TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD
 

1934 Act Registration No. 1-14700
 
 
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of August 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
Six Months Ended June 30, 2006 and 2005 and
Independent Auditors’ Report

 


 

INDEPENDENT AUDITORS’ REPORT
The Board of Directors and Shareholders
Taiwan Semiconductor Manufacturing Company Limited
We have audited the accompanying balance sheets of Taiwan Semiconductor Manufacturing Company Limited as of June 30, 2006 and 2005, and the related statements of income, changes in shareholders’ equity and cash flows for the six months then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the Rules Governing the Audit of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Those rules and standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Taiwan Semiconductor Manufacturing Company Limited as of June 30, 2006 and 2005, and the results of its operations and its cash flows for the six months then ended in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers and accounting principles generally accepted in the Republic of China.
We have also audited, in accordance with the Rules Governing the Audit of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China, the consolidated financial statements of Taiwan Semiconductor Manufacturing Company Limited and subsidiaries as of and for the six months ended June 30, 2006 and 2005, and have expressed an unqualified opinion on the consolidated financial statements.
July 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 jurisdictions. The standards, procedures and practices to audit such financial statements are those generally accepted and applied in the Republic of China.
For the convenience of readers, the auditors’ report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language auditors’ report and financial statements shall prevail.

- 1 -


 

Taiwan Semiconductor Manufacturing Company Limited
BALANCE SHEETS
JUNE 30, 2006 AND 2005
(In Thousands of New Taiwan Dollars, Except Par Value)
                                 
    2006     2005  
    Amount     %     Amount     %  
ASSETS
                               
 
                               
CURRENT ASSETS
                               
Cash and cash equivalents (Notes 2 and 4)
  $ 127,713,018       22     $ 78,597,384       16  
Financial assets at fair value through profit or loss (Notes 2, 3 and 5)
    322,456             121,841        
Available-for-sale financial assets (Notes 2, 3 and 6)
    62,102,387       11       48,298,762       10  
Held-to-maturity financial assets (Notes 2, 3 and 7)
    5,738,737       1       1,109,846        
Notes and accounts receivable
    19,713,819       4       20,040,283       4  
Receivables from related parties (Note 23)
    22,909,889       4       14,999,678       3  
Allowance for doubtful receivables (Note 2)
    (975,704 )           (978,577 )      
Allowance for sales returns and others (Note 2)
    (5,571,076 )     (1 )     (3,945,057 )      
Other receivables from related parties (Note 23)
    1,659,482             1,565,784        
Other financial assets (Note 3)
    872,627             1,603,340        
Inventories, net (Notes 2 and 8)
    18,375,580       3       14,113,615       3  
Deferred income tax assets (Notes 2 and 16)
    6,084,277       1       5,330,000       1  
Prepaid expenses and other current assets (Note 3)
    954,026             969,974        
 
                       
 
                               
Total current assets
    259,899,518       45       181,826,873       37  
 
                       
 
LONG-TERM INVESTMENTS (Notes 2, 3, 6, 7, 9 and 10)
                               
Available-for-sale financial assets
    4,873,970       1              
Held-to-maturity financial assets
    23,524,067       4       27,297,965       5  
Financial assets carried at cost
    818,969             784,939        
Investments accounted for using equity method
    54,000,233       9       48,351,666       10  
 
                       
 
                               
Total long-term investments
    83,217,239       14       76,434,570       15  
 
                       
 
                               
PROPERTY, PLANT, AND EQUIPMENT (Notes 2, 11 and 23)
                               
Cost
                               
Buildings
    91,815,148       16       88,695,499       18  
Machinery and equipment
    484,487,876       84       441,034,330       88  
Office equipment
    8,090,185       1       7,586,253       1  
 
                       
 
    584,393,209       101       537,316,082       107  
Accumulated depreciation
    (388,228,761 )     (67 )     (330,854,258 )     (66 )
Advance payments and construction in progress
    27,054,673       5       18,601,286       4  
 
                       
 
                               
Net property, plant, and equipment
    223,219,121       39       225,063,110       45  
 
                       
 
                               
GOODWILL (Note 2)
    1,567,756             1,741,951        
 
                       
 
                               
OTHER ASSETS
                               
Deferred income tax assets (Notes 2 and 16)
    7,394,956       1       6,313,825       1  
Deferred charges, net (Notes 2 and 12)
    6,163,992       1       7,874,553       2  
Refundable deposits
    83,655             87,542        
Assets leased to others, net (Note 2)
    70,012             75,746        
Idle assets
    6,789             13,995        
 
                       
 
                               
Total other assets
    13,719,404       2       14,365,661       3  
 
                       
 
                               
TOTAL
  $ 581,623,038       100     $ 499,432,165       100  
 
                       
 
                               
LIABILITIES AND SHAREHOLDERS’ EQUITY
                               
 
                               
CURRENT LIABILITIES
                               
Financial liabilities at fair value through profit or loss (Notes 2, 3 and 5)
  $ 599,909           $ 836,704        
Accounts payable
    6,772,076       1       5,680,946       1  
Payables to related parties (Note 23)
    3,281,423             2,146,317        
Income tax payable (Notes 2 and 16)
    4,486,901       1       252,800        
Cash dividends and bonus payable (Note 18)
    65,257,190       11       49,590,312       10  
Payables to contractors and equipment suppliers
    16,952,057       3       10,004,328       2  
Accrued expenses and other current liabilities (Notes 3 and 14)
    7,385,228       1       7,712,787       2  
Current portion of bonds payable (Note 13)
    2,500,000       1       10,500,000       2  
 
                       
 
                               
Total current liabilities
    107,234,784       18       86,724,194       17  
 
                       
 
                               
LONG-TERM LIABILITIES
                               
Bonds payable (Note 13)
    17,000,000       3       19,500,000       4  
Other long-term payables (Note 14)
    1,458,603             1,644,136        
Other payables to related parties (Notes 23 and 26)
    1,085,366             1,727,133       1  
 
