$-   US$-         US$4,067
 
  Wells Fargo Finl Auto Owner Tr   Short-term investment                 US$5,299                 US$5,299
 
  Wells Fargo Mtg Bkd Secs   Short-term investment                 US$4,014                 US$3,661
 
  Whole Auto Ln Tr   Short-term investment         US$5,967             US$5,973   US$5,967   US$6        
Partners
  VisEra Holding Company   Long-term investment             18,931     US$18,931             18,931     US$19,862
Note1: The proceeds of bond investments matured are excluded.
Note2: The ending balance included the amortization of premium or discount on bond investments.

- 54 -


 

TABLE 5
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED AND INVESTEES
TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2005
(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Specified)
                                                             
                                            Notes/Accounts Payable or    
            Transaction Details   Abnormal Transaction   Receivable    
            Purchase/                       Unit Price   Payment Terms            
Company Name   Related Party   Nature of Relationship   Sale   Amount   % to Total   Payment Terms   (Note)   (Note)   Ending Balance   % to Total   Note
The Company
  TSMC-North America   Subsidiary   Sales   $ 153,618,916       57     Net 30 days after invoice date       $ 20,407,621       49      
 
  Philips   Major shareholder   Sales     3,298,770       1     Net 30 days after monthly closing         573,565       1      
 
  GUC   Investee with controlling financial interest   Sales     347,456           Net 30 days after monthly closing         49,046        
 
  SSMC   Investee accounted for using equity method   Sales     195,253           Net 45 days after monthly closing                
 
  WaferTech   Subsidiary   Purchases     11,137,313       28     Net 30 days after monthly closing         (1,133,217 )     10      
 
  SSMC   Investee accounted for using equity method   Purchases     5,729,672       15     Net 30 days after monthly closing         (485,873 )     4      
 
  VIS   Investee accounted for using equity method   Purchases     4,142,457       10     Net 30 days after monthly closing         (563,240 )     5      
 
  TSMC-Shanghai   Subsidiary   Purchases     1,405,030       4     Net 30 days after monthly closing         (274,820 )     2      
GUC
  TSMC-North America   The same Parent   Purchases     266,372       23     Net 30 days after invoice date         (66,138 )     37      
    Note: The terms of sales to related parties are not significantly different from those to third parties. For purchase transactions, prices are determined in accordance with the related contractual agreements and no other similar transaction could be compared with.

-55-


 

TABLE 6
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED
RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
DECEMBER 31, 2005
(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Specified)
                                             
                                    Amounts Received    
                        Overdue   in Subsequent   Allowance for Bad
Company Name   Related Party   Nature of Relationship   Ending Balance   Turnover Rate   Amount   Action Taken   Period   Debts
The Company
  TSMC-North America   Subsidiary   $ 20,606,126     43 days   $ 5,735,388     Accelerate demand on account receivables   $ 7,626,255     $—  
 
  TSMC Technology   Indirect subsidiaries     972,563     Note         Accelerate demand on account receivables        
 
  Philips   Major shareholder     573,565     64 days     45,909     Accelerate demand on account receivables     1,603    
 
  VisEra   Indirect investee accounted for using equity method     374,200     Note     1,750     Accelerate demand on account receivables     5,161    
 
  SSMC   Investee accounted for using equity method     149,251     Note         Accelerate demand on account receivables        
Note: The ending balance primarily consisted of other receivables, it is not applicable for the calculation of the turnover rate.

-56-


 

TABLE 7
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED
NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES ON WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE
DECEMBER 31, 2005
(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Specified)
                                                                         
                Original Investment Amount   Balance as of December 31, 2005   Net Income   Investment    
                December 31,   December 31,   Shares (in   Percentage of   Carrying   (Loss) of the   Gain (Loss)    
Investor Company   Investee Company   Location   Main Businesses and Products   2005   2004   Thousands)   Ownership   Value (Note 1)   Investee   (Note 2)   Note
The Company
  TSMC International   Tortola, British Virgin Islands  
Providing investment in companies involved in the design, manufacture, and other related business in the semiconductor industry
  $ 31,445,780     $ 31,445,780       987,968       100     $ 23,912,812     $ (549,454 )   $ (549,454 )   Subsidiary
 
  TSMC-Shanghai   Shanghai, China  
Manufacturing and sales of integrated circuits at the order of and pursuant to product design specifications provided by customers
    12,180,367       9,187,962             100       9,438,856       (2,242,213 )     (2,242,213 )   Subsidiary
 
  VIS   Hsin-Chu, Taiwan  
Research, design, development, manufacture, packaging, testing and sale of memory integrated circuits, LSI, VLSI and related parts
    8,119,816       8,119,816       437,891       27       5,419,747       2,710,971       617,268    
Investee accounted for using equity method
 
  SSMC   Singapore  
Fabrication and supply of integrated circuits
    6,408,190       6,408,190       382       32       4,215,200       2,503,446       801,103    
Investee accounted for using equity method
 
  TSMC Partners   Tortola, British Virgin Islands   Investment activities     10,350       10,350       300       100       4,091,166       46,656       46,656     Subsidiary
 
  TSMC-North America   San Jose, California, U.S.A.  
Sales and marketing of integrated circuits and semiconductor devices
    333,718       333,718       11,000       100       1,790,186       564,201       320,274     Subsidiary
 
  Emerging Alliance   Cayman Islands  
Investing in new start-up technology companies
    1,526,074       1,447,957             99       850,534       (77,208 )     (76,822 )   Subsidiary
 
  VTAF II   Cayman Islands  
Investing in new start-up technology companies
    654,509       332,412             98       642,479       (19,044 )     (21,916 )   Subsidiary
 
  GUC   Hsin-Chu, Taiwan  
Researching, developing, manufacturing, testing and marketing of integrated circuits
    409,920       409,920       40,147       46       442,233       106,748       52,390    
Investee over which the Company has controlling financial interest
 
  TSMC-Japan   Yokohama, Japan   Marketing activities     83,760       83,760       6       100       94,949       2,572       2,572     Subsidiary
 
  Chi Cherng   Taipei, Taiwan   Investment activities     300,000       300,000             36       78,139       77,196       (3,769 )   Subsidiary
 
  Hsin Ruey   Taipei, Taiwan   Investment activities     300,000       300,000             36       77,415       77,257       (3,806 )   Subsidiary
 
  TSMC-Europe   Amsterdam, the Netherlands   Marketing activities     15,749       15,749             100       23,087       295       295     Subsidiary
 
Note 1:   The treasury stock is deducted from the carrying value.
Note 2:   The gains on disposal of the stocks of the Company held by subsidiaries and cash dividends from the Company are excluded.

- 57 -


 

TABLE 8
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED
INFORMATION OF INVESTMENT IN MAINLAND CHINA
DECEMBER 31, 2005
(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Specified)
                                                         
                Accumulated     Accumulated                            
                Outflow of           Outflow of                            
                Investment           Investment                           Accumulated
        Total Amount       from Taiwan as           from Taiwan as                           Inward
        of Paid-in       of   Investment Flows   of                   Carrying Value   Remittance of
        Capital       January 1, 2005   Outflow       December 31, 2005   Percentage of   Investment   as of   Earnings as of
    Main Businesses and   (RMB in   Investment   (US$ in   (US$ in       (US$ in   Ownership in   Gain (Loss)   December 31,   December 31,
Investee Company   Products   Thousand)   Type   Thousand)   Thousand)   Inflow   Thousand)   Investment   (Note 2)   2005   2005
TSMC (Shanghai)
  Company Limited
 
Manufacturing and sales of integrated circuits at the order of and pursuant to product design specifications provided by customers
  $12,180,367(RMB3,070,623)   (Note 1)   $9,187,962(US$276,000)   $2,992,405(US$95,000)   $—   $12,180,367(US$371,000)     100 %   $ (2,242,213 )   $ 9,438,856     $—
         
Accumulated Investment in Mainland   Investment Amounts Authorized by    
China as of December 31, 2005   Investment Commission, MOEA   Upper Limit on Investment
(US$ in Thousand)   (US$ in Thousand)   (US$ in Thousand)
$12,180,367
  $12,180,367   $12,180,367
(US$371,000)
  (US$371,000)   (US$371,000)
 
Note 1:   Direct investments US$371,000 thousand in TSMC-Shanghai.
Note 2:   Amount was recognized based on the audited financial statements.

- 58 -


 

     
 
  Taiwan Semiconductor Manufacturing
 
  Company Limited and Subsidiaries
 
   
 
  Consolidated Financial Statements for the
 
  Years Ended December 31, 2005 and 2004 and
 
  Independent Auditors’ Report

 


 

REPRESENTATION LETTER
The entities included in the combined financial statements of Taiwan Semiconductor Manufacturing Company Limited as of and for the year ended December 31, 2005, which were prepared in conformity with the Criteria Governing the Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises, are the same as the entities included in the consolidated financial statements prepared in conformity with the revised R.O.C. Statement of Financial Accounting Standards No. 7 “Consolidated Financial Statements”. In addition, the information needed to be disclosed in the combined financial statements is included in the consolidated financial statements. Thus, Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries did not prepare a separate set of combined financial statements.
Very truly yours,
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED
By
 
 
     
 
MORRIS CHANG
   
Chairman
   
 
   
January 12, 2006
   

 


 

INDEPENDENT AUDITORS’ REPORT
The Board of Directors and Shareholders
Taiwan Semiconductor Manufacturing Company Limited
We have audited the accompanying consolidated balance sheets of Taiwan Semiconductor Manufacturing Company Limited and subsidiaries (the Company) as of December 31, 2005 and 2004, and the related consolidated statements of income, changes in shareholders’ equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Taiwan Semiconductor Manufacturing Company Limited and subsidiaries as of December 31, 2005 and 2004, and the results of their operations and their cash flows for the years then ended in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers and accounting principles generally accepted in the Republic of China.
 
January 12, 2006
Notice to Readers
The accompanying consolidated financial statements are intended only to present the consolidated 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 consolidated 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.

- 1 -


 

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2005 AND 2004
(In Thousands of New Taiwan Dollars, Except Par Value)
                                 
    2005     2004  
    Amount     %     Amount     %  
ASSETS
                               
 
                               
CURRENT ASSETS
                               
Cash and cash equivalents (Notes 2, 3 and 4)
  $ 96,483,707       19     $ 74,302,351       15  
Short-term investments, net (Notes 2 and 4)
    47,399,308       9       54,107,951       11  
Notes and accounts receivable
    43,082,275       8       31,214,423       7  
Receivables from related parties (Note 20)
    693,266             654,377        
Allowance for doubtful receivables (Note 2)
    (980,594 )           (982,843 )      
Allowance for sales returns and others (Note 2)
    (4,317,413 )     (1 )     (3,342,450 )     (1 )
Other receivables from related parties (Note 20)
    597,910             141,578        
Other financial assets (Notes 2 and 24)
    2,915,696       1       2,212,371        
Inventories, net (Notes 2 and 5)
    17,728,303       3       15,555,937       3  
Deferred income tax assets, net (Notes 2 and 14)
    7,149,306       2       8,917,986       2  
Prepaid expenses and other current assets
    1,503,447             1,667,401        
 
                       
 
                               
Total current assets
    212,255,211       41       184,449,082       37  
 
                       
 
                               
LONG-TERM INVESTMENTS (Notes 2, 6, 18 and 24)
                               
Equity method
    10,287,424       2       9,143,612       2  
Cost method
    3,365,341             3,266,330       1  
Long-term bonds
    18,548,308       4       15,170,167       3  
Other investments
    10,227,000       2       10,521,740       2  
 
                       
 
                               
Total long-term investments
    42,428,073       8       38,101,849       8  
 
                       
 
                               
PROPERTY, PLANT AND EQUIPMENT (Notes 2, 7, 10 and 20)
                               
Cost
                               
Land and land improvements
    851,225             803,508        
Buildings
    105,832,028       21       97,882,699       19  
Machinery and equipment
    510,922,064       98       433,130,364       87  
Office equipment
    9,670,611       2       8,538,225       2  
Leased assets
    597,669             566,243        
 
                       
 
    627,873,597       121       540,921,039       108  
Accumulated depreciation
    (398,124,607 )     (77 )     (331,253,866 )     (66 )
Advance payments and construction in progress
    15,074,302       3       49,244,153       10  
 
                       
 
                               
Property, plant and equipment, net
    244,823,292       47       258,911,326       52  
 
                       
 
                               
GOODWILL (Note 2)
    6,010,601       1       7,115,510       1  
 
                       
 
                               
OTHER ASSETS
                               
Deferred charges, net (Notes 2, 8 and 23)
    7,006,250       2       8,992,452       2  
Deferred income tax assets, net (Notes 2 and 14)
    6,788,418       1       1,649,979        
Refundable deposits
    106,802             106,448        
Assets leased to others, net (Note 2)
    72,879             78,613        
Others (Note 2)
    18,063             48,832        
 
                       
 
                               
Total other assets
    13,992,412       3       10,876,324       2  
 
                       
 
                               
TOTAL
  $ 519,509,589       100     $ 499,454,091       100  
 
                       
                                 
    2005     2004  
    Amount     %     Amount     %  
LIABILITIES AND SHAREHOLDERS’ EQUITY
                               
 
                               
CURRENT LIABILITIES
                               
Short-term bank loans (Note 9)
  $ 328,500           $ 383,004        
Accounts payable
    9,421,452       2       7,264,419       2  
Payables to related parties (Note 20)
    1,743,069             2,217,815       1  
Income tax payable (Notes 2 and 14)
    4,015,451       1       403,955        
Accrued expenses and other current liabilities (Notes 2, 12, 23 and 24)
    10,542,230       2       9,722,413       2  
Payables to contractors and equipment suppliers
    9,066,036       2       33,427,702       6  
Current portion of long-term liabilities (Note 10)
    5,489             10,500,000       2  
 
                       
 
                               
Total current liabilities
    35,122,227       7       63,919,308       13  
 
                       
 
                               
LONG-TERM LIABILITIES
                               
Bonds payable (Note 11)
    19,500,000       4       19,500,000       4  
Long-term bank loans (Note 10)
    663,140             1,915,020        
Other long-term payables (Note 12)
    8,548,887       2       7,964,975       2  
Other payables to related parties (Notes 20 and 23)
    1,100,475             2,317,972        
Liability under capital lease (Note 2)
    597,669             566,243        
 
                       
 
                               
Total long-term liabilities
    30,410,171       6       32,264,210       6  
 
                       
 
                               
OTHER LIABILITIES
                               
Accrued pension cost (Notes 2 and 13)
    3,474,384       1       3,101,707       1  
Guarantee deposits (Note 23)
    2,896,430             412,881        
Deferred credits (Notes 2 and 20)
    1,343,959             704,991        
Others
    23,710             9,958        
 
                       
Total other liabilities
    7,738,483       1       4,229,537       1  
 
                       
 
                               
Total liabilities
    73,270,881       14       100,413,055       20  
 
                       
 
                               
EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF PARENT (Notes 2, 16, 17 and 18)
                               
Capital stock — $10 par value
                               
Authorized: 27,050,000 thousand shares in 2005 and 24,600,000 thousand shares in 2004
                               
Issued: 24,730,025 thousand shares in 2005 and 23,251,964 thousand shares in 2004
    247,300,246       48       232,519,637       47  
Capital surplus
    57,117,886       11       56,537,259       11  
Retained earnings
                               
Appropriated as legal capital reserve
    34,348,208       7       25,528,007       5  
Appropriated as special capital reserve
    2,226,427                    
Unappropriated earnings
    106,196,399       20       88,202,009       18  
Others
                               
Cumulative translation adjustments
    (640,742 )           (2,226,427 )     (1 )
Treasury stock (at cost) — 32,938 thousand shares in 2005 and 45,521 thousand shares in 2004
    (918,075 )           (1,595,186 )      
 
                       
 
                               
Total equity attributable to shareholders of the parent
    445,630,349       86       398,965,299       80  
 
                               
MINORITY INTEREST IN SUBSIDIARIES (Note 2)
    608,359             75,737        
 
                       
 
                               
Total shareholders’ equity
    446,238,708       86       399,041,036       80  
 
                       
 
                               
TOTAL
  $ 519,509,589       100     $ 499,454,091       100  
 
                       
The accompanying notes are an integral part of the consolidated financial statements.

- 2 -


 

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
(In Thousands of New Taiwan Dollars, Except Consolidated Earnings Per Share)
                                 
    2005     2004  
    Amount     %     Amount     %  
GROSS SALES (Notes 2 and 20)
  $ 271,801,696             $ 261,947,351          
 
                               
SALES RETURNS AND ALLOWANCES (Note 2)
    5,236,626               4,734,733          
 
                           
 
                               
NET SALES
    266,565,070       100       257,212,618       100  
 
                               
COST OF SALES (Notes 15 and 20)
    148,362,196       56       141,393,435       55  
 
                       
 
                               
GROSS PROFIT
    118,202,874       44       115,819,183       45  
 
                       
 
                               
OPERATING EXPENSES (Notes 15 and 20)
                               
Research and development
    14,016,506       5       12,516,434       5  
General and administrative
    9,085,536       3       11,454,374       4  
Sales and marketing
    4,132,273       2       3,366,701       1  
 
                       
 
                               
Total operating expenses
    27,234,315       10       27,337,509       10  
 
                       
 
                               
INCOME FROM OPERATIONS
    90,968,559       34       88,481,674       35  
 
                       
 
                               
NON-OPERATING INCOME AND GAINS
                               
Interest (Notes 2 and 24)
    3,069,435       1       1,783,693       1  
Equity in earnings of equity method investees, net (Notes 2 and 6)
    1,433,226       1       2,094,137       1  
Settlement income (Note 22)
    964,710                    
Technical service income (Notes 20 and 23)
    462,624             423,804        
Gain on disposal of property, plant and equipment (Note 2)
    342,756             242,785        
Subsidy income
    321,850                    
Gain on sales of investments, net (Note 2)
                914,541        
Others (Note 20)
    472,896             556,598        
 
                       
 
                               
Total non-operating income and gains
    7,067,497       2       6,015,558       2  
 
                       
 
                               
NON-OPERATING EXPENSES AND LOSSES
                               
Interest (Notes 2, 7 and 24)
    2,662,458       1       1,454,242       1  
Unrealized valuation loss on short-term investments (Note 2)
    337,160             75,212        
Loss on idle assets (Note 2)
    131,849                    
Loss on impairment of long-term investments (Note 2)
    128,900             350,608        
     
  (Continued)

- 3 -


 

                                 
    2005     2004  
    Amount     %     Amount     %  
Loss on disposal of property, plant and equipment and idle assets (Note 2)
  $ 60,109           $ 131,148        
Others
    452,333             520,435        
 
                       
 
                               
Total non-operating expenses and losses
    3,772,809       1       2,531,645       1  
 
                       
 
                               
INCOME BEFORE INCOME TAX
    94,263,247       35       91,965,587       36  
 
                               
INCOME TAX BENEFIT (EXPENSE) (Notes 2 and 14)
    (630,579 )           363,426        
 
                       
 
                               
NET INCOME
  $ 93,632,668       35     $ 92,329,013       36  
 
                       
 
ATTRIBUTABLE TO:
                               
Shareholders of the parent
  $ 93,575,035       35     $ 92,316,115       36  
Minority interest
    57,633             12,898        
 
                       
 
 
  $ 93,632,668       35     $ 92,329,013       36  
 
                       
                                 
    2005     2004  
    Income Attributable     Income Attributable  
    to Shareholders of the Parent     to Shareholders of the Parent  
    Before Tax     After Tax     Before Tax     After Tax  
CONSOLIDATED EARNINGS PER SHARE (Note 19)
                               
Basic earnings per share
  $ 3.82     $ 3.79     $ 3.72     $ 3.73  
 
                       
Diluted earnings per share
  $ 3.82     $ 3.79     $ 3.72     $ 3.73  
 
                       
     
The accompanying notes are an integral part of the consolidated financial statements.
  (Concluded)

- 4 -


 

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
(In Thousands of New Taiwan Dollars, Except Dividends Per Share)
                                                                                                         
    Equity Attributable to Shareholders of the Parent (Notes 2, 16, 17 and 18)        
                            Retained Earnings     Unrealized                             Minority        
    Capital Stock             Legal     Special                     Loss on     Cumulative                     Interest in     Total  
    Shares (in             Capital     Capital     Capital     Unappropriated             Long-term     Translation     Treasury             Subsidiaries     Shareholders’  
    Thousands)     Amount     Surplus     Reserve     Reserve     Earnings     Total     Investments     Adjustments     Stock     Total     (Note 2)     Equity  
BALANCE, JANUARY 1, 2004
    20,266,619     $ 202,666,189     $ 56,855,885     $ 20,802,137     $ 68,945     $ 50,229,008     $ 71,100,090     $ (35 )   $ 225,408     $ (1,633,228 )   $ 329,214,309     $ 88,999     $ 329,303,308  
 
                                                                                                       
Appropriations of prior year’s earnings
                                                                                                       
Legal capital reserve
                      4,725,870             (4,725,870 )                                          
Reversal of special capital reserve
                            (68,945 )     68,945                                            
Employees’ profit sharing — in cash
                                  (681,628 )     (681,628 )                       (681,628 )           (681,628 )
Employees’ profit sharing — in stock
    272,651       2,726,514                         (2,726,514 )     (2,726,514 )                                    
Cash dividends to preferred shareholders
                                  (184,493 )     (184,493 )                       (184,493 )           (184,493 )
Cash dividends to common shareholders — NT$0.60 per share
                                  (12,159,971 )     (12,159,971 )                       (12,159,971 )           (12,159,971 )
Stock dividends to common shareholders - NT$1.41 per share
    2,837,327       28,373,267                         (28,373,267 )     (28,373,267 )                                    
Bonus to directors and supervisors
                                  (127,805 )     (127,805 )                       (127,805 )           (127,805 )
Net income in 2004
                                  92,316,115       92,316,115                         92,316,115       12,898       92,329,013  
Adjustment arising from changes of percentage of ownership in investees
                34,059                                                 34,059             34,059  
Reversal of unrealized loss on long-term investment of investees
                                              35                   35             35  
Translation adjustments
                                                    (2,451,835 )           (2,451,835 )           (2,451,835 )
Issuance of stock from exercising stock options
    87       867       2,757                                                 3,624             3,624  
Cash dividends received by subsidiaries from parent company
                22,781                                                 22,781             22,781  
Treasury stock transactions — sales of parent company’s stock held by subsidiaries
                1,864                                           38,042       39,906             39,906  
Treasury stock repurchased by the parent company
                                                          (7,059,798 )     (7,059,798 )           (7,059,798 )
Retirement of treasury stock
    (124,720 )     (1,247,200 )     (380,087 )                 (5,432,511 )     (5,432,511 )                 7,059,798                    
Decrease in minority interest
                                                                      (26,160 )     (26,160 )
 
                                                                             
 
                                                                                                       
BALANCE, DECEMBER 31, 2004
    23,251,964       232,519,637       56,537,259       25,528,007             88,202,009       113,730,016             (2,226,427 )     (1,595,186 )     398,965,299       75,737       399,041,036  
 
Appropriations of prior year’s earnings
                                                                                                       
Legal capital reserve
                      8,820,201             (8,820,201 )                                          
Special capital reserve
                            2,226,427       (2,226,427 )                                          
Employees’ profit sharing — in cash
                                  (3,086,215 )     (3,086,215 )                       (3,086,215 )           (3,086,215 )
Employees’ profit sharing — in stock
    308,622       3,086,215                         (3,086,215 )     (3,086,215 )                                    
Cash dividends to common shareholders — NT$2.00 per share
                                  (46,504,097 )     (46,504,097 )                       (46,504,097 )           (46,504,097 )
Stock dividends to common shareholders — NT$0.50 per share
    1,162,602       11,626,024                         (11,626,024 )     (11,626,024 )                                    
Bonus to directors and supervisors
                                  (231,466 )     (231,466 )                       (231,466 )           (231,466 )
Net income in 2005
                                  93,575,035       93,575,035                         93,575,035       57,633       93,632,668  
Adjustment arising from changes of percentage of ownership in investees
                71,405                                                 71,405             71,405  
Translation adjustments
                                                    1,585,685             1,585,685       (51,795 )     1,533,890  
Issuance of stock from exercising stock options
    6,837       68,370       202,559                                                 270,929             270,929  
     
  (Continued)

- 5 -


 

                                                                                                         
    Equity Attributable to Shareholders of the Parent (Notes 2, 16, 17 and 18)                
                            Retained Earnings     Unrealized                             Minority        
    Capital Stock             Legal     Special                     Loss on     Cumulative                     Interest in     Total  
    Shares (in             Capital     Capital     Capital     Unappropriated             Long-term     Translation     Treasury             Subsidiaries     Shareholders’  
    Thousands)     Amount     Surplus     Reserve     Reserve     Earnings     Total     Investments     Adjustments     Stock     Total     (Note 2)     Equity  
Cash dividends received by subsidiaries from parent company
        $     $ 84,285     $     $     $     $     $     $     $     $ 84,285     $     $ 84,285  
Treasury stock transactions — sales of parent company’s stock held by subsidiaries
                222,378                                           677,111       899,489             899,489  
Increase in minority interest
                                                                      526,784       526,784  
 
                                                                             
 
                                                                                                       
BALANCE, DECEMBER 31, 2005
    24,730,025     $ 247,300,246     $ 57,117,886     $ 34,348,208     $ 2,226,427     $ 106,196,399     $ 142,771,034     $     $ (640,742 )   $ (918,075 )   $ 445,630,349     $ 608,359     $ 446,238,708  
 
                                                                             
     
The accompanying notes are an integral part of the consolidated financial statements.
  (Concluded)

- 6 -


 

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
(In Thousands of New Taiwan Dollars)
                 
    2005     2004  
CASH FLOWS FROM OPERATING ACTIVITIES
               
Net income attributable to shareholders of the parent
  $ 93,575,035     $ 92,316,115  
Net income attributable to minority interest
    57,633       12,898  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
    75,649,429       69,818,457  
Deferred income taxes
    (3,353,013 )     (1,058,393 )
Equity in earnings of equity method investees, net
    (1,433,226 )     (2,094,137 )
Amortization of premium/discount of long-term bond investments, net
    120,872       28,673  
Loss on impairment of long-term investments
    128,900       350,608  
Gain on sales of long-term investments, net
    (15,304 )     (85,203 )
Gain on disposal of property, plant and equipment and idle assets, net
    (282,647 )     (111,637 )
Loss on idle assets
    131,849        
Donation of idle assets
    7,207        
Provision for pension cost
    360,128       500,257  
Dividends received from equity method investees
    668,464        
Changes in operating assets and liabilities:
               
Decrease (increase) in:
               
Notes and accounts receivable
    (11,572,809 )     (2,709,261 )
Receivables from related parties
    (101,915 )     266,067  
Allowance for doubtful receivables
    (3,145 )     (37,555 )
Allowance for sales returns and others
    974,963       1,206,607  
Other receivables from related parties
    (87,979 )     (9,847 )
Other financial assets
    (469,023 )     (777,100 )
Inventories, net
    (2,006,165 )     (3,420,613 )
Prepaid expenses and other current assets
    183,046       (34,493 )
Increase (decrease) in:
               
Accounts payable
    2,088,582       825,815  
Payables to related parties
    (1,629,217 )     (1,499,968 )
Income tax payable
    3,611,486       266,526  
Accrued expenses and other current liabilities
    292,568       (602,911 )
Deferred credits
    117,335        
 
           
 
               
Net cash provided by operating activities
    157,013,054       153,150,905  
 
           
 
               
CASH FLOWS FROM INVESTING ACTIVITIES
               
Decrease (increase) in short-term investments, net
    6,954,230       (43,554,878 )
Acquisitions of:
               
Long-term investments
    (14,675,413 )     (23,054,379 )
Property, plant and equipment
    (79,878,724 )     (81,094,557 )
Proceeds from disposal of:
               
Long-term investments
    10,533,622       165,243  
Property, plant, and equipment and idle assets
    480,707       1,812,633  
(Continued)

-7-


 

                 
    2005     2004  
Increase in deferred charges
  $ (855,967 )   $ (2,405,673 )
Decrease in refundable deposits
    771       93,074  
Decrease in other assets
    741       51,604  
 
           
 
               
Net cash used in investing activities
    (77,440,033 )     (147,986,933 )
 
           
 
               
CASH FLOWS FROM FINANCING ACTIVITIES
               
Repayments on:
               
Short-term bank loans
    (54,504 )      
Bonds payable
    (10,500,000 )     (5,000,000 )
Long-term bank loans
    (1,337,489 )     (6,656,152 )
Increase (decrease) in guarantee deposits
    2,483,549       (351,008 )
Cash bonus paid to employees
    (3,086,215 )     (681,628 )
Cash dividends paid for preferred stock
          (184,493 )
Cash dividends paid for common stock
    (46,419,812 )     (12,137,190 )
Bonus to directors and supervisors
    (231,466 )     (127,805 )
Repurchase of treasury stock
          (7,059,798 )
Proceeds from:
               
Exercise of employee stock options
    270,929       3,624  
Disposal of treasury stock
    899,489       39,906  
Increase (decrease) in minority interest in subsidiaries
    6,832       (26,160 )
 
           
 
               
Net cash used in financing activities
    (57,968,687 )     (32,180,704 )
 
           
 
               
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    21,604,334       (27,016,732 )
 
               
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
    348,921       (1,669,813 )
 
               
EFFECT OF FIRST INCLUSION FOR CONSOLIDATION OF CERTAIN SUBSIDIARIES
    228,101        
 
               
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
    74,302,351       102,988,896  
 
           
 
               
CASH AND CASH EQUIVALENTS, END OF YEAR
  $ 96,483,707     $ 74,302,351  
 
           
 
               
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
               
Cash paid for
               
Interest (excluding the amount capitalized of NT$278,334 thousand in 2004, Note 7)
  $ 2,435,827     $ 1,470,333  
 
           
Income tax
  $ 341,671     $ 389,189  
 
           
Cash paid for acquisition of property, plant and equipment
               
Total acquisitions
  $ 56,166,205     $ 113,043,552  
Decrease (increase) in payables to contractors and equipment suppliers
    24,361,666       (26,195,599 )
Increase in other long-term payables
    (649,147 )     (5,913,737 )
Decrease in liability under capital lease
          160,341  
 
           
 
  $ 79,878,724     $ 81,094,557  
 
           
(Continued)

-8-


 

                 
    2005     2004  
NONCASH INVESTING AND FINANCING ACTIVITIES
               
Current portion of long-term liabilities
  $ 5,489     $ 10,500,000  
 
           
Current portion of other payables to related parties (classified under payables to related parties)
  $ 693,956     $ 469,494  
 
           
Current portion of other long-term payables (classified under accrued expenses and other current liabilities)
  $ 869,072     $ 1,505,345  
 
           
Reclassification of long-term investments to short-term investments
  $ 245,587     $ 343,950  
 
           
Reclassification of short-term investments to long-term investments
  $     $ 3,402,413  
 
           
The accompanying notes are an integral part of the consolidated financial statements.           (Concluded)

-9-


 

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004
(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Specified)
1. GENERAL
Taiwan Semiconductor Manufacturing Company Limited (TSMC), a Republic of China (R.O.C.) corporation, was incorporated as a venture among the Government of the R.O.C., acting through the Development Fund of the Executive Yuan; Philips Electronics N.V. and certain of its affiliates (Philips); and certain other private investors. On September 5, 1994, its shares were listed on the Taiwan Stock Exchange (TSE). On October 8, 1997, TSMC listed some of its shares of stock on the New York Stock Exchange (NYSE) in the form of American Depositary Shares (ADSs).
TSMC is engaged mainly in the manufacturing, selling, packaging, testing and computer-aided designing of integrated circuits and other semiconductor devices and the manufacturing of masks.
As of December 31, 2005 and 2004, TSMC and its subsidiaries had 21,950 and 20,444 employees, respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements are presented in conformity with Guidelines Governing the Preparation of Financial Reports by Securities Issuers and accounting principles generally accepted in the R.O.C.
For the convenience of readers, the accompanying consolidated 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 consolidated financial statements shall prevail.
Significant accounting policies are summarized as follows:
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of all directly and indirectly majority owned subsidiaries of TSMC, and the accounts of investees in which TSMC’s ownership percentage is less than 50% but has a controlling interest. All significant intercompany balances and transactions are eliminated upon consolidation.
In compliance with the revised R.O.C. Statement of Financial Accounting Standards (“SFAS”) No. 7 “Consolidated Financial Statements”, the consolidated financial statements included new consolidated entities, including Global Unichip Corporation (GUC), Global Unichip Corp.-North America (GUC-NA), Global Unichip Japan Co., Ltd. (GUC-Japan) and VisEra Technology Company, Ltd. (VisEra; due to the changes in investment structure, the Company no longer had a controlling interest over VisEra in November 2005; the consolidated statement of income for the year ended December 31, 2005 included the revenue and expenses of VisEra for the ten months ended October 31, 2005); moreover, pursuant to the newly adopted standard, the Company did not retroactively restate its consolidated financial statements as of and for the year ended December 31, 2004.

-10-


 

The consolidated entities were as follows:
                 
        Percentage of    
        Ownership at    
        December 31,    
Name of Investor   Name of Investee   2005   Remark
TSMC
  TSMC North America (TSMC-NA)     100 %  
 
  TSMC Japan K. K. (TSMC-Japan)     100 %  
 
  Taiwan Semiconductor Manufacturing Company Europe B.V. (TSMC-Europe)     100 %  
 
  TSMC (Shanghai) Company Limited (TSMC-Shanghai)     100 %  
 
  TSMC Partners, Ltd. (TSMC Partners)     100 %  
 
  TSMC International Investment Ltd. (TSMC International)     100 %  
 
  Chi Cherng Investment Co., Ltd. (Chi Cherng)     36 %  
TSMC and Hsin Ruey held in aggregate a 100% ownership of Chi Cherng. As of December 31, 2005, Chi Cherng held 16,454 thousand common shares in TSMC (approximately 0.07% of outstanding common shares).
 
  Hsin Ruey Investment Co., Ltd. (Hsin Ruey)     36 %  
TSMC and Chi Cherng held in aggregate a 100% ownership of Hsin Ruey. As of December 31, 2005, Hsin Ruey held 16,484 thousand common shares in TSMC (approximately 0.07% of outstanding common shares).
 
  Emerging Alliance Fund, L.P. (Emerging Alliance)     99.5 %  
 
  VentureTech Alliance Fund II, L.P. (VTAF II)     98 %  
 
  GUC     46 %  
Starting from January 1, 2005, GUC became a consolidated entity of TSMC as GUC’s president was assigned by TSMC and TSMC has control over the financial, operating and personnel hiring decisions of GUC. Please see Note 20 for significant intercompany transactions between TSMC and GUC during 2004.
(Continued)

-11-


 

                 
        Percentage of    
        Ownership at    
Name of Investor   Name of Investee   December 31, 2005   Remark
 
  VisEra        
Starting from January 1, 2005, VisEra became a consolidated entity of TSMC as VisEra’s president was assigned by TSMC and TSMC no longer had a controlling interest over the financial, operating and personnel hiring decisions of VisEra. However, due to the changes in investment structure, TSMC no longer had a controlling interest over VisEra beginning in November 2005. As a result, its revenue and expenses after October 31, 2005 were excluded from the consolidated statements of income for the year ended December 31, 2005.
TSMC International
  TSMC Technology, Inc. (TSMC Technology)     100 %  
 
  TSMC Development, Inc. (TSMC Development)     100 %  
 
  InveStar Semiconductor Development Fund, Inc. (ISDF)     97 %  
 
  InveStar Semiconductor Development Fund, Inc. (II) LDC (ISDF II)     97 %  
TSMC Development
  WaferTech, LLC (WaferTech)     99.996 %  
GUC
  GUC-NA     100 %  
Starting from January 1, 2005, GUC-NA became a consolidated entity of TSMC as TSMC has control over GUC. TSMC did not enter into significant transactions with GUC-NA in prior years.
 
  GUC-Japan     100 %  
Starting from January 1, 2005, GUC-Japan became a consolidated entity of TSMC as TSMC has control over GUC. TSMC did not enter into significant transactions with GUC-Japan in prior years.

-12-


 

The following diagram presents information regarding the relationship and ownership percentages between TSMC and its consolidated investees as of December 31, 2005:
(FLOW CHART)
TSMC-NA is engaged in selling and marketing of integrated circuits and semiconductor devices. TSMC-Japan and TSMC-Europe are engaged mainly in marketing activities. TSMC-Shanghai is engaged in the manufacturing and sales of integrated circuits at the order of and pursuant to product design specifications provided by customers. TSMC Partners, TSMC Development, Chi Cherng and Hsin Ruey are engaged in investing activities. TSMC International is engaged in investment in companies involved in the design, manufacture, and other related business in the semiconductor industry. TSMC Technology is engaged mainly in engineering support activities. Emerging Alliance, VTAF II, ISDF and ISDF II are engaged in investing in new start-up technology companies. WaferTech is engaged in the manufacturing, selling, testing and computer-aided designing of integrated circuits and other semiconductor devices. GUC is engaged in researching, developing, manufacturing, testing and marketing of integrated circuits. GUC-NA and GUC-Japan are engaged in providing products consulting in North America and Japan.
TSMC together with its consolidated entities are hereinafter referred to collectively as the “Company”.
Minority interest in subsidiaries aforementioned is presented under minority interest in subsidiaries in the consolidated balance sheets.
Use of Estimates
The preparation of consolidated financial statements in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers and accounting principles generally accepted in the R.O.C. that require 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 those expected to be converted to cash, sold or consumed within one year from the balance sheet date. Current liabilities are obligations due on demand 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
Government bonds under repurchase agreements and notes acquired with maturities less than three months from the date of purchase are classified as cash equivalents.

-13-


 

Short-term Investments
Short-term investments primarily consist of agency bonds, corporate bonds, asset-backed securities, bond funds, government bonds and others.
Short-term investments are recorded at historical cost and are carried at the lower of cost or market value as of the balance sheet date. An allowance for decline in value is provided and is charged to current income when the aggregate carrying amount of the investments exceeds the aggregate market value. A reversal of the allowance is recorded for a subsequent recovery of the aggregate market value.
The costs of funds and public-traded stocks sold are accounted for using the weighted-average method; whereas the costs of other securities sold are accounted for using the specific identification method.
The market value of funds is determined using the net asset value of the funds at the end of the year, and the market value of public-traded stocks is determined using the average-closing prices of the listed stocks for the last month of the year. The market value of other short-term investments is determined using the average of bid and ask prices at the end of the year.
Cash dividends are recorded as investment income in the current year.
Allowance for Doubtful Receivables
An allowance for doubtful receivables is provided based on a review of the collectibility of accounts receivables. The Company determines the amount of the allowance for doubtful receivables by examining the aging analysis of outstanding account receivables and current trends in the credit quality of its customers as well as its internal credit policies.
Revenue Recognition and Allowance for Sales Returns and Others
The Company recognizes revenue when evidence of an arrangement exists, shipment is made, price is fixed or determinable, and collectibility is reasonably assured. Revenues from the design and manufacturing of photo masks, which are used as manufacturing tools in the fabrication process, are recognized when the photo masks are qualified by customers. The Company records a provision for estimated future returns and other allowances in the period the related revenue is recorded. Provisions for estimated sales returns and other allowances are generally made based on historical experience, management’s judgment, and any known factors that would significantly affect the allowance.
Sales are determined using the 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, the fair value of receivables is equivalent to the nominal amount of cash to be received.
Inventories
Inventories are stated at the lower of cost or market value. Inventories are recorded at standard cost and adjusted to the approximate weighted-average cost at the balance sheet date. Market value represents replacement cost for raw materials, supplies and spare parts, and net realizable value is used for finished goods and work in process. The Company assesses the impact of changing technology on its inventories on hand and writes off inventories that are considered obsolete. Year-end inventories are evaluated for estimated excess quantities and obsolescence based on a demand forecast within a specific time horizon, which is generally 180 days or less. Estimated losses on scrap and slow-moving items are recognized and included in the allowance for losses.

-14-


 

Long-term Investments
Investments in companies wherein the Company exercises significant influence on the operating and financial policy decisions are accounted for using the equity method of accounting. 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. When equity investments are made, the difference, if any, between the cost of the investment and the Company’s share of the investee’s net equity is amortized using the straight-line method over five years and is also recorded in the “equity in earnings/losses of equity method investees, net” account.
When the Company subscribes for additional investee shares at a percentage different from its existing ownership percentage of equity interest, the resulting carrying amount of the investment in the investee differs from the amount of the Company’s share of the investee’s net equity. The Company records such difference as an adjustment to long-term investments with the corresponding amount charged or credited to capital surplus.
Investments in companies wherein the Company does not exercise significant influence are recorded at historical cost. Cash dividends are recognized as investment income in the year received but are accounted for as reductions to the carrying amount of the investments if the dividends are received in the year of acquisition. Stock dividends are recorded as an increase in the number of shares held and do not affect investment income or the carrying amount of the investment. An allowance is recognized for any decline in the market value of investments in publicly traded stocks with readily ascertainable fair market value, with the corresponding amount recorded as an unrealized loss, a component of shareholders’ equity. A reversal of the allowance is recorded for a subsequent recovery of the market value of such investment.
Investments in mutual funds are stated at the lower of aggregate cost or net asset value. An allowance is recognized when the net asset value of the funds is lower than their cost, with the corresponding amount recorded as a reduction to shareholders’ equity. A reversal of the allowance will result from a subsequent recovery of the net asset value.
The costs of stocks and mutual funds sold are determined using the weighted-average method.
Investments in long-term bonds are stated at amortized cost. The discount or premium is amortized over the duration period using the interest method, and the amortization is recorded as an adjustment to interest income.
When investments in public-traded securities are reclassified from short-term investments to long-term investments or from long-term investments to short-term investments, the Company recognizes a loss to the extent, if any, that the market value of such investments is lower than the carrying amount and the market value at the time of reclassification becomes the new basis.
If an investee recognizes an unrealized loss on its long-term investments using the lower-of-cost-or-market method, the Company also recognizes a corresponding unrealized loss in proportion to its ownership percentage in the investee and records the amount as a component of shareholders’ equity.
When an indication of impairment is identified in an investment, the carrying amount of the investment is reduced to reflect such other-than-temporary decline, with the related impairment loss charged to current income.
Gains or losses on sales from the Company to investees accounted for using the equity method and vice versa are deferred in proportion to the Company’s ownership percentages in the investees until realized through transactions with third parties.
If an investee’s functional currency is a foreign currency, translation adjustments will result from the process of translating the investee’s financial statements into the reporting currency of the Company. Such adjustments are accumulated and reported as a separate component of shareholders’ equity.

-15-


 

Property, Plant and Equipment, Assets Leased to Others, Leased Assets and Idle Assets
Property, plant and equipment and assets leased to others are stated at cost less accumulated depreciation. Properties covered by agreements qualifying as capital leases are carried at the lower of the leased equipment’s market value or the present value of the minimum lease payments at the inception date of the lease, with the corresponding amount recorded as a liability under capital lease. 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 future 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. Idle assets are stated at the lower of net realizable value or book value. Significant additions, renewals and betterments incurred during the construction period are capitalized. Maintenance and repairs are expensed in the year incurred. Interest expense incurred during the purchase and construction period is also capitalized.
Depreciation is computed using the straight-line method over the following estimated service lives: land improvements — 20 years; buildings — 10 to 50 years; machinery and equipment — 3 to 10 years; office equipment — 3 to 15 years; and leased assets — 20 years.
Upon sale or disposal of property, plant and equipment, the related cost and accumulated depreciation are removed from the corresponding accounts, with any gain or loss credited or charged to non-operating gains or losses in the year of sale or disposal.
Goodwill
Goodwill represents the excess of the consideration paid for acquisition over the fair market value of identifiable net assets acquired. Goodwill is amortized using the straight-line method over the estimated life of 10 years. If an event occurs or circumstances change that more likely than not reduce the fair value of goodwill below its carrying amount, an impairment loss is charged to current income. No recording of subsequent recovery in the fair value of the goodwill is allowed.
Deferred Charges
Deferred charges consist of technology license fees, software and system design costs and other charges. The amounts are amortized as follows: 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 — 2 to 5 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 future 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 amortization, as if no impairment loss had been recognized.
Pension Costs
For employees under defined contribution pension plans, pension costs are recorded based on the actual contributions made to employees’ individual pension accounts. For employees under defined benefit pension plans, pension costs are recorded based on actuarial calculations.

-16-


 

Income Tax
The Company uses an inter-period tax allocation method for income tax. Deferred income tax assets and liabilities are recognized for the tax effects of temporary differences, net operating loss carryforwards 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, 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 taxes on unappropriated earnings (excluding earnings from foreign consolidating subsidiaries) of 10% are expensed in the year of shareholder approval which is the year subsequent to the year the earnings are generated.
Stock-based Compensation
Employee stock option plans that are amended or have options granted on or after January 1, 2004 must be accounted for by the interpretations issued by the Accounting Research and Development Foundation. The Company adopted the intrinsic value method and any compensation cost determined using this method is charged to expense over the employee vesting period.
Treasury Stock
When TSMC repurchases its outstanding common stock, the cost of the reacquired stock is recorded as treasury stock, a reduction to shareholders’ equity. When TSMC 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. TSMC’s stock held by its subsidiaries is treated as treasury stock and reclassified from long-term investments to treasury stock. The gains resulted from the disposal of treasury stock held by the subsidiaries and cash dividends received by the subsidiaries from TSMC are recorded under capital surplus — treasury stock transactions.
Foreign-currency Transactions
Foreign currency transactions are recorded in New Taiwan dollars at the rates of exchange in effect when the transactions occur. Exchange gains or losses derived from foreign currency transactions or monetary assets and liabilities denominated in foreign currencies are recognized in current income. At the end of the year, assets and liabilities denominated in foreign currencies are revalued at the prevailing exchange rates with the resulting gains or losses recognized in current income.

-17-


 

Derivative Financial Instruments
The Company enters into foreign currency forward contracts to manage foreign exchange exposures on foreign-currency-denominated assets and liabilities. The contracts are recorded in New Taiwan dollars at the current rate of exchange at the contract date. The differences in the New Taiwan dollar amounts translated using the current rates and the amounts translated using the contracted forward rates are amortized over the terms of the forward contracts using the straight-line method. At the end of the year, the receivables or payables arising from forward contracts are restated using the prevailing exchange rates with the resulting differences credited or charged to income. In addition, the receivables and payables related to the same forward contracts are netted with the resulting amount presented as either an asset or a liability. Any resulting gain or loss upon settlement is credited or charged to income in the year of settlement.
The Company enters into cross currency swap contracts to manage currency exposures on foreign-currency-denominated assets and liabilities. The principal amount is recorded using the current rate at the contract date. The differences in the New Taiwan dollar amounts translated using the current rates and the amounts translated using the contracted rates are amortized over the terms of the contracts using the straight-line method. At the end of the year, the receivables or payables arising from cross-currency swap contracts are restated using the prevailing exchange rate with the resulting differences credited or charged to income. In addition, the receivables and payables related to the contracts of the same counter party are netted with the resulting amount presented as either an asset or a liability. The difference in interest computed pursuant to the contracts on each settlement date or the balance sheet date is recorded as an adjustment to the interest income or expense associated with the hedged items. Any resulting gain or loss upon settlement is credited or charged to income in the year of settlement.
The contract amounts of foreign currency option contracts entered into for hedging purposes are not recognized as an asset or liability on the contract dates. Any resulting gain or loss upon settlement is credited or charged to income in the year of settlement.
The Company enters into interest rate swap contracts to manage exposures to changes in interest rates on existing assets or liabilities. The receivable or payable computed pursuant to the contracts on each settlement date or the balance sheet date is recorded as an adjustment to the interest income or expense associated with the hedged items.
Translation of Foreign-currency Financial Statements
R.O.C. SFAS No. 14, “Accounting for Foreign-currency Translation”, applies to foreign subsidiaries that use the local currency as their functional currency. The financial statements of foreign subsidiaries are translated into New Taiwan dollars at the following exchange rates: Assets and liabilities — current rate at year-end; shareholders’ equity — historical rate; income and expenses — average rate during the year. The resulting translation adjustments are recorded as a separate component of shareholders’ equity.
Reclassifications
Certain accounts in the consolidated financial statements as of and for the year ended December 31, 2004 have been reclassified to conform to the consolidated financial statements as of and for the year ended December 31, 2005.

-18-


 

3. CASH AND CASH EQUIVALENTS
                 
    2005     2004  
Cash and deposits in bank
  $ 48,107,316     $ 54,608,986  
Government bonds acquired under repurchase agreements
    47,963,226       19,215,153  
Corporate notes
    413,165       478,212  
 
           
 
               
 
  $ 96,483,707     $ 74,302,351  
 
           
4. SHORT-TERM INVESTMENTS, NET
                 
    2005     2004  
Agency bonds
  $ 14,607,694     $ 8,633,889  
Corporate bonds
    12,463,688       13,554,598  
Corporate issued asset-backed securities
    11,724,149       11,766,877  
Bond funds
    6,055,578       10,662,758  
Government bonds
    2,087,418       7,346,858  
Public-traded stocks
    349,218       168,299  
Corporate notes
    263,249       63,796  
Money market funds
    260,686       1,640,973  
Government bonds acquired under repurchase agreements
          249,449  
Commercial papers
          95,666  
 
           
 
    47,811,680       54,183,163  
Allowance for valuation
    (412,372 )     (75,212 )
 
           
 
               
 
  $ 47,399,308     $ 54,107,951  
 
           
 
               
Market value
  $ 49,137,413     $ 54,990,545  
 
           
TSMC entered into investment management agreements with three well-known financial institutions (fund managers) to manage its investment portfolios. In accordance with the investment guidelines and terms specified in these agreements, the securities invested by the fund managers cannot be below a pre-defined credit rating. As of December 31, 2005, TSMC’s investment portfolios managed by these fund managers aggregated to an original amount of US$1,200,000 thousand. The investment portfolios included securities such as agency bonds, corporate bonds, asset-backed securities, government bonds and others. Securities acquired with maturities less than three months from the date of purchase were reclassified as cash equivalents.
5. INVENTORIES, NET
                 
    2005     2004  
Finished goods
  $ 2,963,989     $ 3,526,036  
Work in process
    13,359,209       11,437,466  
Raw materials
    1,765,369       993,151  
Supplies and spare parts
    1,325,582       1,176,735  
 
           
 
    19,414,149       17,133,388  
Allowance for valuation
    (1,685,846 )     (1,577,451 )
 
           
 
               
 
  $ 17,728,303     $ 15,555,937  
 
           

-19-


 

6. LONG-TERM INVESTMENTS
                                 
    2005     2004  
            % of             % of  
    Carrying     Owner-     Carrying     Owner-  
    Amount     ship     Amount     ship  
Equity method
                               
Vanguard International Semiconductor Corporation (VIS)
  $ 5,419,747       27     $ 5,401,982       28  
Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)
    4,215,200       32       3,290,888       32  
VisEra Holding Company (VisEra Holding)
    652,477       50              
GUC (Note 2)
                391,626       47  
VisEra
                59,116       25  
 
                           
 
    10,287,424               9,143,612          
 
                           
Cost method
                               
Common stocks
                               
Publicly traded stocks
    60,177             71,832        
Non-publicly traded stocks
    1,006,203             1,226,499        
Preferred stocks
    1,963,971             1,677,865        
Funds
    334,990             290,134        
 
                           
 
    3,365,341               3,266,330          
 
                           
Long-term bonds
                               
Government bonds
    9,922,937               10,260,481          
Corporate bonds
                               
Taiwan Power Company
    3,263,348               915,276          
Nan Ya Plastics Corporation
    2,150,842               407,526          
China Steel Corporation
    1,010,532               2,978,804          
Formosa Petrochemical Corporation
    791,963               202,595          
Chinese Petroleum Corporation
    705,436                        
Far Eastone Telecommunication Co., Ltd.
    300,026                        
Formosa Plastics Corporation
    268,855               405,485          
Formosa Chemical & Fiber Corporation
    134,369                        
 
                           
 
    18,548,308               15,170,167          
 
                           
 
                               
Other investments
    10,227,000               10,521,740          
 
                           
 
                               
 
  $ 42,428,073             $ 38,101,849          
 
                           
For the years ended December 31, 2005 and 2004, net equity in earnings recognized from the equity method investees was NT$1,433,226 thousand and NT$2,094,137 thousand, respectively. The carrying amounts of the investments accounted for under the equity method and the related equity in earnings of equity method investees were determined based on the audited financial statements of the investees as of and for the same periods as the Company.
In November 2005, the Company transferred all of its shares in VisEra to VisEra Holding Company, an investee accounted for using the equity method of TSMC Partners, due to the changes in investment structure.