                       
 
                               
Total long-term liabilities
    19,543,969       3       22,871,269       5  
 
                       
 
                               
OTHER LIABILITIES
                               
Accrued pension cost (Notes 2 and 15)
    3,484,350       1       3,410,250       1  
Guarantee deposits (Note 26)
    3,354,046       1       1,517,584        
Deferred credits (Notes 2 and 23)
    1,173,542             708,941        
 
                       
 
                               
Total other liabilities
    8,011,938       2       5,636,775       1  
 
                       
 
                               
Total liabilities
    134,790,691       23       115,232,238       23  
 
                       
 
                               
CAPITAL STOCK — $10 PAR VALUE
                               
Authorized: 27,050,000 thousand shares, Issued: 25,823,357 thousand shares in 2006, 24,726,129 thousand shares in 2005
    258,233,569       44       247,261,288       50  
 
                       
 
                               
CAPITAL SURPLUS (Notes 2 and 18)
    53,822,486       9       56,720,875       11  
 
                       
 
                               
RETAINED EARNINGS (Note 18)
                               
Appropriated as legal capital reserve
    43,705,711       8       34,348,208       7  
Appropriated as special capital reserve
    640,742             2,226,427        
Unappropriated earnings
    92,376,976       16       47,808,698       10  
 
                       
 
                               
 
    136,723,429       24       84,383,333       17  
 
                       
 
                               
OTHERS (Notes 2 and 3)
                               
Cumulative translation adjustments
    (1,145,616 )           (2,612,996 )     (1 )
Unrealized gains on financial instruments
    116,554                    
 
                       
 
                               
 
    (1,029,062 )           (2,612,996 )     (1 )
 
                       
 
                               
TREASURY STOCK (AT COST, Notes 2 and 20) 33,926 thousand shares in 2006 and 46,862 thousand shares in 2005
    (918,075 )           (1,552,573 )      
 
                       
 
                               
Total shareholders’ equity
    446,832,347       77       384,199,927       77  
 
                       
 
                               
TOTAL
  $ 581,623,038       100     $ 499,432,165       100  
 
                       
The accompanying notes are an integral part of the financial statements.

- 2 -


 

Taiwan Semiconductor Manufacturing Company Limited
STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)
                                 
    2006     2005  
    Amount     %     Amount     %  
GROSS SALES (Notes 2 and 23)
  $ 161,789,754             $ 116,819,058          
 
                               
SALES RETURNS AND ALLOWANCES (Note 2)
    3,269,063               2,649,624          
 
                           
 
                               
NET SALES
    158,520,691       100       114,169,434       100  
 
                               
COST OF SALES (Notes 17 and 23)
    80,991,942       51       69,315,398       61  
 
                       
 
                               
GROSS PROFIT
    77,528,749       49       44,854,036       39  
 
                       
 
                               
OPERATING EXPENSES (Notes 17 and 23)
                               
Research and development
    7,255,721       4       6,632,293       6  
General and administrative
    3,379,438       2       3,743,998       3  
Marketing
    1,053,473       1       617,811        
 
                       
 
                               
Total operating expenses
    11,688,632       7       10,994,102       9  
 
                       
 
                               
INCOME FROM OPERATIONS
    65,840,117       42       33,859,934       30  
 
                       
 
                               
NON-OPERATING INCOME AND GAINS
                               
Equity in earnings of equity method investees, net (Notes 2 and 10)
    3,404,382       2              
Interest income (Notes 2 and 3)
    1,910,958       1       1,175,969       1  
Settlement income (Note 25)
    483,734       1       711,324       1  
Gain on disposal of financial instruments, net (Notes 2, 3, 5 and 22)
    468,482             1,394,620       1  
Technical service income (Notes 23 and 26)
    344,601             186,962        
Gain on disposal of property, plant and equipment and other assets (Notes 2 and 23)
    257,239             107,395        
Others (Note 23)
    172,551             221,233        
 
                       
 
                               
Total non-operating income and gains
    7,041,947       4       3,797,503       3  
 
                       
 
                               
NON-OPERATING EXPENSES AND LOSSES
                               
Foreign exchange loss, net (Note 2)
    1,250,047       1       2,035,490       2  
Interest expense (Notes 3 and 13)
    330,600             606,225        
Valuation loss on financial instruments, net (Notes 2, 3, 5 and 22)
    277,453             41,467        
Loss on idle assets
    37,283             106,972        
(Continued)

- 3 -


 

                                 
    2006     2005  
    Amount     %     Amount     %  
Loss on disposal of property, plant, and equipment (Note 2)
  $ 8,996           $ 53,599        
Equity in losses of equity method investees, net (Notes 2 and 10)
                786,018       1  
Others
    71,630             29,942        
 
                       
 
                               
Total non-operating expenses and losses
    1,976,009       1       3,659,713       3  
 
                       
 
                               
INCOME BEFORE INCOME TAX
    70,906,055       45       33,997,724       30  
 
                               
INCOME TAX BENEFIT (EXPENSE) (Notes 2 and 16)
    (4,051,241 )     (3 )     1,189,610       1  
 
                       
 
                               
NET INCOME BEFORE CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES
    66,854,814       42       35,187,334       31  
 
                               
CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES, NET OF TAX BENEFIT OF NT$82,062 THOUSAND (Note 3)
    (246,186 )                  
 
                       
 
                               
NET INCOME
  $ 66,608,628       42     $ 35,187,334       31  
 
                       
                                 
    2006     2005  
    Before     After     Before     After  
    Income     Income     Income     Income  
    Tax     Tax     Tax     Tax  
EARNINGS PER SHARE (NT$, Note 21)
                               