-20-


 

Other investments consisted of the following structured time-deposits:
                                 
    Principal     Interest     Range of        
    Amount     Receivable     Interest Rates     Maturity Date  
December 31, 2005
                               
 
                               
Step-up callable deposits
                               
Foreign banks
  $ 3,000,000     $ 8,145       1.40%-1.50 %   Jun. 2007-Oct. 2007
Callable range accrual deposits
                               
Foreign banks
    7,227,000       9,951     (See below)   Sep. 2009-Jan. 2010
 
                           
 
                               
 
  $ 10,227,000     $ 18,096                  
 
                           
 
                               
December 31, 2004
                               
 
                               
Step-up callable deposits
                               
Domestic banks
  $ 2,000,000     $ 7,681       2.05%-2.20 %   Jul. 2007-Aug. 2007
Foreign banks
    2,138,340       14,054       1.44%-4.75 %   Jun. 2007-Aug. 2007
Callable range accrual deposits
                               
Foreign banks
    6,383,400       30,751     (See below)   Sep. 2009-Dec. 2009
 
                           
 
                               
 
  $ 10,521,740     $ 52,486                  
 
                           
The interest rate of the step-up callable deposits is determined by the Company and the related banks. The amount of interest earned by the Company for the callable range accrual deposits is based on a pre-defined range as determined by the 3-month or 6-month LIBOR plus an agreed upon rate ranging between 2.10% and 3.45%. Based on the terms of the deposits, if the 3-month or 6-month LIBOR moves outside of the pre-defined range, the interest paid to the Company is at a fixed rate between zero and 1.5%. Under the terms of the contracts, the bank has the right to cancel the contracts prior to the maturity date.
As of December 31, 2005 and 2004, deposits that reside in banks located in Hong Kong amounted to NT$2,628,000 thousand and NT$2,553,360 thousand, respectively; those that reside in banks located in Singapore amounted to NT$657,000 thousand and NT$638,340 thousand, respectively.
7. PROPERTY, PLANT AND EQUIPMENT
Accumulated depreciation at December 31, 2005 and 2004 consisted of the following:
                 
    2005     2004  
Land improvements
  $ 206,408     $ 172,484  
Buildings
    46,560,127       38,160,322  
Machinery and equipment
    344,431,001       287,204,368  
Office equipment
    6,862,502       5,683,577  
Leased assets
    64,569       33,115  
 
           
 
               
 
  $ 398,124,607     $ 331,253,866  
 
           
There was no capitalized interest for the year ended December 31, 2005. Interest expense for the year ended December 31, 2004 was NT$1,732,576 thousand (before deducting the amount capitalized of NT$278,334 thousand); the rates used for calculating the capitalized interest ranged from 1.89% to 2.89%.

-21-


 

8. DEFERRED CHARGES, NET
Deferred charges, net at December 31, 2005 and 2004 consisted of the following:
                 
    2005     2004  
Technology license fees
  $ 5,099,227     $ 6,534,899  
Software and system design costs
    1,737,384       2,213,636  
Other
    169,639       243,917  
 
           
 
               
 
  $ 7,006,250     $ 8,992,452  
 
           
9. SHORT-TERM BANK LOANS
Short-term bank loans at December 31, 2005 and 2004 consisted of the following:
                 
    2005     2004  
Unsecured loans:
               
US$10,000 thousand and US$12,000 thousand in 2005 and 2004, respectively, repayable by June 2006, annual interest at 4.77% and 2.80% in 2005 and 2004, respectively
  $ 328,500     $ 383,004  
 
           
10. LONG-TERM BANK LOANS
Long-term bank loans at December 31, 2005 and 2004 consisted of the following:
                 
    2005     2004  
Unsecured loan:
               
US$60,000 thousand, repaid before original maturities, annual interest at 2.475% in 2004
  $     $ 1,915,020  
Secured loan:
               
US$20,000 thousand, repayable by November 2010 in 5 payments, annual interest at 5.01%
    656,914        
Science Park Administration (SPA) SOC loan (GUC, Note 2), repayable by July 2008 in 20 payments, interest-free
    7,658        
SPA DSP loan (GUC, Note 2), repayable by April 2007 in 20 payments, interest-free
    4,057        
 
           
 
    668,629       1,915,020  
Current portion
    (5,489 )      
 
           
 
               
 
  $ 663,140     $ 1,915,020  
 
           
As of December 31, 2005, assets of TSMC-Shanghai with a carrying amount aggregating NT$5,511,456 thousand (RMB1,354,166 thousand) were provided as collateral for the aforementioned secured loan. Pursuant to the loan agreement, the annual audited financial statements of TSMC-Shanghai must maintain certain financial covenants. As of December 31, 2005, TSMC-Shanghai did not violate those financial covenants.

-22-


 

As of December 31, 2005, future principal repayments for the Company’s long-term bank loans were as follows:
         
Year of Repayment   Amount  
2006
  $ 5,489  
2007
    4,137  
2008
    133,471  
2009
    262,766  
2010
    262,766  
 
     
 
       
 
  $ 668,629  
 
     
11. BONDS PAYABLE
Bonds payable at December 31, 2005 and 2004 consisted of the following:
                 
    2005     2004  
Domestic unsecured bonds:
               
Issued in December 2000 and repayable in December 2005 and 2007 in two installments, 5.25% and 5.36% interest payable annually, respectively
  $ 4,500,000     $ 15,000,000  
Issued in January 2002 and repayable in January 2007, 2009 and 2012 in three installments, 2.60%, 2.75% and 3.00% interest payable annually, respectively
    15,000,000       15,000,000  
 
           
 
    19,500,000       30,000,000  
Current portion
          (10,500,000 )
 
           
 
               
 
  $ 19,500,000     $ 19,500,000  
 
           
As of December 31, 2005, future principal repayments for the Company’s bonds were as follows:
         
Year of Repayment   Amount  
2007
  $ 7,000,000  
2009
    8,000,000  
2010 and thereafter
    4,500,000  
 
     
 
       
 
  $ 19,500,000  
 
     
12. OTHER LONG-TERM PAYABLES
Other long-term payables at December 31, 2005 and 2004 consisted of the following:
                 
    2005     2004  
Payables for acquisition of property, plant and equipment (Note 23k)
  $ 7,037,787     $ 6,030,007  
Payables for royalties
    2,380,172       3,440,313  
 
           
 
    9,417,959       9,470,320  
 
Current portion (classified under accrued expenses and other current liabilities)
    (869,072 )     (1,505,345 )
 
           
 
               
 
  $ 8,548,887     $ 7,964,975  
 
           

-23-


 

The payables for royalties were primarily attributable to several license arrangements that the Company entered into for certain semiconductor-related patents.
As of December 31, 2005, future payments for the Company’s other long-term payables were as follows:
         
Year of Payment   Amount  
2006
  $ 869,072  
2007
    459,900  
2008
    262,800  
2009
    262,800  
2010
    262,800  
2011 and thereafter
    7,300,587  
 
     
 
       
 
  $ 9,417,959  
 
     
13. PENSION PLAN
The Labor Pension Act (the “Act”) became effective on July 1, 2005 and the pension mechanism under the Act is deemed a defined contribution plan. The employees who were subject to the Labor Standards Law prior to July 1, 2005 were allowed to choose to be subject to the pension mechanism under the Act or continue to be subject to the pension mechanism under the Labor Standards Law. For those employees who were subject to the Labor Standards Law prior to July 1, 2005 and still work for the same company after July 1, 2005 and have chosen to be subject to the pension mechanism under the Act, their seniority as of July 1, 2005 shall be maintained. The Act prescribes that the rate of contribution by an employer to employees’ pension accounts per month shall not be less than 6% of each employee’s monthly salary. Furthermore, TSMC-Shanghai is required to make contributions to a state-managed retirement plan at a certain ratio of the monthly basic salary of its local employees. Pursuant to the aforementioned Act and regulation, the Company made monthly contributions and recognized pension costs of NT$280,317 thousand and NT$7,503 thousand for the years ended December 31, 2005 and 2004, respectively.
TSMC and GUC have defined benefit plans under the Labor Standards Law that provide benefits based on an employee’s length of service and average monthly salary prior to retirement. TSMC and GUC contribute an amount equal to 2% of salaries paid each month to their respective pension fund (the Funds). The Funds are administered by pension fund monitoring committees and deposited in the committees’ name in the Central Trust of China.
Pension information on the defined benefit plans is summarized as follows:
  a.   Components of net periodic pension cost for the year
                 
    2005     2004  
Service cost
  $ 470,886     $ 632,594  
Interest cost
    163,854       128,315  
Projected return on plan assets
    (49,843 )     (41,925 )
Amortization
    8,345       8,300  
 
           
 
               
Net periodic pension cost
  $ 593,242     $ 727,284  
 
           

-24-


 

  b.   Reconciliation of funded status of the plans and accrued pension cost at December 31, 2005 and 2004
                 
    2005     2004  
Benefit obligation
               
Vested benefit obligation
  $ 62,302     $ 67,104  
Nonvested benefit obligation
    3,364,333       2,704,251  
 
           
Accumulated benefit obligation
    3,426,635       2,771,355  
Additional benefits based on future salaries
    2,550,307       2,132,721  
 
           
Projected benefit obligation
    5,976,942       4,904,076  
Fair value of plan assets
    (1,691,603 )     (1,447,540 )
 
           
Funded status
    4,285,339       3,456,536  
Unrecognized net transitional obligation
    (126,969 )     (132,791 )
Unrecognized net loss
    (684,429 )     (222,549 )
 
           
 
               
Accrued pension cost
  $ 3,473,941     $ 3,101,196  
 
           
 
               
Vested benefit
  $ 67,752     $ 76,003  
 
           
 
               
c.      Actuarial assumptions
               
 
               
Discount rated used in determining present values
    2.75%-3.50 %     3.25 %
Future salary increase rate
    2.00%-3.00 %     3.00 %
Expected rate of return on plan assets
    2.50%-2.75 %     3.25 %
 
               
d.      Contributions to the Funds for the year
  $ 226,181     $ 226,339  
 
           
 
               
e.      Payments from the Funds for the year
  $ 8,419     $ 1,446  
 
           
14. INCOME TAX
  a.   A reconciliation of income tax expense based on income before income tax at the statutory rate and current income tax expense before tax credits is as follows:
                 
    2005     2004  
Income tax expense based on income before income tax at statutory rate
  $ 23,658,498     $ 23,840,497  
Tax-exempt income
    (12,243,435 )     (14,712,500 )
Temporary and permanent differences
    1,123,735       658,164  
 
           
 
               
Current income tax expense before income tax credits
  $ 12,538,798     $ 9,786,161  
 
           
  b.   Income tax expense (benefit) consisted of the following:
                 
    2005     2004  
Current income tax expense before income tax credits
  $ 12,538,798     $ 9,786,161  
Additional tax at 10% on unappropriated earnings
    1,494,811       823,932  
Income tax credits
    (10,133,848 )     (10,470,862 )
Other income tax adjustment
    117,314       555,736  
Net change in deferred income tax assets
               
Net operating loss carryforwards
    690,615       1,652,983  
Investment tax credits
    1,965,878       (234,690 )
Temporary differences
    (2,402,406 )     (1,131,331 )
Adjustment in valuation allowance
    (3,640,583 )     (1,345,355 )
 
           
 
               
Income tax expense (benefit)
  $ 630,579     $ (363,426 )
 
           

-25-


 

  c.   Net deferred income tax assets at December 31, 2005 and 2004 consisted of the following:
                 
    2005     2004  
Current deferred income tax assets, net
               
Investment tax credits
  $ 7,033,621     $ 8,849,000  
Temporary differences
    454,052       319,717  
Net operating loss carryforwards
    15,825        
Valuation allowance
    (354,192 )     (250,731 )
 
           
 
               
 
  $ 7,149,306     $ 8,917,986  
 
           
 
               
Non-current deferred income tax assets, net
               
Investment tax credits
  $ 17,004,324     $ 17,035,584  
Net operating loss carryforwards
    6,261,469       6,735,080  
Temporary differences
    (5,640,477 )     (7,760,152 )
Valuation allowance
    (10,836,898 )     (14,360,533 )
 
           
 
               
 
  $ 6,788,418     $ 1,649,979  
 
           
As of December 31, 2005, the net operating loss carryforwards pertained to WaferTech, TSMC Development, TSMC Technology and GUC would expire at various dates through 2024.
  d.   Integrated income tax information:
The balance of the imputation credit account of TSMC as of December 31, 2005 and 2004 was NT$20,087 thousand and zero, respectively.
The expected and actual creditable ratio of TSMC for distribution of earnings of 2005 and 2004 was 0.02% and 0.11%, respectively.
The imputation credit allocated to the shareholders is based on its balance as of the date of dividend distribution. The expected creditable ratio may change when the actual distribution of the imputation credits is made.
  e.   TSMC’s earnings generated prior to December 31, 1997 have been fully appropriated.
 
  f.   As of December 31, 2005, investment tax credits of TSMC and GUC consisted of the following:
                                 
            Total     Remaining        
            Creditable     Creditable     Expiry  
Law   Item     Amounts     Amounts     Year  
Statute for Upgrading Industries
  Purchase of machinery and equipment   $ 134,467     $       2005  
 
        4,886,592       171       2006  
 
            4,138,857       4,054,072       2007  
 
            11,001,974       11,001,974       2008  
 
            4,160,396       4,160,396       2009  
 
                           
 
                               
 
          $ 24,322,286     $ 19,216,613          
 
                           
(Continued)

-26-


 

                                 
            Total     Remaining        
            Creditable     Creditable     Expiry  
Law   Item     Amounts     Amounts     Year  
Statute for Upgrading Industries
  Research and development expenditures   $ 3,145,894     $       2005  
 
        1,809,841       20,404       2006  
 
            1,421,611       1,421,611       2007  
 
            1,647,252       1,647,252       2008  
 
            1,667,788       1,667,788       2009  
 
                           
 
                               
 
          $ 9,692,386     $ 4,757,055          
 
                           
 
                               
Statute for Upgrading Industries
  Personnel training   $ 29,448     $       2005  
 
            20,427       46       2006  
 
            26,962       26,962       2007  
 
            37,250       37,250       2008  
 
            19       19       2009  
 
                           
 
                               
 
          $ 114,106     $ 64,277          
 
                           
 
                               
Statute for Upgrading Industries
  Investments in important
technology-based enterprises
  $ 38,036     $       2005  
 
                           
  g.   The profits generated from the following expansion and construction projects of TSMC’s manufacturing plants are exempt from income tax:
         
    Tax-Exemption Period
Construction of Fab 8 - module B
    2002 to 2005  
Expansion of Fab 2 - modules A and B, Fab 3, Fab 4, Fab 5 and Fab 6
    2003 to 2006  
Construction of Fab 12
    2004 to 2007  
  h.   The tax authorities have examined income tax returns of TSMC through 2001.
15. LABOR COST, DEPRECIATION AND AMORTIZATION EXPENSES
                                                 
    Year Ended December 31  
    2005     2004  
            Classified as                     Classified as        
    Classified as     Operating             Classified as     Operating        
    Cost of Sales     Expenses     Total     Cost of Sales     Expenses     Total  
Labor cost
                                               
Salary
  $ 11,031,464     $ 6,703,584     $ 17,735,048     $ 10,719,632     $ 5,886,769     $ 16,606,401  
Labor and health insurance
    633,790       343,937       977,727       572,210       320,785       892,995  
Pension
    589,342       295,653       884,995       472,329       271,186       743,515  
Other
    770,906       551,924       1,322,830       430,777       531,876       962,653  
 
                                   
 
                                               
 
  $ 13,025,502     $ 7,895,098     $ 20,920,600     $ 12,194,948     $ 7,010,616     $ 19,205,564  
 
                                   
 
                                               
Depreciation
  $ 68,135,117     $ 3,250,651     $ 71,385,768     $ 61,703,792     $ 2,563,408     $ 64,267,200  
 
                                   
Amortization
  $ 1,766,702     $ 2,574,566     $ 4,341,268     $ 2,496,827     $ 3,052,160     $ 5,548,987  
 
                                   

-27-


 

16. SHAREHOLDERS’ EQUITY
TSMC has issued a total of 864,194 thousand ADSs which are traded on the NYSE as of December 31, 2005. The number of common shares represented by the ADSs is 4,320,969 thousand (one ADS represents five common shares).
Capital surplus can only be used to offset a deficit under the Company Law. However, the capital surplus generated from donations and the excess of the issue 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 restricted to a certain percentage of the paid-in capital of TSMC.
As of December 31, 2005 and 2004, the capital surplus consisted of the following:
                 
    2005     2004  
From merger
  $ 24,003,546     $ 24,003,546  
Additional paid-in capital
    23,254,234       23,051,675  
From convertible bonds
    9,360,424       9,360,424  
From treasury stock transactions
    306,868       205  
From long-term investments
    192,759       121,354  
Donations
    55       55  
 
           
 
               
 
  $ 57,117,886     $ 56,537,259  
 
           
TSMC’s Articles of Incorporation as revised on May 10, 2005 provide that, when allocating the net profits for each fiscal year, TSMC shall first offset its losses in previous years and then set aside the following items accordingly:
  a.   Legal capital reserve at 10% of the profits left over, until the accumulated legal capital reserve has equaled TSMC’s total 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 supervisors and bonus to employees of TSMC equal to not more than 0.3% and not less than 1% of the remainder, respectively. Directors who also serve as executive officers of TSMC are not entitled to receive the bonus to directors and supervisors. TSMC may issue stock bonuses to employees of an affiliated company meeting the conditions set by the Board of Directors or, by the person duly authorized by the Board of Directors;
 
  d.   Any balance left over shall be allocated according to the resolution of the shareholders’ meeting.
TSMC’s Articles of Incorporation also stipulate that profits of TSMC 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 however, the ratio for stock dividend shall not exceed 50% of total distribution.
Any appropriations of the net profits are recorded in the financial statement in the year of shareholder approval.
The appropriation for legal capital reserve shall be made until the reserve equals TSMC’s paid-in capital. The reserve can 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 TSMC has no unappropriated earnings and the reserve balance has exceeded 50% of the paid-in capital. The Company Law also prescribes that, when the reserve has reached 50% of the paid-in capital, up to 50% of the reserve may be transferred to capital.

-28-


 

A special capital reserve equivalent to the net debit balance of the other components of shareholder’s equity (for example, unrealized loss on long-term investments and cumulative translation adjustments, but excluding treasury stock), shall be made from unappropriated earnings pursuant to existing regulations promulgated by the Securities and Futures Bureau (SFB). Any special capital reserve appropriated may be reversed to the extent that the net debit balance reverses.
TSMC’s appropriations of earnings for 2004 and 2003 had been approved in the shareholders’ meetings held on May 10, 2005 and May 11, 2004, respectively. The appropriations and dividend per share were as follows:
                                 
                    Dividend Per Share  
    Appropriation of Earnings     (NT$)  
    For Fiscal     For Fiscal     For Fiscal     For Fiscal  
    Year 2004     Year 2003     Year 2004     Year 2003  
Legal capital reserve
  $ 8,820,201     $ 4,725,870                  
Special capital reserve
    2,226,427       (68,945 )                
Employees’ profit sharing — in cash
    3,086,215       681,628                  
Employees’ profit sharing — in stock
    3,086,215       2,726,514                  
Cash dividends to preferred shareholders
          184,493     $     $ 0.35  
Cash dividends to common shareholders
    46,504,097       12,159,971       2.00       0.60  
Stock dividends to common shareholders
    11,626,024       28,373,267       0.50       1.41  
Bonus to directors and supervisors
    231,466       127,805                  
 
                           
 
                               
 
  $ 75,580,645     $ 48,910,603                  
 
                           
The amounts of the above appropriations of earnings for 2004 and 2003 are consistent with the resolutions of the meetings of the Board of Directors held on February 22, 2005 and February 17, 2004, respectively. However, the Company Law prescribes that TSMC, as a holder of treasury stock shall not participate in the appropriations of earnings. Therefore, the actual cash dividend per share and stock dividend per share are slightly more than those in the aforementioned resolutions. If the above bonus to employee, directors and supervisors had been paid entirely in cash and charged against earnings for 2004 and 2003, the after tax basic earnings per share for the years ended December 31, 2004 and 2003 would have decreased from NT$3.97 to NT$3.70 and NT$2.33 to NT$2.15, respectively. The shares distributed as a bonus to employees represented 1.33% and 1.35% of TSMC’s total outstanding common shares as of December 31, 2004 and 2003, respectively.
As of January 12, 2006, the Board of Directors of TSMC has not resolved the appropriation for earnings of 2005.
The above information about the appropriations of bonus to employees, directors and supervisors is available at Market Observation System website.
Under the Integrated Income Tax System that became effective on January 1, 1998, the R.O.C. resident shareholders are allowed a tax credit for their proportionate share of the income tax paid by TSMC on earnings generated since January 1, 1998.

-29-


 

17.   STOCK-BASED COMPENSATION PLANS
 
    TSMC’s Employee Stock Option Plans, consisting of TSMC 2005 Plan, TSMC 2003 Plan and TSMC 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 TSMC 2005 Plan, TSMC 2003 Plan and TSMC 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 TSMC or any of its domestic or foreign subsidiaries, in which TSMC’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 TSMC’s common shares listed on the TSE on the grant date.
 
    Options that had never been granted or had been granted and subsequently cancelled under the TSMC 2003 Plan and TSMC 2002 Plan were expired as of December 31, 2005.
 
    Information about TSMC’s outstanding stock options for the years ended December 31, 2005 and 2004 was as follows:
                 
            Weighted-  
            Average  
    Number of     Exercise  
    Options     Prices  
    (in Thousands)     (NT$)  
Year ended December 31, 2005
               
 
               
Balance, beginning of year
    64,367     $ 40.5  
Options granted
    14,864       48.4  
Options exercised
    (6,837 )     39.6  
Options cancelled
    (4,636 )     44.1  
 
             
 
               
Balance, end of year
    67,758       42.1  
 
             
 
               
Year ended December 31, 2004
               
 
               
Balance, beginning of year
    49,357       43.0  
Options granted
    20,400       47.3  
Options exercised
    (87 )     41.8  
Options cancelled
    (5,303 )     45.9  
 
             
 
               
Balance, end of year
    64,367       44.1  
 
             
    The numbers of outstanding options and exercise prices have been adjusted to reflect the appropriations of dividends in accordance with the plans.

- 30 -


 

    As of December 31, 2005, information about TSMC’s outstanding and exercisable options was as follows:
                                         
    Options Outstanding     Options Exercisable  
            Weighted-                      
            average     Weighted-             Weighted-  
Range of   Number of     Remaining     average     Number of     average  
Exercise   Options (in     Contractual     Exercise     Options (in     Exercise  
Price (NT$)   Thousands)     Life (Years)     Price (NT$)     Thousands)     Price (NT$)  
$29.9-$42.1
    45,787       7.10     $ 38.73       27,143     $ 38.59  
$47.0-$54.5
    21,971       8.82       49.20       327       54.50  
 
                                   
 
                                       
 
    67,758                       27,470          
 
                                   
    GUC’s Employee Stock Option Plans, consisting of GUC 2003 Plan and GUC 2002 Plan, were approved by its Board of Directors on January 23, 2003 and July 1, 2002, respectively. The maximum number of options authorized to be granted under the GUC 2003 Plan and GUC 2002 Plan was 7,535 and 5,000, respectively, with each option eligible to subscribe for one thousand common shares when exercisable. The options may be granted to qualified employees of GUC. The options of all the plans are valid for six years and exercisable in accordance with the plans subsequent to the second anniversary of the grant date. As of December 31, 2005, all of the options under the aforementioned plans had been granted or were expired.
 