Basic earnings per share
  $ 2.74     $ 2.58     $ 1.32     $ 1.37  
 
                       
Diluted earnings per share
  $ 2.73     $ 2.58     $ 1.32     $ 1.37  
 
                       
Certain pro forma information (after income tax) is shown as follows, based on the assumption that the Company’s stock held by its subsidiaries is treated as an investment instead of treasury stock (Notes 2 and 20):
                 
    2006     2005  
NET INCOME BEFORE CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES
  $ 66,937,134     $ 35,278,370  
 
           
 
               
NET INCOME
  $ 66,690,948     $ 35,278,370  
 
           
 
               
EARNINGS PER SHARE (NT$)
               
Basic earnings per share
  $ 2.58     $ 1.37  
 
           
Diluted earnings per share
  $ 2.58     $ 1.37  
 
           
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 SIX MONTHS ENDED JUNE 30, 2006 AND 2005
(In Thousands of New Taiwan Dollars, Except Dividend Per Share)
                                                                                                 
                                                            Others                
                            Retained Earnings             Unrealized                        
    Capital Stock             Legal     Special                     Cumulative     Gain on                     Total  
    Shares (in             Capital     Capital     Capital     Unappropriated             Translation     Financial             Treasury     Shareholders’  
    Thousands)     Amount     Surplus     Reserve     Reserve     Earnings     Total     Adjustments     Instruments     Total     Stock     Equity  
BALANCE, JANUARY 1, 2006
    24,730,025     $ 247,300,246     $ 57,117,886     $ 34,348,208     $ 2,226,427     $ 106,196,399     $ 142,771,034     $ (640,742 )   $     $ (640,742 )   $ (918,075 )   $ 445,630,349  
 
                                                                                               
Appropriations of prior year’s earnings
                                                                                               
Legal capital reserve
                      9,357,503             (9,357,503 )                                    
Special capital reserve
                            (1,585,685 )     1,585,685                                      
Employees’ profit sharing — in cash
                                  (3,432,129 )     (3,432,129 )                             (3,432,129 )
Employees’ profit sharing — in stock
    343,213       3,432,129                         (3,432,129 )     (3,432,129 )                              
Cash dividends to shareholders — NT$2.50 per share
                                  (61,825,061 )     (61,825,061 )                             (61,825,061 )
Stock dividends to shareholders — NT$0.15 per share
    370,950       3,709,504                         (3,709,504 )     (3,709,504 )                              
Bonus to directors and supervisors
                                  (257,410 )     (257,410 )                             (257,410 )
 
                                                                                               
Capital surplus transferred to capital stock
    370,950       3,709,504       (3,709,504 )                                                      
 
                                                                                               
Issuance of stock from exercising stock options
    8,219       82,186       243,864                                                       326,050  
 
                                                                                               
Adjustment arising from changes in percentage of ownership in investees
                87,920                                                       87,920  
 
                                                                                               
Cash dividends received by subsidiaries from the Company
                82,320                                                       82,320  
 
                                                                                               
Net income for the six months ended June 30, 2006
                                  66,608,628       66,608,628                               66,608,628  
 
                                                                                               
Translation adjustments
                                              (504,874 )           (504,874 )           (504,874 )
 
                                                                                               
Valuation loss on available-for-sale financial assets
                                                    (191,469 )     (191,469 )           (191,469 )
 
                                                                                               
Equity in the valuation gain on available-for-sale financial assets of equity method investees
                                                    308,023       308,023             308,023  
 
                                                                       
 
BALANCE, JUNE 30, 2006
    25,823,357     $ 258,233,569     $ 53,822,486     $ 43,705,711     $ 640,742     $ 92,376,976     $ 136,723,429     $ (1,145,616 )   $ 116,554     $ (1,029,062 )   $ (918,075 )   $ 446,832,347  
 
                                                                       
(Continued)

- 5 -


 

     
                                                                                                 
                                                            Others                
                            Retained Earnings             Unrealized                        
    Capital Stock             Legal     Special                     Cumulative     Gain on                     Total  
    Shares (in             Capital     Capital     Capital     Unappropriated             Translation     Financial             Treasury     Shareholders’  
    Thousands)     Amount     Surplus     Reserve     Reserve     Earnings     Total     Adjustments     Instruments     Total     Stock     Equity  
BALANCE, JANUARY 1, 2005
    23,251,964     $ 232,519,637     $ 56,537,259     $ 25,528,007     $     $ 88,202,009     $ 113,730,016     $ (2,226,427 )   $     $ (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 shareholders — NT$2.00 per share
                                  (46,504,097 )     (46,504,097 )                             (46,504,097 )
Stock dividends to 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 )
 
                                                                                               
Issuance of stock from exercising stock options
    2,941       29,412       87,806                                                       117,218  
 
                                                                                               
Adjustment arising from changes in percentage of ownership in investees
                4,774                                                       4,774  
 
                                                                                               
Cash dividends received by subsidiaries from the Company
                84,285                                                       84,285  
 
                                                                                               
Net income for the six months ended June 30, 2005
                                  35,187,334       35,187,334                               35,187,334  
 
                                                                                               
Translation adjustments
                                              (386,569 )           (386,569 )           (386,569 )
 
                                                                                               
Treasury stock transactions — sales of the Company’s stock held by subsidiaries
                6,751                                                 42,613       49,364  
 
                                                                       
 
                                                                                               
BALANCE, JUNE 30, 2005
    24,726,129     $ 247,261,288     $ 56,720,875     $ 34,348,208     $ 2,226,427     $ 47,808,698     $ 84,383,333     $ (2,612,996 )   $     $ (2,612,996 )   $ (1,552,573 )   $ 384,199,927  
 
                                                                       
The accompanying notes are an integral part of the financial statements.   (Concluded)

- 6 -


 

Taiwan Semiconductor Manufacturing Company Limited
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005
(In Thousands of New Taiwan Dollars)
                 