    Moreover, GUC 2004 Plan was approved by the SFB on August 16, 2004 to grant a maximum of 2,500 options, with each option eligible to subscribe for one thousand common shares when exercisable. The options may be granted to qualified employees of GUC or any of its subsidiaries. The options of GUC 2004 Plan are valid for six years and exercisable in accordance with the plan subsequent to the second anniversary of the grant date.
 
    Information about GUC’s outstanding stock options for the years ended December 31, 2005 and 2004 was as follows:
                 
            Weighted-  
            Average  
    Number of     Exercise  
    Options     Prices (NT$)  
Year ended December 31, 2005
               
 
               
Balance, beginning of year
    7,889     $ 10.50  
Options granted
    2,499       10.96  
Options exercised
    (2,641 )     10.50  
Options cancelled
    (615 )     10.57  
 
             
 
               
Balance, end of year
    7,132       10.66  
 
             
 
               
Year ended December 31, 2004
               
 
               
Balance, beginning of year
    7,058       10.50  
Options granted
    831       10.50  
 
             
 
               
Balance, end of year
    7,889       10.50  
 
             

- 31 -


 

    As of December 31, 2005, information about GUC’s outstanding and exercisable options was as follows:
                                         
    Options Outstanding     Options Exercisable  
            Weighted-                      
            average     Weighted-             Weighted-  
Range of           Remaining     average             average  
Exercise   Number of     Contractual     Exercise     Number of     Exercise  
Price (NT$)   Options     Life (Years)     Price (NT$)     Options     Price (NT$)  
$10.50-$10.96
    7,132       2.58-5.75       $10.66       3,890       $10.50  
 
                                   
    No compensation cost was recognized under the intrinsic value method for the years ended December 31, 2005 and 2004 for TSMC and GUC. Had the Company used the fair value based method (based on the Black-Scholes model) to evaluate the options granted after January 1, 2004, the assumptions and pro forma results of the Company for the years ended December 31, 2005 and 2004 would have been as follows:
                     
        2005   2004
Assumptions:
                   
TSMC
  Expected dividend yield   1.00%-3.44%   1.00%
 
  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
 
                   
GUC
  Expected dividend yield            
 
  Expected volatility   22.65%-28.02%   38.74%-41.74%
 
  Risk free interest rate   2.56%   2.56%
 
  Expected life   6 years   6 years
 
                   
Net income attributable to shareholders of the parent:                
As reported
      $ 93,575,035     $ 92,316,115  
Pro forma
        93,456,533       92,257,355  
 
                   
Consolidated earnings per share (EPS) — after income tax (NT$):                
Basic EPS as reported
      $ 3.79     $ 3.73  
Pro forma basic EPS
        3.79       3.73  
Diluted EPS as reported
        3.79       3.73  
Pro forma diluted EPS
        3.78       3.73  
    The estimated weighted average fair value per unit of option granted during the years ended December 31, 2005 and 2004 under the TSMC plans was NT$17.69 and NT$19.73, respectively. The estimated weighted average fair value per unit of option (eligible to subscribe for one thousand common shares) granted during the years ended December 31, 2005 and 2004 under the GUC plans was NT$3.32 thousand and NT$3.86 thousand, respectively.

- 32 -


 

18.   TREASURY STOCK (COMMON STOCK)
(Shares in Thousands)
                                 
            Increase                
    Beginning     /Stock             Ending  
    Shares     Dividend     Disposal     Shares  
Year ended December 31, 2005
                               
 
                               
Reclassification of parent company stock held by subsidiaries from long-term investments
    45,521       2,242       14,825       32,938  
 
                       
 
                               
Year ended December 31, 2004
                               
 
                               
Reclassification of parent company stock held by subsidiaries from long-term investments
    40,597       5,676       752       45,521  
Repurchase under share buyback plan
          124,720       124,720        
 
                       
 
                               
 
    40,597       130,396       125,472       45,521  
 
                       
    Proceeds from disposal of treasury stock for the years ended December 31, 2005 and 2004 were NT$899,489 thousand and NT$39,906 thousand, respectively. As of December 31, 2005 and 2004, the book value of the treasury stock was NT$918,075 thousand and NT$1,595,186 thousand, respectively; the market value was NT$2,047,126 thousand and NT$2,241,009 thousand, respectively. TSMC’s stocks held by its subsidiaries are treated as treasury stock and the holders are entitled to the rights of shareholders, except that starting from June 24, 2005, pursuant to the revised Company Law, the holders are no longer entitled to the right to vote.
 
    TSMC held a special meeting of the Board of Directors and approved a share buyback plan to repurchase its common shares listed on the TSE during the period from March 24, 2004 to May 23, 2004. TSMC repurchased 124,720 thousand common shares for a total cost of NT$7,059,798 thousand. All the treasury stock repurchased under the buyback plan was retired on August 16, 2004.
 
19.   CONSOLIDATED EARNINGS PER SHARE
 
    Consolidated EPS is computed as follows:
                                         
                    Number of        
                    Shares        
    Amounts (Numerator)     (Denominator)     Consolidated EPS (NT$)  
    Before Tax     After Tax     (in Thousands)     Before Tax     After Tax  
Year ended December 31, 2005
                                       
 
                                       
Consolidated basic EPS
                                       
Income available to shareholders of the parent
  $ 94,205,614     $ 93,575,035       24,679,947     $ 3.82     $ 3.79  
 
                                   
Effect of dilutive potential common stock — stock options
                13,165                  
 
                                 
 
                                       
Consolidated diluted EPS
                                       
Income available to shareholders of the parent (including the effect of dilutive potential common stock)
  $ 94,205,614     $ 93,575,035       24,693,112     $ 3.82     $ 3.79  
 
                             
(Continued)

- 33 -


 

                                         
                    Number of        
                    Shares        
    Amounts (Numerator)     (Denominator)     Consolidated EPS (NT$)  
    Before Tax     After Tax     (in Thousands)     Before Tax     After Tax  
Year ended December 31, 2004
                                       
 
                                       
Consolidated basic EPS
                                       
Income available to shareholders of the parent
  $ 91,952,689     $ 92,316,115       24,717,531     $ 3.72     $ 3.73  
 
                                   
Effect of dilutive potential common stock — stock options
                6,484                  
 
                                 
 
                                       
Consolidated diluted EPS
                                       
Income available to shareholders of the parent (including the effect of dilutive potential common stock)
  $ 91,952,689     $ 92,316,115       24,724,015     $ 3.72     $ 3.73  
 
                             
20.   RELATED PARTY TRANSACTIONS
    The Company engages in business transactions with the following related parties:
  a.   Industrial Technology Research Institute (ITRI), the chairman of TSMC is one of its directors
 
  b.   Philips, a major shareholder of TSMC
 
  c.   Investees of the TSMC
 
      VIS (accounted for using equity method)
SSMC (accounted for using equity method)
GUC (with controlling financial interest and was consolidated with significant transactions eliminated in 2005)
 
  d.   Indirect investee
 
      VisEra, originally an investee over which TSMC had control; starting from November 2005, VisEra became an indirect investee accounted for using the equity method due to the changes in investment structure.
    Transactions with the aforementioned parties, excluding those disclosed in other notes, are summarized as follows:
                                 
    2005     2004  
    Amount     %     Amount     %  
For the year
                               
 
                               
Sales
                               
Philips
  $ 3,298,770       1     $ 5,463,565       2  
GUC
                371,546        
Others
    492,683             440,736        
 
                       
 
                               
 
  $ 3,791,453       1     $ 6,275,847       2  
 
                       
(Continued)

- 34 -


 

                                 
    2005     2004  
    Amount     %     Amount     %  
Purchases
                               
SSMC
  $ 5,729,672       4     $ 5,869,123       4  
VIS
    4,142,457       3       9,169,602       7  
 
                       
 
                               
 
  $ 9,872,129       7     $ 15,038,725       11  
 
                       
 
                               
Manufacturing expenses — technical assistance fee (Note 23a)
                               
Philips
  $ 581,059           $ 907,047       1  
 
                       
 
                               
General and administrative expenses — rental expenses
                               
GUC
  $           $ 13,186        
 
                       
 
                               
Research and development expenses
                               
GUC
  $           $ 11,688        
 
                       
 
                               
Proceeds from disposal of property, plant and equipment
                               
VisEra
  $ 534,279       60     $        
VIS
                33,974       2  
 
                       
 
                               
 
  $ 534,279       60     $ 33,974       2  
 
                       
 
                               
Non-operating income and gains
                               
SSMC (primarily for technical service income, see Note 23e)
  $ 316,243       4     $ 364,505       6  
VisEra
    308,071       4       28,917        
VIS (primarily for technical service income, see Note 23j)
    210,720       3       117,760       2  
 
                       
 
                               
 
  $ 835,034       11     $ 511,182       8  
 
                       
 
                               
At end of year
                               
 
                               
Receivables
                               
Philips
  $ 573,565       83     $ 581,487       89  
VisEra
    99,401       14              
ITRI
    20,300       3       16,453       2  
GUC
                56,437       9  
 
                       
 
                               
 
  $ 693,266       100     $ 654,377       100  
 
                       
 
                               
Other receivables
                               
VisEra
  $ 374,202       63     $ 30,278       21  
SSMC
    149,251       25       63,701       45  
VIS
    74,457       12       47,599       34  
 
                       
 
                               
 
  $ 597,910       100     $ 141,578       100  
 
                       
(Continued)

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    2005     2004  
    Amount     %     Amount     %  
Payables
                               
Philips
  $ 693,956       40     $ 469,494       21  
VIS
    563,240       32       1,533,938       69  
SSMC
    485,873       28       207,794       10  
GUC
                6,589        
 
                       
 
                               
 
  $ 1,743,069       100     $ 2,217,815       100  
 
                       
 
                               
Other long-term payables
                               
Philips
  $ 1,100,475       100     $ 2,317,972       100  
 
                       
 
                               
Deferred credits
                               
VisEra
  $ 186,525       14     $        
 
                       
    The terms of sales to related parties were not significantly different from those to third parties. For other related party transactions, prices were determined in accordance with related contractual agreements.
 
    The Company deferred the gains (classified under deferred credits) derived from sales of property, plant and equipment to VisEra, and then recognized such gains (classified under non-operating income and gains) over the depreciable lives of the disposed assets.
 
21.   SIGNIFICANT LONG-TERM LEASES
 
    TSMC and GUC lease parcels of land from the SPA. These operating leases expire on various dates from March 2008 to December 2021 and can be renewed upon expiration.
 
    TSMC-NA leases its office premises and certain equipment under non-cancelable operating leases. TSMC-Japan has also entered into lease agreements for its office premises. These operating leases expire between 2010 and 2011 and can be renewed upon expiration.
 
    As of December 31, 2005, future lease payments were as follows:
         
Year   Amount  
2006
  $ 371,165  
2007
    361,511  
2008
    338,995  
2009
    333,727  
2010
    267,089  
2011 and thereafter
    1,129,301  
 
     
 
  $ 2,801,788  
 
     
22.   SETTLEMENT INCOME
 
    TSMC, TSMC-NA and WaferTech filed a series of lawsuits in late 2003 and 2004 against Semiconductor Manufacturing International Corporation (“SMIC”), SMIC (Shanghai) and SMIC Americas. The lawsuits alleged that SMIC companies infringed multiple TSMC patents and misappropriated TSMC’s trade secrets. These suits were settled out of court on January 30, 2005. As part of the settlement, SMIC shall pay TSMC US$175 million over six years to resolve TSMC’s claims.

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23.   SIGNIFICANT COMMITMENTS AND CONTINGENCIES
 
    The significant commitments and contingencies of the Company as of December 31, 2005 were as follows:
  a.   On June 20, 2004, TSMC and Philips amended the Technical Cooperation Agreement, which was originally signed on May 12, 1997. The amended Technical Cooperation Agreement is for five years beginning from January 1, 2004. Upon expiration, this amended Technical Cooperation Agreement will be terminated and will not be automatically renewed; however, the patent cross license arrangement between TSMC and Philips will survive the expiration of the amended Technical Cooperation Agreement. Under this amended Technical Cooperation Agreement, TSMC will pay Philips royalties based on a fixed amount mutually agreed-on, rather than under certain percentage of TSMC’s annual net sales. TSMC and Philips agreed to cross license the patents owned by each party. TSMC also obtained through Philips a number of cross patent licenses
 
  b.   Under a technical cooperation agreement with ITRI, TSMC shall reserve and allocate up to 35% of certain of its production capacity for use by the Ministry of Economic Affairs (MOEA) or any other party designated by the MOEA. The term of this agreement is for five years beginning from January 1, 1987 and is automatically renewed for successive periods of five years unless otherwise terminated by either party with one year prior notice. The agreement was automatically renewed in 1992 and 1997 and on January 1, 2002.
 
  c.   Under several foundry agreements, TSMC shall reserve a portion of its production capacity for certain major customers that have guarantee deposits with TSMC. As of December 31, 2005, TSMC had a total of US$87,660 thousand of guarantee deposits.
 
  d.   Under a Shareholders Agreement entered into with Philips and EDB Investments Pte Ltd. on March 30, 1999, the parties formed a joint venture company, SSMC, for the purpose of constructing an integrated circuit foundry in Singapore. TSMC’s equity interest in SSMC was 32%. TSMC and Philips committed to buy specific percentages of the production capacity of SSMC. TSMC and Philips are required, in the aggregate, to purchase up to 70% of SSMC’s full capacity, but TSMC alone is not required to purchase more than 28% of the annual installed capacity. If any party defaults on the commitment and the capacity utilization of SSMC falls below a specific percentage of its total capacity, the defaulting party is required to compensate SSMC for all related unavoidable costs.
 
  e.   TSMC provides technical services to SSMC under a Technology Cooperation Agreement (the Agreement) entered into on May 12, 1999. TSMC receives compensation for such services computed at a specific percentage of net selling price of all products sold by SSMC. The Agreement shall remain in force for ten years and may be automatically renewed for successive periods of five years each unless pre-terminated by either party under certain conditions.
 
  f.   Under a Technology Transfer Agreement (TTA) with National Semiconductor Corporation (National) entered into on June 27, 2000, TSMC shall receive payments for the licensing of certain technology to National. The agreement was to remain in force for ten years and could be automatically renewed for successive periods of two years thereafter unless either party gives notice for early termination under certain conditions. In January 2003, TSMC and National entered into a Termination Agreement whereby the TTA was terminated for convenience. Under the Termination Agreement, TSMC will be relieved of any further obligation to transfer any additional technology. In addition, TSMC granted National an option to request the transfer of certain technologies under the same terms and conditions as the terminated TTA. The option will expire in January 2008.
 
  g.   Beginning in 2001, TSMC entered into several licensing arrangements for certain semiconductor patents. The terms of the contracts vary with payments to be made in the form of royalties. TSMC has recorded the related amounts as a liability with the corresponding amounts recorded as deferred charges which are amortized and charged to cost of sales on a straight-line basis over the estimated life of the technology or the term of the contract, whichever is shorter.

- 37 -


 

  h.   In November 2002, TSMC entered into an Amended and Restated Joint Technology Cooperation Agreement with Philips, Freescale Semiconductor, Inc. and STMicroelectronics to jointly develop 90-nm to 65-nm advanced CMOS Logic and e-DRAM technologies. TSMC also agreed to align 0.12 micron CMOS Logic technology to enhance its foundry business opportunities. TSMC will contribute process technologies and share a portion of the costs associated with this joint development project. This agreement expired on December 31, 2005.
 
  i.   In December 2003, TSMC entered into a Technology Development and License Agreement with Freescale Semiconductor, Inc. to jointly develop 65-nm SOI (silicon on insulator) technology. TSMC will also license related 90-nm SOI technology from Freescale Semiconductor, Inc. Any intellectual properties arising out of the co-development project shall be jointly owned by the parties. In accordance with the agreement, TSMC will pay royalties to Freescale Semiconductor, Inc. and will share a portion of the costs associated with the joint development project.
 
  j.   TSMC provides a technology transfer to VIS under a Manufacturing License and Technology Transfer Agreement entered into on April 1, 2004. TSMC 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 TSMC certain products at prices as agreed by the parties.
 
  k.   TSMC-Shanghai entered into an agreement with a certain foreign company. In accordance with the agreement, TSMC-Shanghai is obligated to purchase certain property, plant and equipment at the agreed-upon price within the contract period. If the purchase is not completed, TSMC-Shanghai is obligated to compensate counterparty.
 
  l.   Amounts available under unused letters of credit as of December 31, 2005 were NT$6,480 thousand.
24.   ADDITIONAL DISCLOSURES
 
    Following are the additional disclosures required by the SFB for the Company and its investees:
  a.   Financing provided: Please see Table 1 attached;
 
  b.   Endorsement/guarantee provided: Please see Table 2 attached;
 
  c.   Marketable securities held: Please see Table 3 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 4 attached;
 
  e.   Acquisition of real estate properties at costs of at least NT$100 million or 20% of the paid-in capital: None;
 
  f.   Disposal of 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 5 attached;
 
  h.   Receivable from related parties amounting to at least NT$100 million or 20% of the paid-in capital: Please see Table 6 attached;
 
  i.   Names, locations, and related information of investees on which the Company exercises significant influence: Please see Table 7 attached;

- 38 -


 

  j.   Financial instrument transactions:
  1)   Derivative financial instruments
 
      The Company entered into derivative financial instrument transactions in the years ended December 31, 2005 and 2004 to manage exposures related to foreign exchange rate and interest rate fluctuations. Certain information on these contracts was as follows:
  a)   Outstanding forward exchange contracts as of December 31, 2005 and 2004:
                         
                    Contract
Financial                   Amount
Instruments   Currency   Maturity   (in Thousands)
December 31, 2005
                       
 
                       
Sell
  US$/NT$   Jan. 2006   US$ 60,000  
 
                       
December 31, 2004
                       
 
                       
Sell
  US$/NT$   Jan. 2005 to Mar. 2005   US$ 733,000  
Sell
  US$/EUR   Jan. 2005   US$ 159,081  
      As of December 31, 2005 and 2004, receivables resulted from forward exchange contracts (classified under current assets) aggregated NT$26,720 thousand and NT$392,534 thousand, respectively. As of December 31, 2004, payables resulted from forward exchange contracts (classified under current liabilities) aggregated NT$559 thousand.
  b)   Cross currency swap contracts
 
      Outstanding cross currency swap contracts as of December 31, 2005 and 2004 were as follows:
                         
                    Range of
    Contract Amount   Range of   Interest Rate
Maturity Date   (in Thousands)   Interest Rate Paid   Received
December 31, 2005
                       
 
                       
Jan. 2006 to Mar. 2006
  US$ 2,089,000       4.15%-4.54 %     0.02%-2.12 %
 
                       
December 31, 2004
                       
 
                       
January 2005 to June 2005
  US$ 1,420,000       1.28%-2.72 %     0.49%-1.17 %
      As of December 31, 2005 and 2004, receivables resulted from cross currency swap contracts (classified under current assets) were NT$1,119,905 thousand and NT$761,030 thousand, respectively.
 
  c)   Option contracts
 
      As of December 31, 2005, the Company did not have any outstanding foreign currency option contract. The Company did not enter into any foreign currency option contract in the year ended December 31, 2004.

- 39 -


 

      During the years ended December 31, 2005 and 2004, the net exchange gain or loss arising from forward exchange contracts, cross currency swap contracts and foreign currency option contracts was recognized in the “foreign exchange gain/loss, net” account and the difference in interest was recorded in interest income/expense.
 
  d)   Interest rate swap contracts
 
      The Company rescinded all interest rate swap contracts in the first quarter of 2005 before their original maturities. The rescission loss of NT$28,295 thousand was recognized in the “interest expense” account. There was no outstanding contract as of December 31, 2005.
 
      Outstanding contracts as of December 31, 2004 were as follows:
             
        Notional  
        Amount  
Contract Date   Period   (in Thousands)  
Sep. 2003
  Sep. 2003 to Dec. 2005   NT$500,000  
Oct. 2003
  Oct. 2003 to Dec. 2005     500,000  
Oct. 2003
  Oct. 2003 to Dec. 2005     500,000  
Oct. 2003
  Oct. 2003 to Dec. 2005     500,000  
Oct. 2003
  Oct. 2003 to Dec. 2005     500,000  
Nov. 2003
  Nov. 2003 to Dec. 2005     500,000  
  e)   Transaction risk
  i)   Credit risk. Credit risk represents the positive net settlement amount of those contracts with positive fair values at the balance sheet date. The positive net settlement amount represents the loss to be incurred by the Company if the counter-parties breached the contracts. The banks, which are the counter-parties to the foregoing derivative financial instruments, are reputable financial institutions. Management believes its exposure related to the potential default by those counter-parties is low.
 
  ii)   Market price risk. All derivative financial instruments are intended as hedges for fluctuations in foreign exchange rates and interest rates. Gains or losses from these hedging instruments are likely to be offset by gains or losses from the hedged items. Thus, market price risk is believed to be low.
 
  iii)   Cash flow risk and the amount and period of future cash needs.
As of December 31, 2005, the Company’s future cash needs for outstanding forward exchange contracts and cross currency swap contracts were as follows:
         
    Inflow   Outflow
Term   (In Thousands)   (In Thousands)
Within one year
  NT$71,820,892   US$2,149,000
      The Company has sufficient operating capital to meet the above cash needs. In addition, there will be corresponding cash inflow for the cash outflow. Therefore, the cash flow risk is low.

- 40 -


 

  2)   Fair values of financial instruments were as follows:
                                 
    2005   2004
    Carrying           Carrying    
    Amount   Fair Value   Amount   Fair Value
Non-derivative financial instruments
                               
 
                               
Assets
                               
Short-term investments, net
  $ 47,399,308     $ 49,137,413     $ 54,107,951     $ 54,990,545  
Long-term investments (securities with market price)
    34,273,328       39,678,791       31,165,721       34,265,072  
Liabilities
                               
Bonds payable (including current portion)
    19,500,000       19,924,923       30,000,000       30,607,341  
 
Derivative financial instruments
                               
 
                               
Assets (liabilities)
                               
Forward exchange contracts (sell)
    26,720       28,474       391,975       317,090  
Cross currency swap contracts
    1,119,905       789,903       761,030       760,012  
Interest rate swap contracts
                4,361       (22,714 )
      The above financial instruments do not include cash and cash equivalents, receivables, other financial assets, short-term bank loans, payables, and payable to contractors and equipment suppliers. The carrying amounts of the aforementioned financial instruments reported in the balance sheet approximate their fair values.
 
      The above financial instruments also exclude refundable deposits, guarantee deposits, long-term investments that do not have quoted market prices, long-term bank loans as well as other long-term payables. The future cash inflow and outflow of the deposits approximate their fair values. Some of the long-term investments do not have quoted market prices; therefore, fair values for those long-term investments are not shown above. The fair value of long-term bank loans with floating interest rates is their carrying amount. The fair value of long-term bank loans with fixed interest rates is the present value of expected cash flows discounted using the interest rate the Company may obtain for similar long-term bank loans. The fair value of other long-term payables is determined using the discounted value of expected cash flows, which approximates their carrying amount.
 
      Fair values of financial instruments were determined as follows:
  a)   Fair value of short-term and publicly traded long-term investments is based on quoted market prices.
 
  b)   Fair value of bonds payable is based on their quoted market price.
 
  c)   Fair value of derivative financial instruments is the amount receivable from or payable to the counter-party if the contracts were terminated on the balance sheet date.
      The fair values of some financial and non-financial instruments were not included in the fair values disclosed above. Accordingly, the sum of the fair values of the financial instruments listed above does not represent the fair value of the Company as a whole.
  k.   Information on investment in Mainland China
  1)   The name of the investee company in Mainland China, main businesses and products, its issued capital, method of investment, information on inflow or outflow of capital, percentage of ownership, equity in the net earnings or loss, ending balance, earnings distributed by the investee, and the limitation on investment: Please see Table 8 attached.