    2006     2005  
CASH FLOWS FROM OPERATING ACTIVITIES
               
Net income
  $ 66,608,628     $ 35,187,334  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
    32,154,504       34,330,028  
Amortization of premium/ discount of financial assets
    43,781       58,771  
Loss (gain) on disposal of available-for-sale financial assets, net
    (1,116 )     111,808  
Gain on disposal of financial assets carried at cost, net
          (94 )
Gain on disposal of property, plant, and equipment, net
    (248,243 )     (53,796 )
Equity in losses (earnings) of equity method investees, net
    (3,404,382 )     786,018  
Loss on idle assets
    37,283       106,972  
Deferred income taxes
    293,722       (1,149,822 )
Changes in operating assets and liabilities:
               
Decrease (increase) in:
               
Financial assets and liabilities at fair value through profit or loss
    1,424,079       1,872,228  
Notes and accounts receivable
    877,999       (4,713,402 )
Receivables from related parties
    (1,859,285 )     1,136,361  
Allowance for doubtful receivables
    (640 )     (1,884 )
Allowance for sales returns and others
    1,301,107       617,143  
Other receivables from related parties
    473,280       (1,095,494 )
Other financial assets
    233,403       (768,010 )
Inventories, net
    (2,117,625 )     58,330  
Prepaid expenses and other current assets
    217,747       785,308  
Increase (decrease) in:
               
Accounts payable
    (1,280,030 )     (807,671 )
Payables to related parties
    24,117       (1,619,155 )
Income tax payable
    671,013       (127,103 )
Accrued expenses and other current liabilities
    (645,267 )     (1,235,137 )
Accrued pension cost
    22,958       309,054  
Deferred credits
    (47,872 )      
 
           
 
               
Net cash provided by operating activities
    94,779,161       63,787,787  
 
           
 
               
CASH FLOWS FROM INVESTING ACTIVITIES
               
Acquisitions of:
               
Available-for-sale financial assets
    (64,826,510 )     (42,911,838 )
Held-to-maturity financial assets
    (7,754,790 )     (3,485,821 )
Financial assets carried at cost
    (11,479 )     (14,207 )
Investments accounted for using equity method
    (274,687 )     (3,225,972 )
Property, plant, and equipment
    (32,170,773 )     (51,194,392 )
Proceeds from disposal of:
               
Available-for-sale financial assets
    44,101,660       43,277,329  
Financial assets carried at cost
          1,996  
Property, plant, and equipment and other assets
    710,702       1,430,769  
(Continued)

- 7 -


 

                 
    2006     2005  
Redemption of held-to-maturity financial assets upon maturity
  $ 7,837,000     $ 4,914,180  
Increase in deferred charges
    (693,239 )     (503,079 )
Increase in refundable deposits
    (13 )     (2,129 )
Proceeds from return of capital by investee
    102,662        
 
           
 
               
Net cash used in investing activities
    (52,979,467 )     (51,713,164 )
 
           
 
               
CASH FLOWS FROM FINANCING ACTIVITIES
               
Increase in guarantee deposits
    461,101       1,105,191  
Proceeds from exercise of employee stock options
    326,050       117,218  
Bonus to directors and supervisors
    (257,410 )     (231,466 )
 
           
 
               
Net cash provided by financing activities
    529,741       990,943  
 
           
 
               
NET INCREASE IN CASH AND CASH EQUIVALENTS
    42,329,435       13,065,566  
 
               
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    85,383,583       65,531,818  
 
           
 
               
CASH AND CASH EQUIVALENTS, END OF PERIOD
  $ 127,713,018     $ 78,597,384  
 
           
 
               
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
               
Interest paid
  $ 420,000     $ 420,000  
 
           
Income tax paid
  $ 2,994,232     $ 87,315  
 
           
 
               
INVESTING ACTIVITIES AFFECTING BOTH CASH AND NON-CASH ITEMS
               
Acquisition of property, plant, and equipment
  $ 40,263,600     $ 30,044,411  
Decrease (increase) in payables to contractors and equipment suppliers
    (8,092,827 )     21,149,981  
 
           
Cash paid
  $ 32,170,773     $ 51,194,392  
 
           
 
               
NON-CASH FINANCING ACTIVITIES
               
Current portion of bonds payable
  $ 2,500,000     $ 10,500,000  
 
           
Current portion of other long-term payables (under accrued expenses and other current liabilities)
  $ 940,123     $ 1,417,437  
 
           
The accompanying notes are an integral part of the financial statements.   (Concluded)

- 8 -


 

Taiwan Semiconductor Manufacturing Company Limited
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2006 AND 2005
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
1.   GENERAL
Taiwan Semiconductor Manufacturing Company Limited (the Company or TSMC), a Republic of China (R.O.C.) corporation, was incorporated as a venture among the Government of the R.O.C., acting through the Development Fund of the Executive Yuan; Philips Electronics N.V. and certain of its affiliates (Philips); and certain other private investors. On September 5, 1994, its shares were listed on the Taiwan Stock Exchange (TSE). On October 8, 1997, TSMC listed some of its shares of stock on the New York Stock Exchange (NYSE) in the form of American Depositary Shares (ADSs).
The Company is engaged mainly in the manufacturing, selling, packaging, testing and computer-aided designing of integrated circuits and other semiconductor devices and the manufacturing of masks.
As of June 30, 2006 and 2005, the Company had 20,357 and 18,734 employees, respectively.
2.   SIGNIFICANT ACCOUNTING POLICIES
The financial statements are presented in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers 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 expected to be due within one year from the balance sheet date. Assets and liabilities that are not classified as current are noncurrent assets and liabilities, respectively.

- 9 -


 

Cash Equivalents
Repurchase agreements collateralized by government bonds, notes and treasury bills acquired with maturities of less than three months from the date of purchase are classified as cash equivalents. The carrying amount approximates fair value.
Financial Assets/Liabilities at Fair Value Through Profit or Loss
Derivatives that do not meet the criteria for hedge accounting are initially recognized at fair value, with transaction costs expensed as incurred. The derivatives are remeasured at fair value subsequently with the changes in fair value recognized in current income. A regular way purchase or sale of financial assets is accounted for using settlement date accounting.
Fair value is estimated using valuation techniques incorporating estimates and assumptions that are consistent with prevailing market conditions. When the fair value is positive, the derivative is recognized as a financial asset; when the fair value is negative, the derivative is recognized as a financial liability.
Available-for-Sale Financial Assets
Investments designated as available-for-sale financial assets include debt securities and equity securities. Available-for-sale financial assets are initially recognized at fair value plus transaction costs that are directly attributable to the acquisition. The changes in fair value from subsequent remeasurement are reported as a separate component of shareholders’ equity. The corresponding accumulated gains or losses are recognized in earnings when the financial asset is derecognized from the balance sheet. A regular way purchase or sale of financial assets is accounted for using settlement date accounting.
Fair values for beneficiary certificates of open-end funds and publicly traded stocks are determined using the net assets value and the closing-price at the balance sheet date, respectively. For other debt securities, fair value is determined using the average of bid and asked prices at the balance sheet date.
Cash dividends are recognized as investment income upon resolution of shareholders of an investee but are accounted for as reductions to the original cost of investment if such dividends are declared on the earnings of the investees attributable to periods prior to the purchase of the investments. Stock dividends are recorded as an increase in the number of shares held and do not affect investment income. The cost per share is recalculated based on the new total number of shares. Any difference between the initial carrying amount of a debt security and the amount due at maturity is amortized using the effective interest method, with the amortization recognized in earnings.
If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. If, in a subsequent period, the amount of the impairment loss decreases, for equity securities, the previously recognized impairment loss is reversed to the extent of the decrease and recorded as an adjustment to shareholders’ equity; for debt securities, the amount of the decrease is recognized in earnings, provided that the decrease is clearly attributable to an event which occurred after the impairment loss was recognized.
Held-to-Maturity Financial Assets
Debt securities for which the Company has a positive intention and ability to hold to maturity are categorized as held-to-maturity financial assets and are carried at amortized cost under the effective interest method. Those financial assets are initially recognized at fair value plus transaction costs that are directly attributable to the acquisition. Earnings or losses are recognized at the time of derecognition, impairment or amortization. A regular way purchase or sale of financial assets is accounted for using settlement date accounting.

- 10 -


 

If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. If, in a subsequent period, the amount of the impairment loss decreases and the decrease is clearly attributable to an event which occurred after the impairment loss was recognized, the previously recognized impairment loss is reversed to the extent of the decrease. The reversal may not result in a carrying amount of the financial asset that exceeds the amortized cost that would have been determined as if no impairment loss had been recognized.
Allowance for Doubtful Receivables
An allowance for doubtful receivables is provided based on a review of the collectibility of accounts receivable. The Company determines the amount of allowance for doubtful receivables by examining the aging analysis of outstanding accounts receivable and current trends in the credit quality of its customers as well as its internal credit policies.
Revenue Recognition and Allowance for Sales Returns and Others
The Company recognizes revenue when evidence of an arrangement exists, shipment is made, price is fixed or determinable, and collectibility is reasonably assured. Revenues from the design and manufacturing of photo masks, which are used as manufacturing tools in the fabrication process, are recognized when the photo masks are qualified by customers. Provisions for estimated sales returns and other allowances are generally recorded in the period the related revenue is recognized based on historical experience, management’s judgment, and any known factors that would significantly affect the allowance.
Sales prices are determined using fair value taking into account related sales discounts agreed to by the Company and its customers. Sales agreements typically provide that payment is due 30 days from invoice date for a majority of the customers and 30 to 45 days after the end of the month in which sales occur for some customers. Since the receivables from sales are collectible within one year and such transactions are frequent, fair value of the receivables is equivalent to the nominal amount of the cash to be received.
Inventories
Inventories are stated at the lower of cost or market value. Inventories are recorded at standard cost and adjusted to the approximate weighted-average cost at the balance sheet date. Market value represents replacement cost for raw materials, supplies and spare parts and net realizable value for work in process and finished goods. The Company assesses the impact of changing technology on its inventories on hand and writes off inventories that are considered obsolete. Period-end inventories are evaluated for estimated excess quantities and obsolescence based on a demand forecast within a specific time horizon, which is generally 180 days or less. Estimated losses on scrap and slow-moving items are recognized and included in the allowance for losses.
Financial Assets Carried at Cost
Investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are carried at their original cost, such as non-publicly traded stocks and mutual funds. The costs of funds and non-publicly traded stocks are determined using the weighted-average method. If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. A subsequent reversal of such impairment loss is not allowed.
The accounting treatment for cash dividends and stock dividends arising from financial assets carried at cost is the same as that for cash and stock dividends arising from available-for-sale financial assets.

- 11 -


 