- 41 -


 

  2)   Significant direct or indirect transactions with the investee company, their 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 statements: Please see Table 9 attached.
  l.   Intercompany relationships and significant intercompany transactions: Please see Table 9 attached.
25.   SEGMENT FINANCIAL INFORMATION
  a.   Industry financial information
 
      The Company is engaged mainly in the manufacturing, selling, packaging and testing of integrated circuits. Therefore, the disclosure of industry financial information is not applicable to the Company.
 
  b.   Geographic information:
                                 
                    Adjustments        
    North America             and        
    and Others     Taiwan     Elimination     Consolidated  
2005
                               
 
                               
Sales to other than consolidated entities
  $ 152,517,793     $ 114,047,277     $     $ 266,565,070  
Sales among consolidated entities
    13,513,219       152,132,512       (165,645,731 )      
 
                       
 
                               
Total sales
  $ 166,031,012     $ 266,179,789     $ (165,645,731 )   $ 266,565,070  
 
                       
 
                               
Gross profit
  $ 2,858,063     $ 115,722,187     $ (377,376 )   $ 118,202,874  
 
                         
Operating expenses
                            (27,234,315 )
Non-operating income and gains
                            7,067,497  
Non-operating expenses and losses
                            (3,772,809 )
 
                             
 
                               
Income before income tax
                          $ 94,263,247  
 
                             
 
                               
Net income attributable to minority interest
                          $ 57,633  
 
                             
 
                               
Identifiable assets
  $ 92,904,411     $ 430,038,385     $ (45,861,280 )   $ 477,081,516  
 
                         
Long-term investments
                            42,428,073  
 
                             
 
                               
Total assets
                          $ 519,509,589  
 
                             
 
                               
2004
                               
 
                               
Sales to other than consolidated entities
  $ 143,801,130     $ 113,411,488     $     $ 257,212,618  
Sales among consolidated entities
    15,657,797       142,580,939       (158,238,736 )      
 
                       
 
                               
Total sales
  $ 159,458,927     $ 255,992,427     $ (158,238,736 )   $ 257,212,618  
 
                       
(Continued)

- 42 -


 

                                 
                    Adjustments        
    North America             and        
    and Others     Taiwan     Elimination     Consolidated  
Gross profit
  $ 6,173,780     $ 110,160,584     $ (515,181 )   $ 115,819,183  
 
                         
Operating expenses
                            (27,337,509 )
Non-operating income and gains
                            6,015,558  
Non-operating expenses and losses
                            (2,531,645 )
 
                             
 
                               
Income before income tax
                          $ 91,965,587  
 
                             
Net income attributable to minority interest
                          $ 12,898  
 
                             
 
                               
Identifiable assets
  $ 89,000,906     $ 416,076,665     $ (43,725,329 )   $ 461,352,242  
 
                         
Long-term investments
                            38,101,849  
 
                             
 
                               
Total assets
                          $ 499,454,091  
 
                             
  c.   Export sales
 
      The export sales for the years ended December 31, 2005 and 2004 were as follows:
                 
Area   2005     2004  
Asia
  $ 64,942,647     $ 57,321,557  
Europe and others
    15,932,575       26,067,317  
 
           
 
               
 
  $ 80,875,222     $ 83,388,874  
 
           
      The export sales information is based on amounts billed to customers within the areas.
 
  d.   Major customer
 
      The Company only had one customer to which the net sales accounts for at least 10% of its total net sales in the year ended December 31, 2005 and 2004. The net sales to such customer amounted to NT$29,258,338 thousand and NT$25,299,856 thousand in the years ended December 31, 2005 and 2004, representing 11% and 10% of its total net sales, respectively.

- 43 -


 

TABLE 1
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED AND SUBSIDIARIES
FINANCING PROVIDED
FOR THE YEAR ENDED DECEMBER 31, 2005
(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Specified)
                                                                                             
                                                                                        Financing  
                Maximum                                                                     Company’s  
                Balance for the                                                             Financing Limit     Financing  
                Period                     Type of           Reasons for                           for Each     Amount Limits  
            Financial Statement   (US$ in     Ending Balance             Financing   Transaction     Short-term   Allowance for     Collateral     Borrowing     (US$ in  
No.   Financing Name   Counter-party   Account   Thousands)     (US$ in Thousands)     Interest Rate   (Note 1)   Amounts     Financing   Bad Debt     Item     Value     Company     Thousands)  
1
  TSMC International   TSMC Development   Other receivables   $ 1,971,000     $ 1,149,750       1.50 %   2   $     Operating capital   $           $     N/A     $ 32,454,757  
 
              (US$ 60,000 )   (US$ 35,000 )                                                           (US$ 987,968 )
 
                                                                                      (Note 2)
 
                                                                                           
2
  TSMC Partners   TSMC Development   Other receivables     2,628,000             1.50 %   2         Operating capital                     N/A     (Note 3)
 
              (US$ 80,000 )                                                                        
 
Note 1: The type No. 2 represents necessary for short-term financing.
Note 2: Not exceeding the issued capital of the Company.
Note 3: Generally not exceeding the issued capital of the Company, unless approved by all members of the board.

- 44 -


 

TABLE 2
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED AND SUBSIDIARIES
ENDORSEMENT/GUARANTEE PROVIDED
FOR THE YEAR ENDED DECEMBER 31, 2005
(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Specified)
                                                         
                                            Ratio of Accumulated    
        Counter-party                               Amount of Collateral   Maximum
            Nature of   Limits on Each Counter-party’s   Maximum           Value of Collateral   to Net Equity of the   Collateral/Guarantee
    Endorsement/       Relationship   Endorsement/   Balance for the Period   Ending Balance   Property, Plant and   Latest Financial   Amounts Allowable
No.   Guarantee Provider   Name   (Note 2)   Guarantee Amounts   (US$ in Thousands)   (US$ in Thousands)   Equipment   Statement   (Note 1)
0   The Company   TSMC-North America   2   Not exceed 10% of the net worth of the Company, and be also limited to the paid-in capital of the endorsement/guarantee company, unless otherwise approved by Board of Directors.   $ 1,314,000     $ 1,314,000     $       0.29 %   $   111,407,587  
 
                (US$ 40,000 )   (US$ 40,000 )                        
 
      TSMC Development   3       1,971,000                            
 
                (US$ 60,000 )                                
 
Note 1:   25% of the net worth of the Company as of December 31, 2005.
Note 2:   The No. 2 represents a subsidiary in which the Company holds directly over 50% of the equity interest.
The No. 3 represents an investee in which the Company holds directly and indirectly over 50% of the equity interest.

- 45 -


 

TABLE 3
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED AND SUBSIDIARIES
MARKETABLE SECURITIES HELD
DECEMBER 31, 2005
(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Specified)
                                                 
                December 31, 2005    
                                        Market Value or    
                        Carrying Value           Net Asset Value    
        Relationship with the   Financial Statement   Shares/Units   (US$ in   Percentage of   (US$ in    
Held Company Name   Marketable Securities Type and Name   Company   Account   (in Thousands)   Thousands)   Ownership   Thousands)   Note
The Company
  Government bonds                                            
 
  United States Treas Nts     Short-term investment         US$ 47,516       N/A     US$ 47,233      
 
  Kreditanstal Fur Wiederaufbau     Short-term investment         US$ 6,881       N/A     US$ 6,839      
 
  2004 Government Bond Series E     Short-term investment         $ 300,472       N/A     $ 300,563      
 
  2002 Government Bond Series B     Long-term investment           355,936       N/A       354,832      
 
  2002 Government Bond Series F     Long-term investment           149,441       N/A       149,256      
 
  2004 Government Bond Series A     Long-term investment           2,349,973       N/A       2,349,857      
 
  2004 Government Bond Series E     Long-term investment           3,898,610       N/A       3,896,739      
 
  2004 Kaohsiung Municipal Bond Series A     Long-term investment           620,000       N/A       618,160      
 
  2005 Government Bond Series A     Long-term investment           2,548,977       N/A       2,544,964      
 
 
  Bond funds                                            
 
  JF Taiwan First Bond Fund     Short-term investment     63,131       856,359       N/A       875,416      
 
  ABN AMRO Bond Fund     Short-term investment     134,906       1,956,175       N/A       2,004,862      
 
  JF Taiwan Bond Fund     Short-term investment     62,009       908,656       N/A       933,430      
 
  Dresdner Bond DAM Fund     Short-term investment     69,303       771,617       N/A       792,068      
 
  Shinkong Chi Shin Bond Fund     Short-term investment     55,063       762,771       N/A       778,482      
 
  NITC Bond Fund     Short-term investment     3,764       600,000       N/A       610,864      
 
  ABN AMRO Select Bond Fund     Short-term investment     18,235       200,000       N/A       203,860      
 
 
  Stock                                            
 
  Taiwan Mask Corp.     Short-term investment     1,439       5,257             21,280      
 
  TSMC International   Subsidiary   Long-term investment     987,968       23,912,812       100       23,912,812      
 
  VIS   Investee accounted
for using equity
method
  Long-term investment     437,891       5,419,747       27       10,991,064      
 
  SSMC   Investee accounted
for using equity
method
  Long-term investment     382       4,215,200       32       4,215,200      
 
  TSMC Partners   Subsidiary   Long-term investment     300       4,091,166       100       4,091,166      
 
  TSMC-North America   Subsidiary   Long-term investment     11,000       1,790,186       100       1,790,186      
 
  GUC   Investee with
controlling
financial interest
  Long-term investment     40,147       442,233       46       465,258      
 
  TSMC-Japan   Subsidiary   Long-term investment     6       94,949       100       94,949      
 
  TSMC-Europe   Subsidiary   Long-term investment           23,087       100       23,087      
 
  United Industrial Gases Co., Ltd.     Long-term investment     16,783       193,584       10       295,606      
 
  Shin-Etsu Handotai Taiwan Co., Ltd.     Long-term investment     10,500       105,000       7       186,387      
(Continued)

-46-


 

                                                 
                December 31, 2005    
                                        Market Value or    
                        Carrying Value           Net Asset Value    
        Relationship with the   Financial Statement   Shares/Units   (US$ in   Percentage of   (US$ in    
Held Company Name   Marketable Securities Type and Name   Company   Account   (in Thousands)   Thousands)   Ownership   Thousands)   Note
 
  Hontung Venture Capital Co., Ltd.     Long-term investment     8,392     $ 83,916       10     $ 46,801      
 
  Gobaltop Partner I Venture Capital Corp.     Long-term investment     5,000       50,000       1       49,947      
 
  W.K. Technology Fund IV     Long-term investment     4,000       40,000       2       43,645      
 
                                               
 
  Capital                                            
 
  TSMC-Shanghai   Subsidiary   Long-term investment           9,438,856       100       9,438,856      
 
  Emerging Alliance   Subsidiary   Long-term investment           850,534       99       850,534      
 
  VTAF II   Subsidiary   Long-term investment           642,479       98       642,479      
 
  Chi Cherng   Subsidiary   Long-term investment           78,139       36       536,703     Treasury stock of NT$458,564 thousand is deducted from the carrying value
 
                                               
 
  Hsin Ruey   Subsidiary   Long-term investment           77,415       36       536,926     Treasury stock of NT$459,511 thousand is deducted from the carrying value
 
                                               
 
  Corporate bonds                                            
 
  Abbott Labs     Short-term investment         US$ 1,581       N/A     US$ 1,526      
 
  Abbott Labs     Short-term investment         US$ 2,732       N/A     US$ 2,595      
 
  Ace Ltd.     Short-term investment         US$ 1,046       N/A     US$ 1,011      
 
  AIG Sunamerica Global Fing Ix     Short-term investment         US$ 1,032       N/A     US$ 1,001      
 
  Allstate Life Global Fdg Secd     Short-term investment         US$ 2,998       N/A     US$ 2,948      
 
  Alltel Corp.     Short-term investment         US$ 609       N/A     US$ 598      
 
  American Express Co.     Short-term investment         US$ 3,550       N/A     US$ 3,435      
 
  American Gen Fin Corp.     Short-term investment         US$ 1,768       N/A     US$ 1,670      
 
  American Gen Fin Corp. Mtn     Short-term investment         US$ 1,058       N/A     US$ 1,011      
 
  American Gen Fin Corp. Mtn     Short-term investment         US$ 3,130       N/A     US$ 2,998      
 
  American Honda Fin Corp. Mtn     Short-term investment         US$ 3,800       N/A     US$ 3,808      
 
  Ameritech Capital Funding Co.     Short-term investment         US$ 510       N/A     US$ 491      
 
  Amgen Inc.     Short-term investment         US$ 3,005       N/A     US$ 2,907      
 
  Amsouth Bk Birmingham Ala     Short-term investment         US$ 1,972       N/A     US$ 1,967      
 
  Anz Cap Tr I     Short-term investment         US$ 1,012       N/A     US$ 968      
 
  Associates Corp. North Amer     Short-term investment         US$ 2,700       N/A     US$ 2,582      
 
  Bank New York Inc.     Short-term investment         US$ 1,972       N/A     US$ 1,984      
 
  Bank New York Inc.     Short-term investment         US$ 1,525       N/A     US$ 1,485      
 
  Bank Scotland Treas Svcs Plc     Short-term investment         US$ 2,715       N/A     US$ 2,729      
 
  Bank Utd Houston Tx Mtbn     Short-term investment         US$ 580       N/A     US$ 544      
 
  Bear Stearns Cos Inc.     Short-term investment         US$ 3,329       N/A     US$ 3,337      
 
  Bear Stearns Cos Inc.     Short-term investment         US$ 3,757       N/A     US$ 3,662      
 
  Beneficial Corp. Mtn Bk Entry     Short-term investment         US$ 2,434       N/A     US$ 2,340      
 
  Berkshire Hathaway Fin Corp.     Short-term investment         US$ 1,498       N/A     US$ 1,472      
 
  Cargill Inc.     Short-term investment         US$ 2,120       N/A     US$ 2,012      
 
  Caterpillar Finl Svcs Mtn     Short-term investment         US$ 5,721       N/A     US$ 5,724      
 
  Chase Manhattan Corp. New     Short-term investment         US$ 1,628       N/A     US$ 1,546      
 
  Chase Manhattan Corp. New       Short-term investment         US$ 2,246       N/A     US$ 2,155      
 
  Chubb Corp.     Short-term investment         US$ 2,138       N/A     US$ 2,125      
(Continued)

-47-


 

                                 
                December 31, 2005    
                            Market Value or    
                    Carrying Value       Net Asset Value    
        Relationship with the   Financial Statement   Shares/Units   (US$ in   Percentage of   (US$ in    
Held Company Name   Marketable Securities Type and Name   Company   Account   (in Thousands)   Thousands)   Ownership   Thousands)   Note
 
  Cit Group Hldgs Inc.     Short-term investment     US$3,203   N/A   US$3,068    
 
  Citicorp     Short-term investment     US$1,473   N/A   US$1,407    
 
  Cogentrix Energy Inc.     Short-term investment     US$2,885   N/A   US$2,739    
 
  Colonial Pipeline Co.     Short-term investment     US$1,625   N/A   US$1,536    
 
  Corestates Cap Corp.     Short-term investment     US$1,062   N/A   US$1,018    
 
  Countrywide Fdg Corp. Mtn     Short-term investment     US$2,100   N/A   US$2,066    
 
  Countrywide Home Lns Inc.     Short-term investment     US$5,210   N/A   US$5,020    
 
  Credit Suisse Fb USA Inc.     Short-term investment     US$4,141   N/A   US$4,029    
 
  Credit Suisse Fincl Products     Short-term investment     US$1,507   N/A   US$1,508    
 
  Credit Suisse First Boston     Short-term investment     US$   786   N/A   US$   748    
 
  Credit Suisse First Boston USA     Short-term investment     US$2,249   N/A   US$2,175    
 
  Daimlerchrysler North Amer     Short-term investment     US$   997   N/A   US$   972    
 
  Daimlerchrysler North Amer Hld     Short-term investment     US$   749   N/A   US$   751    
 
  Dayton Hudson Corp.     Short-term investment     US$2,104   N/A   US$2,056    
 
  Deere John Cap Corp.     Short-term investment     US$5,079   N/A   US$5,020    
 
  Dell Computer Corp.     Short-term investment     US$3,054   N/A   US$2,874    
 
  Den Danske Bk Aktieselskab     Short-term investment     US$2,192   N/A   US$2,067    
 
  Diageo Plc     Short-term investment     US$3,459   N/A   US$3,419    
 
  Dow Chem Co.     Short-term investment     US$   921   N/A   US$   863    
 
  European Invt Bk     Short-term investment     US$3,918   N/A   US$3,910    
 
  European Invt Bk     Short-term investment     US$8,315   N/A   US$8,023    
 
  Fifth Third Bk Cincinnati OH     Short-term investment     US$2,419   N/A   US$2,414    
 
  First Data Corp.     Short-term investment     US$3,013   N/A   US$2,860    
 
  Fleet Boston Corp.     Short-term investment     US$2,850   N/A   US$2,718    
 
  Fleet Finl Group Inc. New     Short-term investment     US$   975   N/A   US$   923    
 
  Fleet Finl Group Inc. New     Short-term investment     US$   494   N/A   US$   474    
 
  Fpl Group Cap Inc.     Short-term investment     US$1,001   N/A   US$   997    
 
  Fpl Group Cap Inc.     Short-term investment     US$   860   N/A   US$   845    
 
  Gannett Co Inc.     Short-term investment     US$2,999   N/A   US$2,930    
 
  General Elec Cap Corp. Mtn     Short-term investment     US$3,989   N/A   US$3,894    
 
  General Elec Cap Corp. Mtn     Short-term investment     US$8,862   N/A   US$8,755    
 
  General Re Corp.     Short-term investment     US$3,500   N/A   US$3,430    
 
  Genworth Finl Inc.     Short-term investment     US$3,412   N/A   US$3,419    
 
  Goldman Sachs Group Inc.     Short-term investment     US$4,981   N/A   US$4,970    
 
  Goldman Sachs Group Inc.     Short-term investment     US$3,477   N/A   US$3,452    
 
  Goldman Sachs Group LP     Short-term investment     US$1,637   N/A   US$1,530    
 
  Greenpoint Finl Corp.     Short-term investment     US$   974   N/A   US$   959    
 
  Gte Corp.     Short-term investment     US$2,134   N/A   US$2,041    
 
  Hancock John Global Fdg II Mtn     Short-term investment     US$3,566   N/A   US$3,512    
 
  Hancock John Global Fdg Mtn     Short-term investment     US$1,003   N/A   US$   970    
 
  Hartford Finl Svcs Group Inc.     Short-term investment     US$   296   N/A   US$   297    
 
  Hartford Finl Svcs Group Inc.     Short-term investment     US$1,435   N/A   US$1,371    
 
  Hbos Plc Medium Term Sr Nts     Short-term investment     US$3,201   N/A   US$3,181    
 
  Hbos Plc Meduim Term Sr Nts     Short-term investment     US$2,977   N/A   US$2,940    
 
  Heller Finl Inc.     Short-term investment     US$2,071   N/A   US$1,984    
(Continued)

-48-


 

                                         
                December 31, 2005    
                                Market Value or    
                    Carrying Value       Net Asset Value    
        Relationship with the   Financial Statement   Shares/Units   (US$ in   Percentage of   (US$ in    
Held Company Name   Marketable Securities Type and Name   Company   Account   (in Thousands)   Thousands)   Ownership   Thousands)   Note
 
  Hershey Foods Corp.     Short-term investment     US$ 1,627     N/A   US$ 1,537      
 
  Hewlett Packard Co.     Short-term investment     US$ 3,373     N/A   US$ 3,204      
 
  Honeywell Inc.     Short-term investment     US$ 3,284     N/A   US$ 3,081      
 
  Household Fin Corp.     Short-term investment     US$ 2,993     N/A   US$ 2,908      
 
  Household Fin Corp.     Short-term investment     US$ 532     N/A   US$ 512      
 
  Household Intl Inc.     Short-term investment     US$ 2,878     N/A   US$ 2,892      
 
  HSBC Fin Corp Mtn     Short-term investment     US$ 5,097     N/A   US$ 5,066      
 
  HSBC USA Inc. New     Short-term investment     US$ 1,154     N/A   US$ 1,091      
 
  Huntington Natl Bk Columbus OH     Short-term investment     US$ 2,954     N/A   US$ 2,954      
 
  ING Bank     Short-term investment     US$ 2,114     N/A   US$ 2,024      
 
  ING Sec Life Instl Fdg     Short-term investment     US$ 2,544     N/A   US$ 2,485      
 
  International Business Machs     Short-term investment     US$ 2,249     N/A   US$ 2,208      
 
  International Lease Fin Corp.     Short-term investment     US$ 2,031     N/A   US$ 2,005      
 
  Intl Lease Fin Corp. Mtn     Short-term investment     US$ 3,028     N/A   US$ 2,943      
 
  Intl Lease Fin Corp. Mtn     Short-term investment     US$ 2,471     N/A   US$ 2,481      
 
  JP Morgan Chase + Co.     Short-term investment     US$ 3,406     N/A   US$ 3,353      
 
  Jackson Natl Life Global Fdg     Short-term investment     US$ 1,036     N/A   US$ 1,006      
 
  Jackson Natl Life Global Fdg S     Short-term investment     US$ 1,999     N/A   US$ 2,004      
 
  JP Morgan Chase + Co.     Short-term investment     US$ 3,663     N/A   US$ 3,522      
 
  Key Bk Na Med Term Nts Bk Entr     Short-term investment     US$ 4,450     N/A   US$ 4,409      
 
  Keycorp Mtn Book Entry     Short-term investment     US$ 3,500     N/A   US$ 3,512      
 
  Kraft Foods Inc.     Short-term investment     US$ 773     N/A   US$ 749      
 
  Kraft Foods Inc.     Short-term investment     US$ 1,037     N/A   US$ 1,006      
 
  Lehman Brothers Hldgs Inc.     Short-term investment     US$ 1,668     N/A   US$ 1,631      
 
  Lehman Brothers Hldgs Inc.     Short-term investment     US$ 499     N/A   US$ 489      
 
  Lehman Brothers Hldgs Inc.     Short-term investment     US$ 1,163     N/A   US$ 1,105      
 
  Lincoln Natl Corp. In     Short-term investment     US$ 519     N/A   US$ 503      
 
  Merita Bk Ltd. Ny Brh     Short-term investment     US$ 538     N/A   US$ 513      
 
  Merrill Lynch + Co. Inc.     Short-term investment     US$ 3,486     N/A   US$ 3,421      
 
  Merrill Lynch + Co. Inc.     Short-term investment     US$ 1,992     N/A   US$ 1,983      
 
  Merrill Lynch + Co. Inc.     Short-term investment     US$ 4,900     N/A   US$ 4,891      
 
  Metropolitan Life Global Mtn     Short-term investment     US$ 1,907     N/A   US$ 1,894      
 
  Monumental Global Fdg II     Short-term investment     US$ 1,534     N/A   US$ 1,476      
 
  Monumental Global Fdg II 2002A     Short-term investment     US$ 1,045     N/A   US$ 1,005      
 
  Morgan Stanley     Short-term investment     US$ 2,144     N/A   US$ 2,142      
 
  Morgan Stanley Group Inc.     Short-term investment     US$ 4,507     N/A   US$ 4,432      
 
  National City Corp.     Short-term investment     US$ 3,426     N/A   US$ 3,378      
 
  National Westminster Bk Plc     Short-term investment     US$ 1,433     N/A   US$ 1,355      
 
  Nationwide Bldg Soc     Short-term investment     US$ 3,457     N/A   US$ 3,463      
 
  Nationwide Bldg Soc Mtn     Short-term investment     US$ 3,000     N/A   US$ 3,001      
 
  Nationwide Life Global Mtn     Short-term investment     US$ 1,463     N/A   US$ 1,459      
 
  Pepsico Inc. Mtn Book Entry     Short-term investment     US$ 3,818     N/A   US$ 3,678      
 
  Pnc Fdg Corp.     Short-term investment     US$ 1,080     N/A   US$ 1,029      
 
  Popular North Amer Inc. Mtn     Short-term investment     US$ 3,042     N/A   US$ 2,931      
 
  Premark Intl Inc.     Short-term investment     US$ 2,954     N/A   US$ 2,789      
(Continued)

-49-


 

                                         
                December 31, 2005    
                                Market Value or    
                    Carrying Value       Net Asset Value    
        Relationship with the   Financial Statement   Shares/Units   (US$ in   Percentage of   (US$ in    
Held Company Name   Marketable Securities Type and Name   Company   Account   (in Thousands)   Thousands)   Ownership   Thousands)   Note
 
  Pricoa Global Fdg 1 Mtn     Short-term investment     US$ 3,500     N/A   US$ 3,502      
 
  Protective Life Secd Trs     Short-term investment     US$ 2,920     N/A   US$ 2,903      
 
  Prudential Ins Co. Amer     Short-term investment     US$ 2,648     N/A   US$ 2,523      
 
  Prudential Ins Co. Amer     Short-term investment     US$ 2,774     N/A   US$ 2,704      
 
  Public Svc Elec Gas Co.     Short-term investment     US$ 3,225     N/A   US$ 3,184      
 
  Regions Finl Corp. New     Short-term investment     US$ 2,397     N/A   US$ 2,378      
 
  Reinsurance Group Amer Inc.     Short-term investment     US$ 2,091     N/A   US$ 2,012      
 
  Royal Bk Scotland Group Plc     Short-term investment     US$ 1,563     N/A   US$ 1,489      
 
  Safeco Corp.     Short-term investment     US$ 765     N/A   US$ 730      
 
  Santander US Debt S A Uniperso     Short-term investment     US$ 4,998     N/A   US$ 4,974      
 
  Sara Lee Corp.     Short-term investment     US$ 1,596     N/A   US$ 1,527      
 
  Sbc Communications Inc.     Short-term investment     US$ 1,776     N/A   US$ 1,713      
 
  Sbc Communications Inc.     Short-term investment     US$ 3,681     N/A   US$ 3,515      
 
  Scotland Intl Fin B V 144a     Short-term investment     US$ 1,533     N/A   US$ 1,446      
 
  Slm Corp.     Short-term investment     US$ 500     N/A   US$ 496      
 
  Slm Corp. Medium Term Nts     Short-term investment     US$ 2,950     N/A   US$ 2,922      
 
  Sp Powerassests Ltd. Global     Short-term investment     US$ 991     N/A   US$ 971      
 
  St Paul Cos Inc. Mtn Bk Ent     Short-term investment     US$ 2,661     N/A   US$ 2,593      
 
  Suntrust Bks Inc.     Short-term investment     US$ 1,062     N/A   US$ 1,014      
 
  Swedbank Sparbanken Svenge Ab     Short-term investment     US$ 1,084     N/A   US$ 1,021      
 