Investments Accounted for Using Equity Method
Investments in companies wherein the Company exercises significant influence over the operating and financial policy decisions are accounted for using the equity method. The Company’s share of the net income or net loss of an investee is recognized in the “equity in earnings/losses of equity method investees, net” account. The difference, if any, between the cost of investment and the Company’s proportionate share of the investee’s equity was previously amortized by the straight-line method over five years and was also recorded in the “equity in earnings/losses of equity method investees, net” account. Effective January 1, 2006, pursuant to the revised Statement of Financial Accounting Standards No. 5, “Long-term Investments in Equity Securities” (SFAS No. 5), investment premiums, representing goodwill, are no longer being amortized; while investment discounts continue to be amortized over the remaining periods. When an indication of impairment is identified, the carrying amount of the investment is reduced, with the related impairment loss charged to current income.
When the Company subscribes for additional investee’s shares at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment in the investee differs from the amount of the Company’s share in the investee’s net equity. The Company records such a difference as an adjustment to long-term investments with the corresponding amount charged or credited to capital surplus.
Gains or losses on sales from the Company to equity method investees are deferred in proportion to the Company’s ownership percentage in the investees until such gains or losses are realized through transactions with third parties. The entire amount of the gains or losses on sales to investees over which the Company has a controlling interest is deferred until such gains or losses are realized through the subsequent sales of the related products to third parties. Gains or losses on sales from equity method investees to the Company are deferred in proportion to the Company’s ownership percentages in the investees until they are realized through transactions with third parties.
Gains or losses on sales between equity method investees are deferred in proportion to the Company’s weighted-average ownership percentages in the investees until such gains or losses are realized through transactions with third parties.
If an investee’s functional currency is a foreign currency, translation adjustments will result from the translation of the investee’s financial statements into the reporting currency of the Company. Such adjustments are accumulated and reported as a separate component of shareholders’ equity.
Property, Plant, and Equipment and Assets Leased to Others
Property, plant, and equipment and assets leased to others are stated at cost less accumulated depreciation. When an indication of impairment is identified, any excess of the carrying amount of an asset over its recoverable amount is recognized as a loss. If the recoverable amount increases in a 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. Significant additions, renewals and betterments incurred during the construction period are capitalized. Maintenance and repairs are expensed as incurred.
Depreciation is computed using the straight-line method over the following estimated service lives: Buildings — 10 to 20 years; machinery and equipment — 5 years; and office equipment — 3 to 5 years.
Upon sale or disposal of property, plant, and equipment, the related cost and accumulated depreciation are deducted from the corresponding accounts, with any gain or loss credited or charged to non-operating gains or losses in the period of sale or disposal.

- 12 -


 

Goodwill
Goodwill represents the excess of the consideration paid for acquisition over the fair value of identifiable net assets acquired. Goodwill was previously amortized using the straight-line method over the estimated life of 10 years. Effective January 1, 2006, pursuant to the newly revised SFAS No. 25, “Business Combinations — Accounting Treatment under Purchase Method” (SFAS No. 25), goodwill is no longer amortized and is assessed for impairment at least on an annual basis. If an event occurs or circumstances change which indicated that fair value of goodwill is more likely than not below its carrying amount, an impairment loss is charged to current income. A subsequent recovery in fair value of goodwill is not allowed.
Deferred Charges
Deferred charges consist of technology license fees, software and system design costs and other charges. The amounts are amortized over the following periods: Technology license fees — the shorter of the estimated life of the technology or the term of the technology transfer contract; software and system design costs and other charges — 3 years. When an indication of impairment is identified, any excess of the carrying amount of an asset over its recoverable amount is recognized as a loss. If the recoverable amount increases in a 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 during service periods. For employees under defined benefit pension plans, pension costs are recorded based on actuarial calculations.
Income Tax
The Company applies intra-period and inter-period allocations for its income tax whereby (1) a portion of current income tax expense is allocated to the cumulative effect of changes in accounting principles; and(2) deferred income tax assets and liabilities are recognized for the tax effects of temporary differences and unused tax credits. Valuation allowances are provided to the extent, if any, that it is more likely than not that deferred income tax assets will not be realized. A deferred tax asset or liability is classified as current or noncurrent in accordance with the classification of its related asset or liability. However, if a deferred tax asset or liability does not relate to an asset or liability in the financial statements, then it is classified as either current or noncurrent based on the expected length of time before it is realized or settled.
Any tax credits arising from purchases of machinery, equipment and technology, research and development expenditures, personnel training, and investments in important technology-based enterprises are recognized using the flow-through method.
Adjustments of prior years’ tax liabilities are added to or deducted from the current period’s tax provision.
Income tax on unappropriated earnings of 10% is expensed in the year of shareholder approval which is the year subsequent to the year the earnings are generated.
The R.O.C. government enacted the Alternative Minimum Tax Act (“AMT Act”), which became effective on January 1, 2006. The alternative minimum tax (“AMT”) imposed under the AMT Act is a supplemental tax levied at a rate of 10% which is payable if the income tax payable determined pursuant to the Income Tax Law is below the minimum amount prescribed under the AMT Act. The taxable income for calculating the AMT includes most of the income that is exempted from income tax under various laws and statutes. The Company has considered the impact of the AMT Act in the determination of its tax liabilities.

- 13 -


 

Stock-based Compensation
Employee stock option plans that are amended or have options granted on or after January 1, 2004 are accounted for by the interpretations issued by the Accounting Research and Development Foundation. The Company adopted the intrinsic value method and any compensation cost determined using this method is charged to expense over the employee vesting period.
Treasury Stock
The Company’s stock held by its subsidiaries is treated as treasury stock and reclassified from investments accounted for using equity method to treasury stock. The gains resulted from disposal of the treasury stock held by 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 balance sheet date, monetary assets and liabilities denominated in foreign currencies are revalued at the prevailing exchange rates with the resulting gains or losses recognized in current income.
3.   ACCOUNTING CHANGES
On January 1, 2006, the Company adopted the newly released Statements of Financial Accounting Standards No. 34, “Accounting for Financial Instruments” (SFAS No. 34) and No. 36, “Disclosure and Presentation for Financial Instruments” and related revisions of previously released SFASs.
  a.   Effect of adopting the newly released SFASs and related revisions of previously released SFASs
 
      The Company had properly categorized its financial assets and liabilities upon the initial adoption of the newly released SFASs. The adjustments made to the carrying amounts of the financial instruments categorized as financial assets or financial liabilities at fair value through profit or loss were included in the cumulative effect of changes in accounting principles; on the other hand, the adjustments made to the carrying amounts of those categorized as available-for-sale financial assets were recognized as adjustments to shareholders’ equity.
 
      The effect of adopting the newly released SFASs is summarized as follows:
                 
    Recognized as        
    Cumulative        
    Effect of     Recognized as  
    Changes in     a Separate  
    Accounting     Component of  
    Principles     Shareholders’  
    (Net of Tax)     Equity  
Financial assets or liabilities at fair value through profit or loss
  $ (246,186 )   $  
Available-for-sale financial assets
           
 
           
 
               
 
  $ (246,186 )   $  
 
           

- 14 -


 

    The adoption of the newly released SFASs resulted in a decrease in net income before cumulative effect of changes in accounting principles of NT$31,267 thousand, a decrease in net income of NT$277,453 thousand, and a decrease in basic earnings per share (after income tax) of NT$0.01, for the six months ended June 30, 2006.
 
    Effective January 1, 2006, the Company adopted the newly revised SFAS No. 5 and SFAS No. 25, which prescribe that investment premiums, representing goodwill, be assessed for impairment at least on an annual basis instead of being amortized. Such a change in accounting principle did not have a material effect on the Company’s financial statements as of and for the six months ended June 30, 2006.
 
b.   Reclassifications
 
    Upon the adoption of SFAS No. 34, certain accounts in the financial statements as of and for the six months ended June 30, 2005 were reclassified to conform with the financial statements as of and for the six months ended June 30, 2006. The previous issued financial statements as of and for the six months ended June 30, 2005 need not be restated.
 
    Certain accounting policies prior to the adoption of the newly released SFASs are summarized as follows:
  1)   Short-term investments
 
      Short-term investments that were publicly-traded, easily converted to cash, and not acquired for the purpose of controlling the investees or establishing close business relationship with the investees were carried at the lower of cost or market value at the balance sheet date, with any temporary decline in value charged to current income. The market value of publicly-traded stocks was determined using the average-closing prices for the last month of the period.
 
  2)   Derivative financial instruments
 
      The Company entered into forward exchange contracts to manage foreign exchange exposures on foreign-currency-denominated assets and liabilities. The contracts were 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 were amortized over the terms of the forward contracts using the straight-line method. At the end of each period, the receivables or payables arising from forward contracts were 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 were netted with the resulting amount presented as either an asset or a liability. Any resulting gain or loss upon settlement was credited or charged to income in the period of settlement.
 
      The Company entered into cross currency swap contracts to manage currency exposures on foreign-currency-denominated assets and liabilities. The principal amount was recorded using the current rates 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 were amortized over the terms of the contracts using the straight-line method. At the end of each period, the receivables or payables arising from cross-currency swap contracts were 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 were 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 was recorded as an adjustment to the interest income or expense associated with the hedged items. Any resulting gain or loss upon settlement was credited or charged to income in the period of settlement.

- 15 -


 

      The Company entered into interest rate swap contracts to manage exposures to changes in interest rates on existing assets or liabilities. These transactions were accounted for on an accrual basis, in which the cash settlement receivable or payable was recorded as an adjustment to interest income or expense associated with the hedged items.
 
      Certain accounts in the financial statements as of and for the six months ended June 30, 2005 have been reclassified to conform to the classifications prescribed by the newly released SFASs. The reclassifications of the whole or a part of the account balances of certain accounts are summarized as follows:
                 
    Before     After  
    Reclassification     Reclassification  
Balance sheet
               
 
               
Short-term investments
  $ 49,408,608     $  
Other financial assets
    78,900        
Prepaid expenses and other current assets
    42,941        
Long-term investments accounted for using cost method
    784,939        
Long-term bonds investment
    16,342,005        
Other long-term investments
    10,955,960        
Accrued expenses and other current liabilities
    (836,704 )      
Financial assets at fair value through profit or loss
          121,841  
Financial liabilities at fair value through profit or loss
          (836,704 )
Available-for-sale financial assets
          48,298,762  
Held-to-maturity financial assets
          28,407,811  
Financial assets carried at cost
          784,939  
 
           
 
               
 
  $ 76,776,649     $ 76,776,649  
 
           
 
               
Statement of income
               
 
               
Interest income
  $ 449,756     $  
Foreign exchange gain, net
    1,837,806        
Interest expense
    (781,134 )      
Unrealized valuation loss on short-term investments
    (41,467 )      
Loss on disposal of investment, net
    (111,808 )      
Valuation loss on financial instruments, net
          (41,467 )
Gain on disposal of financial instruments, net
          1,394,620  
 
           
 
               
 
  $ 1,353,153     $ 1,353,153  
 
           
4.   CASH AND CASH EQUIVALENTS
                 
    June 30  
    2006     2005  
Cash and deposits in banks
  $ 67,694,314     $ 48,158,582  
Repurchase agreements collaterized by government bonds
    59,351,764       29,804,199  
Corporate notes
    666,940       172,291  
Treasury bills
          349,892  
Agency notes
          112,420  
 
           
 
               
 
  $ 127,713,018     $ 78,597,384  
 
           

- 16 -


 

5.   FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
                 
    June 30  
    2006     2005  
Derivatives — financial assets
               
 
               
Forward exchange contracts
  $     $ 1,123  
Cross currency swap contracts
    322,456       120,718  
 
           
 
               
 
  $ 322,456     $ 121,841  
 
           
 
               
Derivatives — financial liabilities
               
 
               
Forward exchange contracts
  $ 8,265     $ 41,092  
Cross currency swap contracts
    591,644       795,612  
 
           
 
               
 
  $ 599,909     $ 836,704  
 
           
    The Company entered into derivative contracts for the six months ended June 30, 2006 and 2005 to manage exposures due to the fluctuations of foreign exchange rates. The derivative contracts entered into by the Company did not meet the criteria for hedge accounting prescribed by SFAS No. 34. Therefore, effective from January 1, 2006, the Company discontinued applying hedge accounting treatment for its derivative financial instruments.
 