  Tiaa Global Mkts Inc.     Short-term investment     US$ 519     N/A   US$ 501      
 
  Tribune Co. Med Trm Nts     Short-term investment     US$ 2,943     N/A   US$ 2,838      
 
  Unitedhealth Group Inc.     Short-term investment     US$ 3,119     N/A   US$ 3,015      
 
  US Bk Natl Assn Cincinnati Oh     Short-term investment     US$ 2,669     N/A   US$ 2,678      
 
  Virginia Elec + Pwr Co.     Short-term investment     US$ 2,884     N/A   US$ 2,702      
 
  Vodafone Group Plc New     Short-term investment     US$ 2,559     N/A   US$ 2,505      
 
  Wal Mart Cda Venture Corp.     Short-term investment     US$ 3,670     N/A   US$ 3,511      
 
  Washington Mut Fin Corp.     Short-term investment     US$ 1,043     N/A   US$ 1,007      
 
  Washington Mut Inc.     Short-term investment     US$ 4,735     N/A   US$ 4,539      
 
  Washington Post Co.     Short-term investment     US$ 3,182     N/A   US$ 3,023      
 
  Wells Fargo + Co. New     Short-term investment     US$ 3,697     N/A   US$ 3,520      
 
  Westfield Cap Corp. Ltd.     Short-term investment     US$ 1,999     N/A   US$ 2,007      
 
  Wps Resources Corp.     Short-term investment     US$ 1,107     N/A   US$ 1,074      
 
  Formosa Petrochemical Corporation       Short -term investment     $ 311,568     N/A   $ 301,946      
 
  Taiwan Power Company       Long term investment       3,263,348     N/A     3,263,232      
 
  Nan Ya Plastics Corporation       Long term investment       2,150,842     N/A     2,152,156      
 
  China Steel Corporation       Long term investment       1,010,532     N/A     1,010,657      
 
  Formosa Petrochemical Corporation       Long term investment       791,963     N/A     791,771      
 
  Chinese Petroleum Corporation       Long term investment       705,436     N/A     704,878      
 
  Far Eastone Telecommunications Co. Ltd.       Long term investment       300,026     N/A     300,001      
 
  Formosa Plastics Corporation       Long term investment       268,855     N/A     270,086      
 
  Formosa Chemicals & Fiber Corporation       Long term investment       134,369     N/A     137,529      
(Continued)

-50-


 

                                         
                December 31, 2005    
                                Market Value or    
                    Carrying Value       Net Asset Value    
        Relationship with the   Financial Statement   Shares/Units   (US$ in   Percentage of   (US$ in    
Held Company Name   Marketable Securities Type and Name   Company   Account   (in Thousands)   Thousands)   Ownership   Thousands)   Note
 
  Agency bonds                                    
 
  Fed Hm Ln Pc Pool 1H2520     Short-term investment     US$ 3,753     N/A   US$ 3,743      
 
  Fed Hm Ln Pc Pool 1H2524     Short-term investment     US$ 2,861     N/A   US$ 2,838      
 
  Fed Hm Ln Pc Pool 781959       Short-term investment       US$ 7,112     N/A   US$ 7,123      
 
  Fed Hm Ln Pc Pool E89857     Short-term investment     US$ 1,980     N/A   US$ 1,923      
 
  Fed Hm Ln Pc Pool G11295     Short-term investment     US$ 1,753     N/A   US$ 1,703      
 
  Federal Home Ln Mtg       Short-term investment       US$ 3,848     N/A   US$ 3,834      
 
  Federal Home Ln Mtg Corp.     Short-term investment     US$ 887     N/A   US$ 882      
 
  Federal Home Ln Mtg Corp.     Short-term investment     US$ 3,454     N/A   US$ 3,406      
 
  Federal Home Ln Mtg Corp.     Short-term investment     US$ 3,954     N/A   US$ 3,945      
 
  Federal Home Ln Mtg Corp.     Short-term investment     US$ 6,096     N/A   US$ 5,977      
 
  Federal Home Ln Mtg Corp.     Short-term investment     US$ 3,280     N/A   US$ 3,185      
 
  Federal Home Ln Mtg Corp.     Short-term investment     US$ 4,098     N/A   US$ 4,102      
 
  Federal Home Ln Mtg Corp.     Short-term investment     US$ 9,905     N/A   US$ 9,898      
 
  Federal Home Ln Mtg Corp.     Short-term investment     US$ 4,902     N/A   US$ 4,843      
 
  Federal Home Ln Mtg Corp.     Short-term investment     US$ 3,755     N/A   US$ 3,735      
 
  Federal Natl Mtg Assn     Short-term investment     US$ 3,696     N/A   US$ 3,668      
 
  Federal Natl Mtg Assn     Short-term investment     US$ 110     N/A   US$ 109      
 
  Federal Natl Mtg Assn     Short-term investment     US$ 1,930     N/A   US$ 1,887      
 
  Federal Natl Mtg Assn     Short-term investment     US$ 4,030     N/A   US$ 3,992      
 
  Federal Natl Mtg Assn     Short-term investment     US$ 4,051     N/A   US$ 4,000      
 
  Federal Natl Mtg Assn     Short-term investment     US$ 1,668     N/A   US$ 1,626      
 
  Federal Natl Mtg Assn Gtd     Short-term investment     US$ 3,659     N/A   US$ 3,655      
 
  Federal Natl Mtg Assn Gtd     Short-term investment     US$ 445     N/A   US$ 432      
 
  Fnma Pool 254507     Short-term investment     US$ 2,286     N/A   US$ 2,240      
 
  Fnma Pool 254834     Short-term investment     US$ 1,750     N/A   US$ 1,729      
 
  Fnma Pool 255883     Short-term investment     US$ 3,771     N/A   US$ 3,762      
 
  Fnma Pool 685116     Short-term investment     US$ 842     N/A   US$ 817      
 
  Fnma Pool 687863     Short-term investment     US$ 3,570     N/A   US$ 3,565      
 
  Fnma Pool 696485     Short-term investment     US$ 4,175     N/A   US$ 4,167      
 
  Fnma Pool 725095     Short-term investment     US$ 1,562     N/A   US$ 1,516      
 
  Fnma Pool 730033     Short-term investment     US$ 1,793     N/A   US$ 1,771      
 
  Fnma Pool 740934     Short-term investment     US$ 1,775     N/A   US$ 1,753      
 
  Fnma Pool 790828     Short-term investment     US$ 3,504     N/A   US$ 3,407      
 
  Fnma Pool 793025     Short-term investment     US$ 3,306     N/A   US$ 3,245      
 
  Fnma Pool 793932     Short-term investment     US$ 764     N/A   US$ 742      
 
  Fnma Pool 794040     Short-term investment     US$ 940     N/A   US$ 912      
 
  Fnma Pool 795548     Short-term investment     US$ 623     N/A   US$ 610      
 
  Fnma Pool 806642     Short-term investment     US$ 1,573     N/A   US$ 1,544      
 
  Fnma Pool 815626     Short-term investment     US$ 3,622     N/A   US$ 3,625      
 
  Fnma Pool 816594     Short-term investment     US$ 2,657     N/A   US$ 2,630      
 
  Fnma Pool 825395     Short-term investment     US$ 3,265     N/A   US$ 3,229      
 
  Fnma Pool 825398     Short-term investment     US$ 4,949     N/A   US$ 4,889      
 
  Fnma Pool 841069     Short-term investment     US$ 3,673     N/A   US$ 3,649      
(Continued)

-51-


 

                                         
                December 31, 2005    
                                Market Value or    
                    Carrying Value       Net Asset Value    
        Relationship with the   Financial Statement   Shares/Units   (US$ in   Percentage of   (US$ in    
Held Company Name   Marketable Securities Type and Name   Company   Account   (in Thousands)   Thousands)   Ownership   Thousands)   Note
 
  Gnma II Pool 081150     Short-term investment     US$ 813     N/A   US$ 796      
 
  Gnma II Pool 081153     Short-term investment     US$ 2,956     N/A   US$ 2,884      
 
  Federal Farm Cr Bks     Short-term investment     US$ 3,985     N/A   US$ 3,936      
 
  Federal Home Ln Bank     Short-term investment     US$ 3,962     N/A   US$ 3,962      
 
  Federal Home Ln Bks     Short-term investment     US$ 6,110     N/A   US$ 6,083      
 
  Federal Home Ln Bks     Short-term investment     US$ 2,454     N/A   US$ 2,483      
 
  Federal Home Ln Bks     Short-term investment     US$ 2,990     N/A   US$ 2,991      
 
  Federal Home Ln Bks     Short-term investment     US$ 3,932     N/A   US$ 3,929      
 
  Federal Home Ln Bks     Short-term investment     US$ 4,997     N/A   US$ 4,966      
 
  Federal Home Ln Bks     Short-term investment     US$ 2,962     N/A   US$ 2,949      
 
  Federal Home Ln Bks     Short-term investment     US$ 4,927     N/A   US$ 4,896      
 
  Federal Home Ln Bks     Short-term investment     US$ 3,976     N/A   US$ 3,951      
 
  Federal Home Ln Bks     Short-term investment     US$ 4,136     N/A   US$ 4,103      
 
  Federal Home Ln Bks     Short-term investment     US$ 4,939     N/A   US$ 4,865      
 
  Federal Home Ln Bks     Short-term investment     US$ 7,886     N/A   US$ 7,977      
 
  Federal Home Ln Bks     Short-term investment     US$ 2,233     N/A   US$ 2,217      
 
  Federal Home Ln Bks     Short-term investment     US$ 8,672     N/A   US$ 8,672      
 
  Federal Home Ln Bks     Short-term investment     US$ 4,965     N/A   US$ 4,926      
 
  Federal Home Ln Bks     Short-term investment     US$ 4,808     N/A   US$ 4,816      
 
  Federal Home Ln Bks     Short-term investment     US$ 7,558     N/A   US$ 7,499      
 
  Federal Home Ln Bks     Short-term investment     US$ 8,594     N/A   US$ 8,524      
 
  Federal Home Ln Bks     Short-term investment     US$ 3,024     N/A   US$ 2,980      
 
  Federal Home Ln Bks     Short-term investment     US$ 3,972     N/A   US$ 3,949      
 
  Federal Home Ln Bks     Short-term investment     US$ 7,887     N/A   US$ 7,759      
 
  Federal Home Ln Bks     Short-term investment     US$ 19,846     N/A   US$ 19,832      
 
  Federal Home Ln Bks     Short-term investment     US$ 6,908     N/A   US$ 6,901      
 
  Federal Home Ln Bks     Short-term investment     US$ 6,098     N/A   US$ 5,895      
 
  Federal Home Ln Bks     Short-term investment     US$ 9,134     N/A   US$ 9,008      
 
  Federal Home Ln Bks     Short-term investment     US$ 3,379     N/A   US$ 3,304      
 
  Federal Home Ln Bks     Short-term investment     US$ 1,042     N/A   US$ 1,001      
 
  Federal Home Ln Bks     Short-term investment     US$ 2,532     N/A   US$ 2,419      
 
  Federal Home Ln Mtg Corp.     Short-term investment     US$ 3,388     N/A   US$ 3,412      
 
  Federal Home Ln Mtg Corp.     Short-term investment     US$ 9,997     N/A   US$ 9,778      
 
  Federal Home Ln Mtg Corp.     Short-term investment     US$ 6,980     N/A   US$ 6,935      
 
  Federal Home Ln Mtg Corp.     Short-term investment     US$ 5,929     N/A   US$ 5,941      
 
  Federal Home Ln Mtg Corp. Mtn     Short-term investment     US$ 4,930     N/A   US$ 4,883      
 
  Federal Home Loan Bank     Short-term investment     US$ 3,475     N/A   US$ 3,462      
 
  Federal Home Loan Mtg Assn     Short-term investment     US$ 4,847     N/A   US$ 4,859      
 
  Federal Home Loan Mtg Corp.     Short-term investment     US$ 4,903     N/A   US$ 4,893      
 
  Federal Natl Mtg Assn     Short-term investment     US$ 4,921     N/A   US$ 4,897      
 
  Federal Natl Mtg Assn     Short-term investment     US$ 7,892     N/A   US$ 7,889      
 
  Federal Natl Mtg Assn     Short-term investment     US$ 4,943     N/A   US$ 4,936      
 
  Federal Natl Mtg Assn     Short-term investment     US$ 8,971     N/A   US$ 8,935      
 
  Federal Natl Mtg Assn     Short-term investment     US$ 4,430     N/A   US$ 4,339      
(Continued)

-52-


 

                                         
                December 31, 2005    
                                Market Value or      
                    Carrying Value         Net Asset Value      
        Relationship with the   Financial Statement   Shares/Units   (US$ in     Percentage of   (US$ in      
Held Company Name   Marketable Securities Type and Name   Company   Account   (in Thousands)   Thousands)     Ownership   Thousands)     Note
 
  Federal Natl Mtg Assn     Short-term investment     US$ 17,888     N/A   US$ 17,753      
 
  Federal Natl Mtg Assn     Short-term investment     US$ 5,928     N/A   US$ 5,873      
 
  Federal Natl Mtg Assn     Short-term investment     US$ 7,926     N/A   US$ 7,852      
 
  Federal Natl Mtg Assn Mtn     Short-term investment     US$ 9,758     N/A   US$ 9,772      
 
  Federal Natl Mtg Assn Mtn     Short-term investment     US$ 15,787     N/A   US$ 15,791      
 
  Federal Natl Mtg Assn Mtn     Short-term investment     US$ 7,000     N/A   US$ 6,919      
 
  Federal Natl Mtg Assn Mtn     Short-term investment     US$ 2,876     N/A   US$ 2,888      
 
  Federal Natl Mtg Assn Mtn     Short-term investment     US$ 2,866     N/A   US$ 2,870      
 
  Federal Natl Mtg Assn Mtn     Short-term investment     US$ 5,740     N/A   US$ 5,643      
 
  Corporate issued asset-backed securities                                    
 
  American Home Mtg Invt Tr     Short-term investment     US$ 411     N/A   US$ 411      
 
  Americredit Automobile Rec Tr     Short-term investment     US$ 1,034     N/A   US$ 1,014      
 
  Americredit Automobile Rec Tr     Short-term investment     US$ 2,000     N/A   US$ 1,977      
 
  Americredit Automobile Receiva     Short-term investment     US$ 5,000     N/A   US$ 4,971      
 
  Americredit Automobile Receivb     Short-term investment     US$ 4,949     N/A   US$ 4,894      
 
  Atlantic City Elc Trns Fdg LLC     Short-term investment     US$ 680     N/A   US$ 668      
 
  Banc Amer Coml Mtg Inc.     Short-term investment     US$ 4,462     N/A   US$ 4,362      
 
  Banc Amer Mtg Secs Inc.     Short-term investment     US$ 4,030     N/A   US$ 3,990      
 
  Bank Of Amer Lease Equip Tr     Short-term investment     US$ 2,986     N/A   US$ 2,932      
 
  Bear Stearns Alt A Tr     Short-term investment     US$ 958     N/A   US$ 958      
 
  Bear Stearns Arm Tr     Short-term investment     US$ 1,947     N/A   US$ 1,952      
 
  Bear Stearns Coml Mtg Secs Inc     Short-term investment     US$ 6,350     N/A   US$ 6,350      
 
  California Infrastructure Dev     Short-term investment     US$ 864     N/A   US$ 839      
 
  Capital Auto Receivables Asset     Short-term investment     US$ 1,588     N/A   US$ 1,566      
 
  Capital One Auto Fin Tr     Short-term investment     US$ 2,650     N/A   US$ 2,612      
 
  Capital One Auto Fin Tr     Short-term investment     US$ 3,000     N/A   US$ 2,999      
 
  Capital One Multi Asset Execut     Short-term investment     US$ 4,957     N/A   US$ 4,863      
 
  Capital One Multi Asset Execut     Short-term investment     US$ 3,974     N/A   US$ 3,941      
 
  Capital One Multi Asset Execut     Short-term investment     US$ 2,999     N/A   US$ 2,974      
 
  Capital One Prime Auto Receiv     Short-term investment     US$ 2,800     N/A   US$ 2,781      
 
  Caterpillar Finl Asset Tr     Short-term investment     US$ 4,453     N/A   US$ 4,390      
 
  Caterpillar Finl Asset Tr     Short-term investment     US$ 8,219     N/A   US$ 8,142      
 
  Cendant Rent Car Fdg Aesop LLC     Short-term investment     US$ 11,626     N/A   US$ 11,400      
 
  Centex Home Equity Ln Tr     Short-term investment     US$ 3,500     N/A   US$ 3,476      
 
  Cit Equip Coll Tr     Short-term investment     US$ 4,999     N/A   US$ 4,941      
 
  Citibank Cr Card Issuance Tr     Short-term investment     US$ 9,782     N/A   US$ 9,753      
 
  Citicorp Mtg Secs     Short-term investment     US$ 1,025     N/A   US$ 1,017      
 
  Cnh Equip Tr     Short-term investment     US$ 5,000     N/A   US$ 4,922      
 
  Comm     Short-term investment     US$ 1,383     N/A   US$ 1,384      
 
  Credit Suisse First Boston Mtg     Short-term investment     US$ 1,296     N/A   US$ 1,282      
 
  Credit Suisse First Boston Mtg     Short-term investment     US$ 1,480     N/A   US$ 1,470      
 
  Cwabs Inc.     Short-term investment     US$ 636     N/A   US$ 636      
 
  Cwabs Inc.     Short-term investment     US$ 2,005     N/A   US$ 2,007      
 
  Cwabs Inc.     Short-term investment     US$ 4,287     N/A   US$ 4,289      
(Continued)

-53-


 

                                         
                December 31, 2005    
                                Market Value or    
                    Carrying Value       Net Asset Value    
        Relationship with the   Financial Statement   Shares/Units   (US$ in   Percentage of   (US$ in    
Held Company Name   Marketable Securities Type and Name   Company   Account   (in Thousands)   Thousands)   Ownership   Thousands)   Note
 
  Cwalt Inc.     Short-term investment     US$ 1,143     N/A   US$ 1,133      
 
  Cwmbs Inc.     Short-term investment     US$ 1,255     N/A   US$ 1,230      
 
  Daimlerchrysler Auto Tr     Short-term investment     US$ 1,261     N/A   US$ 1,260      
 
  Daimlerchrysler Auto Tr     Short-term investment     US$ 4,709     N/A   US$ 4,658      
 
  Deere John Owner Tr     Short-term investment     US$ 2,501     N/A   US$ 2,460      
 
  Drive Auto Receivables Tr       Short-term investment     US$ 3,200     N/A   US$ 3,214      
 
  Fifth Third Auto Tr     Short-term investment     US$ 3,000     N/A   US$ 2,976      
 
  First Horizon Abs Tr     Short-term investment     US$ 999     N/A   US$ 1,001      
 
  First Union Lehman Bros Mtg Tr     Short-term investment     US$ 2,710     N/A   US$ 2,580      
 
  Ford Cr Auto Owner Tr     Short-term investment     US$ 10,908     N/A   US$ 10,789      
 
  Granite Mtgs Plc     Short-term investment     US$ 4,447     N/A   US$ 4,447      
 
  Gs Auto Ln Tr     Short-term investment     US$ 1,899     N/A   US$ 1,913      
 
  Harley Davidson Motorcycle Tr     Short-term investment     US$ 1,533     N/A   US$ 1,515      
 
  Harley Davidson Motorcycle Tr     Short-term investment     US$ 5,999     N/A   US$ 5,811      
 
  Hertz Vehicle Financing LLC     Short-term investment     US$ 5,350     N/A   US$ 5,350      
 
  Holmes Fing No 8 Plc     Short-term investment     US$ 5,001     N/A   US$ 5,003      
 
  Household Automotive Tr     Short-term investment     US$ 5,872     N/A   US$ 5,843      
 
  Hsbc Automotive Tr       Short-term investment     US$ 2,999     N/A   US$ 2,993      
 
  Hyundai Auto Receivables Tr     Short-term investment     US$ 6,442     N/A   US$ 6,330      
 
  Hyundai Auto Receivables Tr     Short-term investment     US$ 3,250     N/A   US$ 3,204      
 
  Hyundai Auto Receivables Tr     Short-term investment     US$ 3,999     N/A   US$ 3,926      
 
  Impac Cmb Tr     Short-term investment     US$ 638     N/A   US$ 638      
 
  Impac Cmb Tr     Short-term investment     US$ 534     N/A   US$ 534      
 
  Impac Secd Assets Corp.     Short-term investment     US$ 880     N/A   US$ 880      
 
  Lb Ubs Coml Mtg Tr     Short-term investment     US$ 4,001     N/A   US$ 3,955      
 
  Long Beach Accep Auto Receivab     Short-term investment     US$ 2,526     N/A   US$ 2,477      
 
  Massachusetts Rrb Spl Purp Tr     Short-term investment     US$ 3,900     N/A   US$ 3,837      
 
  Mastr Asset Backed Secs Tr     Short-term investment     US$ 206     N/A   US$ 206      
 
  Mastr Asset Backed Secs Tr     Short-term investment     US$ 3,499     N/A   US$ 3,503      
 
  Mbna Master Cr Card Tr II     Short-term investment     US$ 8,108     N/A   US$ 7,818      
 
  Monumentl Global Fdg II     Short-term investment     US$ 1,000     N/A   US$ 1,002      
 
  National City Auto Receivables     Short-term investment     US$ 914     N/A   US$ 916      
 
  Navistar Finl 2003 A Owner Tr     Short-term investment     US$ 4,928     N/A   US$ 4,863      
 
  Nissan Auto Receivables     Short-term investment     US$ 7,000     N/A   US$ 6,918      
 
  Onyx Accep Owner Tr     Short-term investment     US$ 4,913     N/A   US$ 4,866      
 
  Pg+E Energy Recovery Fdg LLC     Short-term investment     US$ 4,749     N/A   US$ 4,663      
 
  Providian Gateway Owner Tr     Short-term investment     US$ 2,202     N/A   US$ 2,207      
 
  Providian Gateway Owner Tr     Short-term investment     US$ 3,992     N/A   US$ 3,918      
 
  Reliant Energy Transition Bd     Short-term investment     US$ 4,973     N/A   US$ 4,793      
 
  Residential Asset Mtg Prods     Short-term investment     US$ 2,967     N/A   US$ 2,855      
 
  Residential Asset Sec Mtg Pass     Short-term investment     US$ 3,000     N/A   US$ 2,948      
 
  Residential Asset Sec Mtg Pass     Short-term investment     US$ 3,780     N/A   US$ 3,704      
 
  Residential Fdg Mtg Secs I Inc.     Short-term investment     US$ 2,550     N/A   US$ 2,496      
 
  Residential Fdg Mtg Secs I Inc.     Short-term investment     US$ 4,817     N/A   US$ 4,737      
 
  Revolving Home Equity Ln Tr     Short-term investment     US$ 3,234     N/A   US$ 3,235      
(Continued)

-54-


 

                                             
                December 31, 2005    
                                    Market Value or    
                        Carrying Value       Net Asset Value    
        Relationship with the   Financial Statement   Shares/Units   (US$ in   Percentage of   (US$ in    
Held Company Name   Marketable Securities Type and Name   Company   Account   (in Thousands)   Thousands)   Ownership   Thousands)   Note
 
  Sequoia Mtg Tr     Short-term investment         US$ 1,209     N/A   US$ 1,209      
 
  Sequoia Mtg Tr     Short-term investment         US$ 1,450     N/A   US$ 1,455      
 
  Sequoia Mtg Tr     Short-term investment         US$ 1,070     N/A   US$ 1,070      
 
  Structured Adj Rate Mtg Ln Tr     Short-term investment         US$ 2,059     N/A   US$ 2,012      
 
  Structured Adj Rate Mtg Ln Tr     Short-term investment         US$ 746     N/A   US$ 735      
 
  Structured Asset Invt Ln Tr     Short-term investment         US$ 856     N/A   US$ 855      
 
  Toyota Auto Receivables 2003 B     Short-term investment         US$ 4,970     N/A   US$ 4,892      
 
  Triad Auto Receivables Tr     Short-term investment         US$ 3,339     N/A   US$ 3,287      
 
  TW Hotel Fdg 2005 Lc       Short-term investment         US$ 8,197     N/A   US$ 8,197      
 
  Txu Elec Delivery Transition     Short-term investment         US$ 3,103     N/A   US$ 3,004      
 
  Usaa Auto Owner Tr     Short-term investment         US$ 3,718     N/A   US$ 3,682      
 
  Wachovia Auto Owner Tr     Short-term investment         US$ 38     N/A   US$ 38      
 
  Wachovia Auto Owner Tr     Short-term investment         US$ 4,999     N/A   US$ 4,955      
 
  Washington Mut Mtg Secs Corp.     Short-term investment         US$ 4,067     N/A   US$ 4,026      
 
  Wells Fargo Finl Auto Owner Tr     Short-term investment         US$ 5,299     N/A   US$ 5,269      
 
  Wells Fargo Mtg Bkd Secs     Short-term investment         US$ 3,661     N/A   US$ 3,632      
 
  WFS Financial Owner Trust     Short-term investment         US$ 4,133     N/A   US$ 4,069      
 
  WFS Finl     Short-term investment         US$ 1,311     N/A   US$ 1,308      
 
  WFS Finl 2004 2 Owner Tr     Short-term investment         US$ 4,994     N/A   US$ 4,905      
 
  WFS Finl 2004 4 Owner Tr     Short-term investment         US$ 5,399     N/A   US$ 5,320      
 
  WFS Finl 2005 2 Oner Tr     Short-term investment         US$ 2,250     N/A   US$ 2,229      
 
  Whole Auto Ln Tr     Short-term investment         US$ 1,954     N/A   US$ 1,968      
 
  Whole Auto Ln Tr     Short-term investment         US$ 4,000     N/A   US$ 3,941      
 
  Whole Auto Ln Tr     Short-term investment         US$ 3,000     N/A   US$ 2,927      
 
  World Omni Auto Receivables Tr     Short-term investment         US$ 5,963     N/A   US$ 5,839      
 
                                           
 
  Corporate issued notes                                        
 
  Canadian Imperial BK     Short-term investment         US$ 1,999     N/A   US$ 1,999      
 
  Canadian Imperial BK     Short-term investment         US$ 3,015     N/A   US$ 3,015      
 
  Washington Mutual     Short-term investment         US$ 3,000     N/A   US$ 3,000      
 
                                           
 
  Money market funds                                        
 
  SSGA Cash Mgmt Global Offshore     Short-term investment         US$ 7,936     N/A   US$ 7,936      
 
                                           
 
  Equity                                        
 
  Horizon Venture Fund I, L.P.     Long-term investment         $ 280,179     N/A   $ 280,179      
 
  Crimson Asia Capital Ltd., L.P.     Long-term investment           54,811     N/A     54,811      
 
                                           
Chi Cherng
  TSMC stock   Parent company   Short-term investment     16,454       458,564         1,022,605      
 
                                           
Hsin Ruey
  TSMC stock   Parent company   Short-term investment     16,484       459,511         1,024,521      
(Continued)

-55-


 

                                                 
                December 31, 2005    
                                        Market Value or    
                        Carrying Value           Net Asset Value    
        Relationship with the   Financial Statement   Shares/Units   (US$ in   Percentage of   (US$ in    
Held Company Name   Marketable Securities Type and Name   Company   Account   (in Thousands)   Thousands)   Ownership   Thousands)   Note
TSMC International
  Stock                                            
 
  TSMC Development   Subsidiary   Long-term investment     1     US$ 588,685       100     US$ 588,685      
 
  TSMC Technology   Subsidiary   Long-term investment     1     US$ 5,647       100     US$ 5,647      
 
  InveStar   Subsidiary   Long-term investment     18,505     US$ 21,833       97     US$ 21,833      
 
  InveStar II   Subsidiary   Long-term investment     51,300     US$ 33,451       97     US$ 33,451      
 
                                               
TSMC Development
  WaferTech stock   Subsidiary   Long-term investment         US$ 368,886       99     US$ 368,886      
 
                                               
InveStar
  Common stock                                            
 
  RichTek Technology Corp.     Short-term investment     838     US$ 71           US$ 3,168      
 
  Advanced Power Electronics Corp.     Short-term investment     525     US$ 210       2     US$ 670      
 
  SiRF Technology Holdings, Inc.     Short-term investment     10     US$ 44           US$ 294      
 
  Broadtek Electronics Corp.     Short-term investment     29     US$ 9           US$ 12      
 
  Monolithic Power Systems, Inc.     Short-term investment     1,975     US$ 1,567       7     US$ 28,256      
 
  Global Testing Corp.     Short-term investment     58,044     US$ 4,961       8     US$ 9,161      
 
  Capella Microsystems (Taiwan), Inc.     Long-term investment     530     US$ 154       4     US$ 154      
 
  Signia Technologies, Inc.     Long-term investment     701     US$ 201       3     US$ 201      
 
  Advanced Power Electronics Corp.     Long-term investment     674     US$ 270       2     US$ 860      
 
  Broadtek Electronics Corp.     Long-term investment     116     US$ 37           US$ 47      
 
  RichTek Technology Corp.     Long-term investment     421     US$ 36           US$ 1,591      
 
                                               
 
  Preferred stock                                            
 
  Integrated Memory Logic, Inc.     Long-term investment     1,831     US$ 1,220       9     US$ 1,220      
 
  Sensory, Inc.     Long-term investment     1,404     US$ 125       6     US$ 125      
 
  IP Unity, Inc.     Long-term investment     1,008     US$ 494       3     US$ 494      
 
  Sonics, Inc.     Long-term investment     2,686     US$ 3,530       4     US$ 3,530      
 
  NanoAmp Solutions, Inc.     Long-term investment     541     US$ 853       2     US$ 853      
 
  Memsic, Inc.     Long-term investment     2,727     US$ 1,500       10     US$ 1,500      
 
  Reflectivity, Inc.     Long-term investment     1,064     US$ 741       2     US$ 741      
 
                                               
InveStar II
  Common stock                                            
 
  Monolithic Power Systems, Inc.     Short-term investment     864     US$ 2,081       3     US$ 12,370      
 
  GeoVision, Inc.     Short-term investment     336     US$ 74       1     US$ 1,023      
 
  Advanced Analogic Technology, Inc.     Short-term investment     484     US$ 1,261       1     US$ 6,969      
 
  RichTek Technology Corp.     Short-term investment     386     US$ 192           US$ 1,458      
 
  Signia Technologies, Inc.     Long-term investment     351     US$ 101       1     US$ 101      
 
  Ralink Technology (Taiwan), Inc.     Long-term investment     1,833     US$ 791       3     US$ 791      
 
  Procoat Technology, Inc.     Long-term investment     5,123     US$ 1,940       10     US$ 1,940      
 
  Capella Microsystems (Taiwan), Inc.     Long-term investment     419     US$ 122       2     US$ 122      
 
  Auden Technology MFG. Co., Ltd.     Long-term investment     953     US$ 410       4     US$ 410      
 
  EoNEX Technologies, Inc.     Long-term investment     55     US$ 3,048       5     US$ 3,048      
 
  Conwise Technology Corporation, Ltd.     Long-term investment     2,800     US$ 204       9     US$ 204      
 
  Goyatek Technology, Corp.     Long-term investment     2,088     US$ 545       7     US$ 545      
 
  Trendchip Technologies Corp.     Long-term investment     2,000     US$ 574       5     US$ 574      
 
  EON Technology, Corp.     Long-term investment     3,264     US$ 1,175       8     US$ 1,175      
(Continued)

-56-


 

                                                 
                December 31, 2005    
                                        Market Value or    
                        Carrying Value           Net Asset Value    
        Relationship with the   Financial Statement   Shares/Units   (US$ in   Percentage of   (US$ in    
Held Company Name   Marketable Securities Type and Name   Company   Account   (in Thousands)   Thousands)   Ownership   Thousands)   Note
 
  eChannelOpen Holding, Inc.     Long-term investment     358     US$ 251       4     US$ 251      
 
  eLCOS Microdisplay Technology, Ltd.     Long-term investment     270     US$ 27       1     US$ 27      
 
  Epic Communications, Inc.     Long-term investment     302     US$ 37       1     US$ 37      
 
  RichTek Technology Corp.     Long-term investment     198     US$ 98           US$ 872      
 
  GeoVision, Inc.     Long-term investment     15     US$ 3           US$ 50      
 
                                               
 
  Preferred stock                                            
 
  Memsic, Inc.     Long-term investment     2,289     US$ 1,560       8     US$ 1,560      
 
  NanoAmp Solutions, Inc.     Long-term investment     375     US$ 1,500       1     US$ 1,500      
 
  Sonics, Inc.     Long-term investment     3,082     US$ 3,082       5     US$ 3,082      
 
  Reflectivity, Inc.     Long-term investment     4,255     US$ 2,205       5     US$ 2,205      
 
  Kilopass Technologies, Inc.     Long-term investment     3,887     US$ 2,000       18     US$ 2,000      
 
  FangTek, Inc.     Long-term investment     6,806     US$ 3,250       34     US$ 3,250      
 
  eLCOS Microdisplay Technology, Ltd.     Long-term investment     2,667     US$ 3,500       15     US$ 3,500      
 
  Alchip Technologies Limited     Long-term investment     2,597     US$ 2,950       18     US$ 2,950      
 
                                               
Emerging Alliance
  Common stock                                            
 
  Global Investment Holding, Inc.     Long-term investment     10,800     $ 100,000       6     $ 100,000      
 
  RichWave Technology Corp.     Long-term investment     3,380     US$ 1,247       13     US$ 1,247      
 
  NetLogic Microsystems, Inc.     Long-term investment     113     US$ 1,388       1     US$ 3,051      
 
  Quake Technologies, Inc.     Long-term investment     46     US$ 35           US$ 35      
 
  Pixim, Inc.     Long-term investment     1,924     US$ 512       4     US$ 512      
 
                                               
 
  Preferred stock                                            
 
  Quake Technologies, Inc.     Long-term investment     555     US$ 415       1     US$ 415      
 
  Pixim, Inc.     Long-term investment     2,193     US$ 583           US$ 583      
 
  Ikanos Communication, Inc.     Long-term investment     7,446     US$ 3,125       3     US$ 3,125      
 
  Quicksilver Technology, Inc.     Long-term investment     1,049     US$       4     US$      
 
  Mosaic Systems, Inc.     Long-term investment     2,481     US$ 12       6     US$ 12      
 
  Zenesis Technologies, Inc.     Long-term investment     1,204     US$ 699       4     US$ 699      
 
  Reflectivity, Inc.     Long-term investment     4,848     US$ 2,479       4     US$ 2,479      
 
  Miradia, Inc.     Long-term investment     3,040     US$ 1,000       4     US$ 1,000      
 
  Axiom Microdevices, Inc.     Long-term investment     1,000     US$ 1,000       3     US$ 1,000      
 
  Optichron, Inc.     Long-term investment     714     US$ 1,000       4     US$ 1,000      
 
  NuCORE Technology Inc.     Long-term investment     2,254     US$ 1,455       2     US$ 1,455      
 
  Next IO, Inc.     Long-term investment     800     US$ 500       2     US$ 500      
 
  Audience, Inc.     Long-term investment     1,654     US$ 250       2     US$ 250      
 
  Centrality Communications, Inc.     Long-term investment     1,325     US$ 1,800       3     US$ 1,800      
 
  Britestream Networks, Inc. (Layer N Networks, Inc.)     Long-term investment     2,444     US$ 1,172       2     US$ 1,172      
 
  Teknovus, Inc.     Long-term investment     6,977     US$ 1,327       3     US$ 1,327      
 
  Optimal Corporation     Long-term investment     485     US$ 500       6     US$ 500      
 
  Mobilygen Corporation     Long-term investment     1,415     US$ 750       1     US$ 750      
(Continued)

-57-


 

                                                 
                December 31, 2005    
                                        Market Value or      
                        Carrying Value             Net Asset Value      
        Relationship with the   Financial Statement   Shares/Units   (US$ in     Percentage of     (US$ in      
Held Company Name   Marketable Securities Type and Name   Company   Account   (in Thousands)   Thousands)     Ownership     Thousands)     Note
 
  Warrants                                            
 
  Pixim, Inc.     Long-term investment     242                      
 
                                               
Partners
  Common stock                                            
 
  VisEra Holding Company     Long-term investment     18,931     US$ 19,862       50     US$ 19,862      
 
                                               
VTAF II
  Common stock                                            
 
  Yobon Technologies, Inc.     Long-term investment     1,675     US$ 787       17     US$ 787      
 
  Sentelic, Corp.     Long-term investment     600     US$ 1,022       15     US$ 1,022      
 
                                               
 
  Preferred stock                                            
 
  Powerprecise Solutions, Inc.     Long-term investment     1,032     US$ 1,000       8     US$ 1,000      
 
  Tzero Technologies, Inc.     Long-term investment     244     US$ 500       2     US$ 500      
 
  Miradia, Inc.     Long-term investment     1,809     US$ 1,600       2     US$ 1,600      
 
  Axiom Microdevices, Inc.     Long-term investment     761     US$ 776       2     US$ 776      
 
  Next IO, Inc.     Long-term investment     216     US$ 182           US$ 182      
 
  Ageia Technologies, Inc.     Long-term investment     1,969     US$ 2,000       2     US$ 2,000      
 
  Audience, Inc.     Long-term investment     531     US$ 102       1     US$ 102      
 
  GemFire Corporation     Long-term investment     600     US$ 600       1     US$ 600      
 
  Optichron, Inc.     Long-term investment     353     US$ 869       2     US$ 869      
 
  Leadtrend Technology, Inc.     Long-term investment     900     US$ 431       5     US$ 431      
 
  Aquantia Corporation     Long-term investment     1,401     US$ 1,150       5     US$ 1,150      
 
  Xceive Corporation     Long-term investment     714     US$ 1,000       2     US$ 1,000      
 
  5V Technologies,Inc     Long-term investment     1,333     US$ 1,000           US$ 1,000      
 
  Power Analog Microelectronics     Long-term investment     2,000     US$ 1,500       7     US$ 1,500      
 
  Impinj,Inc     Long-term investment     257     US$ 500           US$ 500      
 
                                               
 
  Warrants                                            
 
  Aquantia Corporation     Long-term investment     46     $           $      
 
                                               
GUC
  Stock                                            
 
  Global Unichip Corporation — NA   Subsidiary   Long-term investment     100       4,715       100       4,715      
 
  Global Unichip Japan   Subsidiary   Long-term investment           2,153       100       2,153      

-58-


 

     
TABLE 4
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED AND SUBSIDIARIES
MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
FOR THE YEAR END DECEMBER 31, 2005
(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Specified)
                                                                                                 
                    Beginning Balance   Acquisition   Disposal (Note 1)   Ending Balance
                                                                    Carrying   Gain (Loss)           Amount
                    Shares/Units   Amount   Shares/Units   Amount   Shares/Units   Amount   Value   on Disposal   Shares/Units   (US$ in
    Marketable Securities Type and   Financial Statement       Nature of   (in   (US$ in   (in   (US$ in   (in   (US$ in   (US$ in   (US$ in   (in   Thousands)
Company Name   Name   Account   Counter-party   Relationship   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   (Note 2)
The Company   Bond funds  
 
                                                                                       
    JF Taiwan Bond Fund   Short-term investment  
JF Asset Management (Taiwan) Ltd.
      78,698     $ 1,153,209           $       16,689     $ 250,000     $ 244,553     $ 5,447       62,009     $ 908,656  
    JF Taiwan First Bond Fund   Short-term investment  
JF Asset Management (Taiwan) Ltd.
      84,886       1,151,463                   21,755       300,000       295,104       4,896       63,131       856,359  
    Invesco R.O.C. Bond Fund   Short-term investment  
INVESCO Asset Management Taiwan
      76,705       1,101,911                   76,705       1,121,779       1,101,911       19,868              
    Dresdner Bond DAM Fund   Short-term investment  
Allianz Dresdner Securities
      80,833       900,000                   11,530       130,000       128,383       1,617       69,303       771,617  
           
Investment Consulting Co., Ltd.
                                                                                   
    Barits Bond Fund   Short-term investment  
Barits Securities Investment Trust
      76,640       900,000                   76,640       915,204       900,000       15,204              
           
Co., Ltd.
                                                                                   
    Shinkong Chi-Shin Fund   Short-term investment  
Shinkong Investment Trust Co., Ltd.
      151,594       2,100,000                   96,531       1,360,000       1,337,229       22,771       55,063       762,771  
 
   
Bonds under repurchase agreement
  Short-term investment  
Chung Shing Bills Finance Corp. and several financial institutions
            249,449                         251,784       249,449       2,335              
 
    Government bonds  
 
                                                                                       
    2003 Government Bond Series A   Short-term investment  
BNP and several financial
            1,207,409                         1,216,500       1,207,409       9,091              
           
institutions
                                                                                   
    2004 Government Bond Series E   Short-term investment  
Chung Shing Bills Finance Corp.
                        300,472                                     300,472  
           
and several financial institutions
                                                                                   
    2002 Government Bond Series B   Long-term investment  
China Bills Finance Corp. and
                        360,608                                     355,936  
           
several financial institutions
                                                                                   
    2002 Government Bond Series F   Long-term investment  
China Bills Finance Corp. and
                        149,440                                     149,441  
           
several financial institutions
                                                                                   
    2005 Government Bond Series A   Long-term investment  
China Bills Finance Corp. and
                                                                                   
           
several financial institutions
                        2,548,689                                     2,548,977  
    Kreditanstalt Fur Wiederaufbau   Short-term investment  
                      US$ 6,881                                   US$ 6,881  
    United States Treas NTS   Short-term investment  
          US$ 192,357           US$ 494,515           US$ 637,301     US$ 639,356     US$ (2,055 )         US$ 47,516  
 
    Corporate bonds  
 
                                                                                       
    Taiwan Power Company   Short-term investment  
China Bills Finance Corp.
          $ 2,777,798           $           $ 2,807,500     $ 2,777,798     $ 29,702           $  
   
Formosa Petrochemical Corporation
  Short-term investment  
China Bills Finance Corp.
                        311,568                                     311,568  
    Allstate Finl Global Fdg LLC   Short-term investment  
          US$ 3,171                       US$ 3,086     US$ 3,171     US$ (85 )            
    American Intl Group Inc. Mtnf   Short-term investment  
          US$ 3,795                       US$ 3,793     US$ 3,795     US$ (2 )            
    Bear Stearns Cos Inc.   Short-term investment  
                      US$ 3,329                                   US$ 3,329  
    Bear Stearns Cos Inc.   Short-term investment  
          US$ 3,518                       US$ 3,484     US$ 3,518     US$ (34 )            
    Bear Stearns Cos Inc.   Short-term investment  
                      US$ 3,757                                   US$ 3,757  
    Bear Stearns Cos Inc. Medium Te   Short-term investment  
          US$ 3,105                       US$ 3,106     US$ 3,105     US$ 1              
    Caterpillar Finl Svcs Mtn   Short-term investment  
                      US$ 5,721                                   US$ 5,721  
    Citigroup Inc.   Short-term investment  
          US$ 3,583                       US$ 3,512     US$ 3,583     US$ (71 )            
    Countrywide Fdg Corp. Mtn   Short-term investment  
                      US$ 3,500           US$ 3,500     US$ 3,500                    
    Countrywide Finl Corp.   Short-term investment  
                      US$ 3,000           US$ 3,000     US$ 3,000                    
    Credit Suisse Fb USA Inc.   Short-term investment  
          US$ 2,645           US$ 4,141           US$ 2,593     US$ 2,645     US$ (52 )         US$ 4,141  
    Credit Suisse First Boston USA   Short-term investment  
                      US$ 3,832           US$ 3,780     US$ 3,832     US$ (52 )            
    Deere John Cap Corp.   Short-term investment  
                      US$ 5,079                                   US$ 5,079  
    European Invt BK   Short-term investment  
                      US$ 3,918                                   US$ 3,918  
    General Elec Cap Corp. Mtn   Short-term investment  
          US$ 3,467                       US$ 3,432     US$ 3,467     US$ (35 )            
    General Elec Cap Corp. Mtn   Short-term investment  
                      US$ 3,989                                   US$ 3,989  
    General Elec Cap Corp. Mtn   Short-term investment  
                      US$ 8,862                                   US$ 8,862  
 
           
 
                                                                              (Continued)

- 59 -


 

     
                                                                                                 
                    Beginning Balance   Acquisition   Disposal (Note 1)   Ending Balance
                                                                    Carrying   Gain (Loss)           Amount
                    Shares/Units   Amount   Shares/Units   Amount   Shares/Units   Amount   Value   on Disposal   Shares/Units   (US$ in
    Marketable Securities Type and   Financial Statement       Nature of   (in   (US$ in   (in   (US$ in   (in   (US$ in   (US$ in   (US$ in   (in   Thousands)
Company Name   Name   Account   Counter-party   Relationship   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   (Note 2)
    General Elec Cap Corp. Mtn   Short-term investment  
          US$ 3,886           US$           US$ 3,823     US$ 3,886     US$ (63 )         US$  
    General Re Corp.   Short-term investment  
                      US$ 3,500                                   US$ 3,500  
    Goldman Sachs Group Inc.   Short-term investment  
                      US$ 4,981                                   US$ 4,981  
    Goldman Sachs Group Inc.   Short-term investment  
                      US$ 3,477                                   US$ 3,477  
    Goldman Sachs Group Inc. Mtn   Short-term investment  
          US$ 3,505                       US$ 3,506     US$ 3,505     US$ 1              
    Hancock John Global Fdg II Mtn   Short-term investment  
                      US$ 3,566                                   US$ 3,566  
    Hbos Plc Medium Term Sr Nts   Short-term investment  
                      US$ 3,201                       $           US$ 3,201  
    Household Fin Corp. Mtn Bk Ent   Short-term investment  
          US$ 3,542                       US$ 3,488     US$ 3,542     US$ (54 )            
    HSBC Fin Corp. Mtn   Short-term investment  
                      US$ 7,894           US$ 2,780     US$ 2,797     US$ (17 )         US$ 5,097  
    ING Sec Life Ins Ingslf   Short-term investment  
          US$ 3,012                       US$ 3,008     US$ 3,012     US$ (4 )            
    International Business Machs   Short-term investment  
                      US$ 7,247           US$ 4,994     US$ 4,998     US$ (4 )         US$ 2,249  
    Intl Lease Fin Corp. Mtn   Short-term investment  
                      US$ 3,028                                   US$ 3,028  
    JP Morgan Chase + Co.   Short-term investment  
                      US$ 3,406                                   US$ 3,406  
   
Key Bk Na Med Term Nts Bk Entr
  Short-term investment  
                      US$ 4,450                                   US$ 4,450  
    Lehman Brothers Hldgs Inc.   Short-term investment  
          US$ 3,705                       US$ 3,511     US$ 3,705     US$ (194 )            
    Merrill Lynch + Co. Inc.   Short-term investment  
                      US$ 4,900                                   US$ 4,900  
    Morgan Stanley Group Inc.   Short-term investment  
          US$ 1,050           US$ 4,507           US$ 1,022     US$ 1,050     US$ (28 )         US$ 4,507  
    Morgan Stanley Group Inc.   Short-term investment  
          US$ 3,638                       US$ 3,571     US$ 3,638     US$ (67 )            
    National City Corp.   Short-term investment  
                      US$ 3,426                                   US$ 3,426  
    Nationsbank Corp.   Short-term investment  
          US$ 3,644                       US$ 3,522     US$ 3,644     US$ (122 )            
    Nationwide Bldg Soc Mtn   Short-term investment  
                      US$ 3,000                                   US$ 3,000  
    Ppg Inds Inc.   Short-term investment  
                      US$ 3,571                                      
    Pricoa Global Fdg 1 Mtn   Short-term investment  
                      US$ 3,500                                   US$ 3,500  
    Pricoa Global Fdg I Mtn   Short-term investment  
          US$ 3,050                       US$ 3,052     US$ 3,050     US$ 2              
    Pricoa Global Fdg I Mtn   Short-term investment  
          US$ 3,507                       US$ 3,510     US$ 3,507     US$ 3              
    Principal Life Global Fdg I Gl   Short-term investment  
          US$ 3,168                       US$ 3,049     US$ 3,168     US$ (119 )            
    Public Svc Elec Gas Co.   Short-term investment  
                      US$ 3,225                                   US$ 3,225  
   
Salomon Smith Barney Hldgs Inc.
  Short-term investment  
          US$ 3,160                       US$ 3,046     US$ 3,160     US$ (114 )            
    Santander Us Debt S A Uniperso   Short-term investment  
                      US$ 4,998                                   US$ 4,998  
    Wachovia Corp.   Short-term investment  
          US$ 3,720                       US$ 3,568     US$ 3,720     US$ (152 )            
    Washington Mut Fin Corp.   Short-term investment  
          US$ 4,768                       US$ 3,591     US$ 3,725     US$ (134 )         US$ 1,043  
    Taiwan Power Company   Long-term investment  
China Bills Finance Corp. and several financial institutions
          $ 915,276           $ 2,967,681           $ 600,000     $ 600,000     $           $ 3,263,348  
    Nan Ya Plastics Corporation   Long-term investment  
China Bills Finance Corp. and several financial institutions
            407,526             1,883,901             132,000       132,000                   2,150,842  
 
    Agency bonds  
 
                                                                                       
    Federal Farm Cr Bks   Short-term investment  
                      US$ 3,985                                   US$ 3,985  
    Federal Home Ln Bank   Short-term investment  
                      US$ 3,962                                   US$ 3,962  
    Federal Home Ln Bks   Short-term investment  
                      US$ 6,110                                   US$ 6,110  
    Federal Home Ln Bks   Short-term investment  
          US$ 4,948                       US$ 4,947     US$ 4,948     US$ (1 )            
    Federal Home Ln Bks   Short-term investment  
          US$ 7,962                       US$ 4,954     US$ 4,972     US$ (18 )         US$ 2,990  
    Federal Home Ln Bks   Short-term investment  
          US$ 13,953                       US$ 13,888     US$ 13,953     US$ (65 )            
    Federal Home Ln Bks   Short-term investment  
                      US$ 3,932                                   US$ 3,932  
    Federal Home Ln Bks   Short-term investment  
          US$ 13,981                       US$ 13,906     US$ 13,981     US$ (75 )            
    Federal Home Ln Bks   Short-term investment  
          US$ 13,983                       US$ 13,865     US$ 13,983     US$ (118 )            
    Federal Home Ln Bks   Short-term investment  
          US$ 7,042                       US$ 6,946     US$ 7,042     US$ (96 )            
    Federal Home Ln Bks   Short-term investment  
          US$ 7,014                       US$ 6,883     US$ 7,014     US$ (131 )            
    Federal Home Ln Bks   Short-term investment  
                      US$ 4,136                                   US$ 4,136  
    Federal Home Ln Bks   Short-term investment  
                      US$ 4,939                                   US$ 4,939  
    Federal Home Ln Bks   Short-term investment  
                      US$ 7,886                                   US$ 7,886  
    Federal Home Ln Bks   Short-term investment  
                      US$ 8,672                                   US$ 8,672  
    Federal Home Ln Bks   Short-term investment  
          US$ 7,018           US$ 3,960           US$ 10,863     US$ 10,978     US$ (115 )            
    Federal Home Ln Bks   Short-term investment  
                      US$ 4,965                                   US$ 4,965  
 
 
           
 
                                                                              (Continued)

- 60 -


 

     
                                                                                                 
                    Beginning Balance   Acquisition   Disposal (Note 1)   Ending Balance
                                                                    Carrying   Gain (Loss)           Amount
                    Shares/Units   Amount   Shares/Units   Amount   Shares/Units   Amount   Value   on Disposal   Shares/Units   (US$ in
    Marketable Securities Type and   Financial Statement       Nature of   (in   (US$ in   (in   (US$ in   (in   (US$ in   (US$ in   (US$ in   (in   Thousands)
Company Name   Name   Account   Counter-party   Relationship   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   (Note 2)
    Federal Home Ln Bks   Short-term investment  
          US$           US$ 4,808           US$     US$     US$           US$ 4,808  
    Federal Home Ln Bks   Short-term investment  
                      US$ 7,558                                   US$ 7,558  
    Federal Home Ln Bks   Short-term investment  
                      US$ 8,594                                   US$ 8,594  
    Federal Home Ln Bks   Short-term investment  
                      US$ 3,024                                   US$ 3,024  
    Federal Home Ln Bks   Short-term investment  
                      US$ 3,972                                   US$ 3,972  
    Federal Home Ln Bks   Short-term investment  
                      US$ 7,887                                   US$ 7,887  
    Federal Home Ln Bks   Short-term investment  
                      US$ 19,846                                   US$ 19,846  
    Federal Home Ln Bks   Short-term investment  
                      US$ 6,908                                   US$ 6,908  
    Federal Home Ln Bks   Short-term investment  
                      US$ 9,134                                   US$ 9,134  
    Federal Home Ln Bks   Short-term investment  
                      US$ 3,379                                   US$ 3,379  
    Federal Home Ln Mtg Corp.   Short-term investment  
          US$ 4,933                       US$ 4,960     US$ 4,933     US$ 27              
    Federal Home Ln Mtg Corp.   Short-term investment  
          US$ 4,953                       US$ 4,938     US$ 4,953     US$ (15 )            
    Federal Home Ln Mtg Corp.   Short-term investment  
                      US$ 6,925           US$ 6,931     US$ 6,925     US$ 6              
    Federal Home Ln Mtg Corp.   Short-term investment  
          US$ 6,978                       US$ 6,926     US$ 6,978     US$ (52 )            
    Federal Home Ln Mtg Corp.   Short-term investment  
                      US$ 6,980                                   US$ 6,980  
    Federal Home Ln Mtg Corp.   Short-term investment  
                      US$ 5,929                                   US$ 5,929  
    Federal Home Loan Bank   Short-term investment  
                      US$ 3,475                                   US$ 3,475  
    Federal Home Loan Corp.   Short-term investment  
                      US$ 7,989           US$ 7,928     US$ 7,989     US$ (61 )            
    Federal Home Loan Mtg Corp.   Short-term investment  
          US$ 4,903           US$ 9,819           US$ 9,798     US$ 9,819     US$ (21 )         US$ 4,903  
    Federal Natl Mtg Assn   Short-term investment  
          US$ 3,466                       US$ 3,485     US$ 3,466     US$ 19              
    Federal Natl Mtg Assn   Short-term investment  
          US$ 6,903                       US$ 6,943     US$ 6,903     US$ 40              
    Federal Natl Mtg Assn   Short-term investment  
          US$ 5,270                       US$ 5,247     US$ 5,270     US$ (23 )            
    Federal Natl Mtg Assn   Short-term investment  
          US$ 6,940                       US$ 6,937     US$ 6,940     US$ (3 )            
    Federal Natl Mtg Assn   Short-term investment  
          US$ 4,981                       US$ 4,953     US$ 4,981     US$ (28 )            
    Federal Natl Mtg Assn   Short-term investment  
                      US$ 4,921                                   US$ 4,921  
    Federal Natl Mtg Assn   Short-term investment  
                      US$ 7,892                                   US$ 7,892  
    Federal Natl Mtg Assn   Short-term investment  
                      US$ 5,337           US$ 5,300     US$ 5,337     US$ (37 )            
    Federal Natl Mtg Assn   Short-term investment  
          US$ 6,997                       US$ 6,956     US$ 6,997     US$ (41 )            
    Federal Natl Mtg Assn   Short-term investment  
                      US$ 4,943                                   US$ 4,943  
    Federal Natl Mtg Assn   Short-term investment  
                      US$ 14,952           US$ 5,964     US$ 5,981     US$ (17 )         US$ 8,971  
    Federal Natl Mtg Assn   Short-term investment  
                      US$ 4,430                                   US$ 4,430  
    Federal Natl Mtg Assn   Short-term investment  
                      US$ 4,061           US$ 4,041     US$ 4,061     US$ (20 )            
    Federal Natl Mtg Assn   Short-term investment  
                      US$ 17,888                                   US$ 17,888  
    Federal Natl Mtg Assn   Short-term investment  
                      US$ 5,928                                   US$ 5,928  
    Federal Natl Mtg Assn   Short-term investment  
                      US$ 7,926                                   US$ 7,926  
    Federal Natl Mtg Assn Mtn   Short-term investment  
                      US$ 9,758                                   US$ 9,758  
    Federal Natl Mtg Assn Mtn   Short-term investment  
                      US$ 5,740                                   US$ 5,740  
    Freddie Mac   Short-term investment  
          US$ 4,929                       US$ 4,931     US$ 4,929     US$ 2              
    Fed Hm Ln Pc Pool 1H2520   Short-term investment  
                      US$ 3,961                                   US$ 3,753  
    Fed Hm Ln Pc Pool 781959   Short-term investment  
                      US$ 7,913                                   US$ 7,112  
    Fed Hm Ln Pc Pool 847290   Short-term investment  
                      US$ 4,173           US$ 4,170     US$ 4,173     US$ (3 )            
    Federal Home Ln Mtg   Short-term investment  
                      US$ 3,958                                   US$ 3,848  
    Federal Home Ln Mtg Corp.   Short-term investment  
                      US$ 3,954                                   US$ 3,954  
    Federal Home Ln Mtg Corp.   Short-term investment  
                      US$ 4,154                                   US$ 4,098  
    Federal Home Ln Mtg Corp.   Short-term investment  
                      US$ 9,955                                   US$ 9,905  
    Federal Home Ln Mtg Corp.   Short-term investment  
                      US$ 5,389                                   US$ 4,902  
    Federal Home Ln Mtg Corp.   Short-term investment  
                      US$ 3,930                                   US$ 3,755  
    Federal Natl Mtg Assn   Short-term investment  
                      US$ 3,918                                   US$ 3,696  
    Federal Natl Mtg Assn   Short-term investment  
                      US$ 4,030                                   US$ 4,030  
    Federal Natl Mtg Assn   Short-term investment  
                      US$ 4,051                                   US$ 4,051  
    Federal Natl Mtg Assn Gtd   Short-term investment  
                      US$ 3,892                                   US$ 3,659  
    Fnma Pool 255883   Short-term investment  
                      US$ 3,827                                   US$ 3,771  
    Fnma Pool 687863   Short-term investment  
                      US$ 3,848                                   US$ 3,570  
    Fnma Pool 696485   Short-term investment  
                      US$ 4,345                                   US$ 4,175  
    Fnma Pool 793025   Short-term investment  
                      US$ 3,915                                   US$ 3,306  
    Fnma Pool 815626   Short-term investment  
                      US$ 3,663                                   US$ 3,622  
           
 
                                                                              (Continued)

- 61 -


 

     
                                                                                                 
                    Beginning Balance   Acquisition   Disposal (Note 1)   Ending Balance
                                                                    Carrying   Gain (Loss)           Amount
                    Shares/Units   Amount   Shares/Units   Amount   Shares/Units   Amount   Value   on Disposal   Shares/Units   (US$ in
    Marketable Securities Type and   Financial Statement       Nature of   (in   (US$ in   (in   (US$ in   (in   (US$ in   (US$ in   (US$ in   (in   Thousands)
Company Name   Name   Account   Counter-party   Relationship   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   (Note 2)
    Fnma Pool 825395   Short-term investment                         US$ 3,417                                   US$ 3,265  
    Fnma Pool 825398   Short-term investment                         US$ 5,246                                   US$ 4,949  
    Fnma Pool 841069   Short-term investment                         US$ 3,966                                   US$ 3,673  
 
    Corporate issued asset - backed securities          
 
                                                                               
    Aesop Fdg II LLC   Short-term investment             US$ 4,955                       US$ 4,958     US$ 4,955     US$ 3              
    American Express Cr Account Ma   Short-term investment             US$ 3,445                       US$ 3,428     US$ 3,445     US$ (17 )            
    Americredit Automobile Receiv   Short-term investment                         US$ 5,000                                   US$ 5,000  
    Bear Stearns Coml Mtg Secs Inc.   Short-term investment                         US$ 6,350                                   US$ 6,350  
    BMW Ven Owner Tr   Short-term investment             US$ 4,978                       US$ 4,874     US$ 4,907     US$ (33 )            
    California Infr + Economic Dev   Short-term investment             US$ 4,298                       US$ 4,153     US$ 4,298     US$ (145 )            
    California Infras + Economic   Short-term investment             US$ 6,126                       US$ 5,103     US$ 5,228     US$ (125 )            
    Capital One Multi Asset Execut   Short-term investment                         US$ 3,974                                   US$ 3,974  
    Caterpillar Finl Asset Tr   Short-term investment             US$ 10,008                       US$ 4,943     US$ 5,009     US$ (66 )         US$ 4,453  
    Caterpillar Finl Asset Tr   Short-term investment                         US$ 8,219                                   US$ 8,219  
    Cendant Rent Car Fdg Aesop LLC   Short-term investment                         US$ 11,626                                   US$ 11,626  
    Citibank Cr Card Issuance Tr   Short-term investment             US$ 4,959                       US$ 4,948     US$ 4,959     US$ (11 )            
    Citibank Cr Card Issuance Tr   Short-term investment                         US$ 9,782                                   US$ 9,782  
    Cwabs Inc.   Short-term investment             US$ 1,903           US$ 1,865           US$ 3,440     US$ 3,435     US$ 5              
    Cwmbs Inc.   Short-term investment             US$ 4,040                       US$ 3,479     US$ 3,492     US$ (13 )            
    Cwmbs Inc.   Short-term investment                         US$ 4,040           US$ 3,842     US$ 3,823     US$ (19 )            
    Daimlerchrysler Auto Tr   Short-term investment             US$ 4,897                       US$ 4,873     US$ 4,897     US$ (24 )            
    Drive Auto Receivables Tr   Short-term investment                         US$ 3,200                                   US$ 3,200  
    First USA Credit Cr Master Tr   Short-term investment             US$ 5,011                       US$ 5,007     US$ 5,011     US$ (4 )            
    Hertz Vehicle Financing LLC   Short-term investment                         US$ 5,350                                   US$ 5,350  
    Honda Auto Receivables   Short-term investment             US$ 5,000                       US$ 4,984     US$ 5,000     US$ (16 )            
    Household Automotive Tr   Short-term investment                         US$ 8,352                                   US$ 5,872  
    Hyundai Auto Receivables Tr   Short-term investment                         US$ 3,250                                   US$ 3,250  
    Hyundai Auto Receivables Tr   Short-term investment                         US$ 3,999                                   US$ 3,999  
    Lb Ubs Coml Mtg Tr   Short-term investment                         US$ 4,243                                   US$ 4,001  
    Massachusetts Rrb Spl Purp Tr   Short-term investment                         US$ 3,900                                   US$ 3,900  
    Mastr Asset Backed Secs Tr   Short-term investment                         US$ 3,825                                   US$ 206  
    Mastr Asset Backed Secs Tr   Short-term investment                         US$ 3,499                                   US$ 3,499  
    Mbna Cr Card Master Nt Tr   Short-term investment                         US$ 5,018           US$ 5,015     US$ 5,018     US$ (3 )            
    Mbna Master Cr Card Tr II   Short-term investment                         US$ 8,108                                   US$ 8,108  
    Nissan Auto Receivables Own Tr   Short-term investment             US$ 4,999                       US$ 4,989     US$ 4,999     US$ (10 )            
    Nissan Auto Receivables Owner   Short-term investment             US$ 4,853                       US$ 4,880     US$ 4,853     US$ 27              
    Pg+E Energy Recovery Fdg LLC   Short-term investment                         US$ 4,749                                   US$ 4,749  
    Prime Cr Card Master Tr   Short-term investment                         US$ 4,080                                      
    Residential Asset Sec Mtg Pass   Short-term investment                         US$ 3,780                                   US$ 3,780  
    Residential Fdg Mtg Secs I Inc.   Short-term investment                         US$ 5,589                                   US$ 4,817  
    Revolving Home Equity Ln Tr   Short-term investment                         US$ 5,000                                   US$ 3,234  
    Sequoia Mtg Tr   Short-term investment                         US$ 4,560           US$ 4,026     US$ 4,026                    
    Sequoia Mtg Tr   Short-term investment                         US$ 3,500           US$ 2,813     US$ 2,810     US$ 3              
    TW Hotel Fdg 2005 LLC   Short-term investment                         US$ 8,197                                   US$ 8,197  
    Txu Elec Delivery Transition   Short-term investment             US$ 7,736                       US$ 3,470     US$ 3,491     US$ (21 )         US$ 3,103  
    Usaa Auto Owner Tr   Short-term investment                         US$ 3,718                                   US$ 3,718  
    Usaa Auto Owner Tr   Short-term investment             US$ 4,000                       US$ 3,995     US$ 4,000     US$ (5 )            
    Washington Mut Mtg Secs Corp.   Short-term investment             US$           US$ 4,365           US$     US$     US$           US$ 4,067  
    Wells Fargo Finl Auto Owner Tr   Short-term investment                         US$ 5,299                                   US$ 5,299  
    Wells Fargo Mtg Bkd Secs   Short-term investment                         US$ 4,014                                   US$ 3,661  
    Whole Auto Ln Tr   Short-term investment             US$ 5,967                       US$ 5,973     US$ 5,967     US$ 6              
           
 
                                                                                   
Partners   VisEra Holding Company   Long-term investment                     18,931     US$ 18,931                               18,931     US$ 19,862  
Note1: The proceeds of bond investments matured are excluded.
Note2: The ending balance included the amortization of premium or discount on bond investments.

- 62 -


 

TABLE 5
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED AND SUBSIDIARIES
TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2005
(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Specified)
                                                             
                                            Notes/Accounts Payable or    
            Transaction Details   Abnormal Transaction   Receivable    
            Purchase/           % to       Unit Price   Payment Terms           % to    
Company Name   Related Party   Nature of Relationship   Sale   Amount   Total   Payment Terms   (Note)   (Note)   Ending Balance   Total   Note
The Company
  TSMC-North America   Subsidiary   Sales   $ 153,618,916       57     Net 30 days after invoice date       $ 20,407,621       49      
 
  Philips   Major shareholder   Sales     3,298,770       1     Net 30 days after monthly closing         573,565       1      
 
  GUC   Investee with
controlling financial
interest
  Sales     347,456           Net 30 days after monthly closing         49,046        
 
  SSMC   Investee accounted
for using equity
method
  Sales     195,253           Net 45 days after monthly closing                
 
  WaferTech   Subsidiary   Purchases     11,137,313       28     Net 30 days after monthly closing         (1,133,217 )     10      
 
  SSMC   Investee accounted
for using equity
method
  Purchases     5,729,672       15     Net 30 days after monthly closing         (485,873 )     4      
 
  VIS   Investee accounted
for using equity
method
  Purchases     4,142,457       10     Net 30 days after monthly closing         (563,240 )     5      
 
  TSMC-Shanghai   Subsidiary   Purchases     1,405,030       4     Net 30 days after monthly closing         (274,820 )     2      
 
                                                           
GUC
  TSMC-North America   The same Parent   Purchases     266,372       23     Net 30 days after invoice date         (66,138 )     37      
     
Note: 
The terms of sales to related parties are not significantly different from those to third parties. For purchase transactions, prices are determined in accordance with the related contractual agreements and no other similar transaction could be compared with.

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TABLE 6
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED AND SUBSIDIARIES
RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
DECEMBER 31, 2005
(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Specified)
                                             
                                    Amounts Received    
                        Overdue   in Subsequent   Allowance for Bad
Company Name   Related Party   Nature of Relationship   Ending Balance   Turnover Rate   Amount   Action Taken   Period   Debts
The Company
  TSMC-North America   Subsidiary   $ 20,606,126     43 days   $ 5,735,388     Accelerate demand on account receivables   $ 7,626,255     $        —
 
  TSMC Technology   Indirect subsidiaries     972,563     Note         Accelerate demand on account receivables                   —
 
  Philips   Major shareholder     573,565     64 days     45,909     Accelerate demand on account receivables     1,603               —
 
  VisEra   Indirect investee
accounted for using
equity method
    374,200     Note     1,750     Accelerate demand on account receivables     5,161               —
 
  SSMC   Investee accounted
for using equity
method
    149,251     Note         Accelerate demand on account receivables                   —
     
Note: 
The ending balance primarily consisted of other receivables, it is not applicable for the calculation of the turnover rate.

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TABLE 7
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED AND SUBSIDIARIES
NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES ON WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE
DECEMBER 31, 2005
(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Specified)
                                                                         
                Original Investment Amount   Balance as of December 31, 2005   Net Income   Investment    
                December 31,   December 31,   Shares (in   Percentage of   Carrying   (Loss) of the   Gain (Loss)    
Investor Company   Investee Company   Location   Main Businesses and Products   2005   2004   Thousands)   Ownership   Value (Note 1)   Investee   (Note 2)   Note
The Company
  TSMC International   Tortola, British Virgin Islands   Providing investment in companies involved in the design, manufacture, and other related business in the semiconductor industry   $ 31,445,780     $ 31,445,780       987,968       100     $ 23,912,812     $ (549,454 )   $ (549,454 )   Subsidiary
 
  TSMC-Shanghai   Shanghai, China   Manufacturing and sales of integrated circuits at the order of and pursuant to product design specifications provided by customers     12,180,367       9,187,962             100       9,438,856       (2,242,213 )     (2,242,213 )   Subsidiary
 
  VIS   Hsin-Chu, Taiwan   Research, design, development, manufacture, packaging, testing and sale of memory integrated circuits, LSI, VLSI and related parts     8,119,816       8,119,816       437,891       27       5,419,747       2,710,971       617,268     Investee accounted
for using equity
method
 
  SSMC   Singapore   Fabrication and supply of integrated circuits     6,408,190       6,408,190       382       32       4,215,200       2,503,446       801,103     Investee accounted
for using equity
method
 
  TSMC Partners   Tortola, British Virgin Islands   Investment activities     10,350       10,350       300       100       4,091,166       46,656       46,656     Subsidiary
 
  TSMC-North America   San Jose, California, U.S.A.   Sales and marketing of integrated circuits and semiconductor devices     333,718       333,718       11,000       100       1,790,186       564,201       320,274     Subsidiary
 
  Emerging Alliance   Cayman Islands   Investing in new start-up technology companies     1,526,074       1,447,957             99       850,534       (77,208 )     (76,822 )   Subsidiary
 
  VTAF II   Cayman Islands   Investing in new start-up technology companies     654,509       332,412             98       642,479       (19,044 )     (21,916 )   Subsidiary
 
  GUC   Hsin-Chu, Taiwan   Researching, developing, manufacturing, testing and marketing of integrated circuits     409,920       409,920       40,147       46       442,233       106,748       52,390     Investee over which
the Company has
controlling
financial interest
 
  TSMC-Japan   Yokohama, Japan   Marketing activities     83,760       83,760       6       100       94,949       2,572       2,572     Subsidiary
 
  Chi Cherng   Taipei, Taiwan   Investment activities     300,000       300,000             36       78,139       77,196       (3,769 )   Subsidiary
 
  Hsin Ruey   Taipei, Taiwan   Investment activities     300,000       300,000             36       77,415       77,257       (3,806 )   Subsidiary
 
  TSMC-Europe   Amsterdam, the Netherlands   Marketing activities     15,749       15,749             100       23,087       295       295     Subsidiary
     
Note 1: 
The treasury stock is deducted from the carrying value.
 
   
Note 2: 
The gains on disposal of the stocks of the Company held by subsidiaries and cash dividends from the Company are excluded.

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TABLE 8
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED AND SUBSIDIARIES
INFORMATION OF INVESTMENT IN MAINLAND CHINA
DECEMBER 31, 2005
(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Specified)
                                                         
                Accumulated           Accumulated                            
                Outflow of           Outflow of                            
                Investment           Investment                           Accumulated
        Total Amount       from Taiwan as           from Taiwan as                           Inward
        of Paid-in       of   Investment Flows   of           Equity in the   Carrying Value   Remittance of
        Capital       January 1, 2005   Outflow       December 31,   Percentage of   Net Earnings   as of   Earnings as of
    Main Business and   (RMB in   Method of   (US$ in   (US$ in       2005, (US$ in   Ownership in   (Loss)   December 31,   December 31,
Investee Company   Products   Thousand)   Investment   Thousand)   Thousand)   Inflow   Thousand)   Investment   (Note 2)   2005   2005
TSMC (Shanghai)
Company Limited
  Manufacturing and sales of integrated circuits at the order of and pursuant to product design specifications provided by customers          $12,180,367
(RMB3,070,623)
  (Note 1)           $9,187,962
(US $   276,000)
          $2,992,405
(US  $    95,000)
  $       —           $12,180,367
(US  $    371,000)
    100 %   $ (2,242,213 )   $ 9,438,856     $                   —
                 
Accumulated Investment in Mainland   Investment Amounts Authorized by    
China as of December 31, 2005   Investment Commission, MOEA   Upper Limit on Investment
(US$ in Thousand)   (US$ in Thousand)   (US$ in Thousand)
          $12,180,367
  $ 12,180,367     $ 12,180,367  
(US    $     371,000)
  (US$ 371,000 )   (US$ 371,000 )
 
Note 1:
Direct investments US$371,000 thousand in TSMC-Shanghai.
 
   
Note 2:
Amount was recognized based on the audited financial statements.

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TABLE 9
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED AND SUBSIDIARIES
INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 2005
(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Specified)
                                         
                    Intercompany Transactions
            Nature of                   Percentage of
            Relationship               Terms   Consolidated Total Gross
No.   Company Name   Counter Party   (Note 1)   Financial Statements Item   Amount   (Note 2)   Sales or Total Assets
0
  TSMC   TSMC-NA     1     Sales   $ 153,618,916         58 %
 
                  Receivables from related parties     20,407,621         4 %
 
                  Other receivables from related parties     198,505          
 
                  Payables to related parties     21,391          
 
      TSMC-Shanghai     1     Sales     5,591          
 
                  Purchases     1,405,030         1 %
 
                  Gain on disposal of property, plant and equipment     151,591          
 
                  Technical service income     28,643          
 
                  Proceeds from disposal of property, plant and equipment     125,381          
 
                  Other receivables from related parties     28,593          
 
                  Payables to related parties     274,820          
 
                  Deferred credits     641,762          
 
      TSMC-Japan     1     Sales and marketing expenses — commission     243,646          
 
                  Payables to related parties     29,892          
 
      TSMC-Europe     1     Sales and marketing expenses — commission     221,164          
 
                  Payables to related parties     22,963          
 
      GUC     1     Sales     347,456          
 
                  Research and development expenses     19,467          
 
                  General and administrative expenses — rental expense     16,744          
 
                  Receivables from related parties     49,046          
 
                  Payables to related parties     6,173          
 
      TSMC Technology     1     Other receivables from related parties     972,563          
 
                  Payables to related parties     10,672          
 
      WaferTech     1     Purchases     11,137,313         4 %
 
                  Payables to related parties     1,133,217          
1
  TSMC-NA   VisEra     3     Sales     661,949          
2
  TSMC International   TSMC Development     3     Interest income     28,352          
 
                  Other receivables     1,151,238          
 
      TSMC Technology     3     Deferred technology income     648,695          
3
  TSMC Partners   TSMC Development     3     Interest income     25,513          
 
      TSMC International     3     Other receivables     10,081,604         2 %
 
            3     Deferred revenue     8,883,518         2 %
4
  TSMC Technology   WaferTech     3     Management service income     12,625          
5
  GUC   TSMC-NA     3     Purchases     266,372          
 
                  Manufacturing expenses     348,397          
 
                  Payables to related parties     66,138          
 
      GUC-NA     3     Operating expenses     27,871          
 
     
Note 1:
  No. 1 represents the transactions from parent company to subsidiary.
 
  No. 3 represents the transactions between subsidiaries.
 
   
Note 2:
  The terms of intercompany sales are not significantly different from those to third parties. For other intercompany transactions, prices are determined in accordance with the related contractual agreements.

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SIGNATURES
     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
           
    Taiwan Semiconductor Manufacturing Company Ltd.
 
       
Date: April 20, 2006
  By        /s/ Lora Ho
 
       
 
      Lora Ho
 
      Vice President & Chief Financial Officer