    Outstanding forward contracts as of June 30, 2006 and 2005:
                         
                    Contract
                    Amount
    Currency   Maturity Date   (in Thousands)
June 30, 2006
                       
 
                       
Sell
  US$/NT$   July 2006
  US$ 10,000  
 
  EUR/US$   July 2006
  EUR 10,000  
 
                       
June 30, 2005
                       
 
                       
Sell
  US$/NT$   July 2005 to August 2005
  US$ 103,000  
    Outstanding cross currency swap contracts as of June 30, 2006 and 2005:
                         
    Contract   Range of   Range of
    Amount   Interest Rates   Interest Rates
Maturity Date   (in Thousands)   Paid   Received
June 30, 2006
                       
 
                       
July 2006 to September 2006
  US$ 2,266,000       2.40%-5.57 %     0.60%-2.78 %
 
                       
June 30, 2005
                       
 
                       
July 2005 to August 2005
  US$ 2,045,000       3.10%-3.40 %     1.03%-1.22 %

- 17 -


 

    The Company did not enter into any interest rate swap contracts during the six months ended June 30, 2006. 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 has been reclassified and included in the “losses on disposal of financial instrument” account.
 
    Net gains arising from derivative financial instruments for the six months ended June 30, 2006 were NT$189,913 thousand (including realized settlement gains of NT$467,366 thousand and valuation losses of NT$277,453 thousand).
 
6.   AVAILABLE-FOR-SALE FINANCIAL ASSETS
                 
    June 30  
    2006     2005  
Beneficiary certificates of open-end funds
  $ 22,157,124     $ 10,300,638  
Corporate bonds
    14,297,001       11,555,183  
Agency bonds
    13,787,394       11,511,740  
Corporate issued asset-backed securities
    10,921,185       11,419,169  
Government bonds
    4,831,843       2,741,122  
Structured time deposits
    498,190        
Money market funds
    385,937       491,465  
Corporate notes
    97,683       158,052  
Commercial papers
          94,770  
Publicly-traded stocks
          26,623  
 
           
 
    66,976,357       48,298,762  
Current portion
    (62,102,387 )     (48,298,762 )
 
           
 
               
 
  $ 4,873,970     $  
 
           
    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 June 30, 2006, 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 corporate bonds, agency bonds, asset-backed securities, government bonds and others. Securities acquired with maturities of less than three months from the date of purchase were classified as cash equivalents.
 
    As of June 30, 2006, structured time deposits categorized as available-for-sale financial assets consisted of the following:
                                 
    Principal     Carrying     Range of        
    Amount     Amount     Interest Rates     Maturity Date  
Step-up callable deposits
                               
 
                               
Domestic deposits
  $ 500,000     $ 498,190       1.76 %   March 2008
 
                           
    The interest rate of the step-up callable deposits is pre-determined by the Company and the banks.

- 18 -


 

7.   HELD-TO-MATURITY FINANCIAL ASSETS
                 
    June 30  
    2006     2005  
Government bonds
  $ 5,239,892     $ 11,817,146  
Corporate bonds
    12,895,132       5,634,705  
Structured time deposits
    11,127,780       10,955,960  
 
           
 
    29,262,804       28,407,811  
Current portion
    (5,738,737 )     (1,109,846 )
 
           
 
               
 
  $ 23,524,067     $ 27,297,965  
 
           
    Structured time deposits categorized as held-to-maturity financial assets consisted of the following:
                         
    Principal     Interest     Range of    
    Amount     Receivable     Interest Rates   Maturity Date
June 30, 2006
                       
 
                       
Step-up callable deposits
                       
Domestic deposits
  $ 4,000,000     $ 27,016     1.40%-2.01%   June 2007 to March 2009
Callable range accrual deposits
                       
Domestic deposits
    3,887,880       4,725     (See below)   September 2009 to December 2009
Foreign deposits
    3,239,900       4,914     (See below)   October 2009 to January 2010
 
                   
 
                       
 
  $ 11,127,780     $ 36,655          
 
                   
June 30, 2005
                       
 
                       
Step-up callable deposits
                       
Domestic deposits
  $ 4,000,000     $ 18,027     1.40%-2.44%   July 2006 to August 2007
Callable range accrual deposits
                       
Domestic deposits
    3,794,160       8,266     (See below)   September 2009 to December 2009
Foreign deposits
    3,161,800       11,971     (See below)   October 2009 to January 2010
 
                   
 
                       
 
  $ 10,955,960     $ 38,264          
 
                   
    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 June 30, 2006 and 2005, the principal of the deposits that resided in banks located in Hong Kong amounted to US$80,000 thousand; those resided in banks located in Singapore amounted to US$20,000 thousand.

- 19 -


 

8.   INVENTORIES, NET
                 
    June 30  
    2006     2005  
Finished goods
  $ 4,163,346     $ 2,600,225  
Work in process
    13,243,014       11,380,115  
Raw materials
    1,236,095       937,820  
Supplies and spare parts
    537,546       658,803  
 
           
 
    19,180,001       15,576,963  
Allowance for losses
    (804,421 )     (1,463,348 )
 
           
 
               
 
  $ 18,375,580     $ 14,113,615  
 
           
9.   FINANCIAL ASSETS CARRIED AT COST
                 
    June 30  
    2006     2005  
Non-publicly traded stocks
  $ 472,500     $ 482,500  
Funds
    346,469       302,439  
 
           
 
               
 
  $ 818,969     $ 784,939  
 
           
10.   INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD
                                 
    June 30  
    2006     2005  
            % of             % of  
    Carrying     Owner-     Carrying     Owner-  
    Amount     ship     Amount     ship  
TSMC International Investment Ltd. (TSMC International)
  $ 25,984,419       100     $ 23,057,382       100  
TSMC (Shanghai) Company Limited (TSMC- Shanghai)
    9,093,788       100       9,967,851       100  
Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)
    5,094,733       32       3,514,280       32  
Vanguard International Semiconductor Corporation (VIS)
    5,087,101       27       5,115,164       27  
TSMC Partners, Ltd. (TSMC Partners)
    4,225,071       100       3,873,176       100  
TSMC North America (TSMC-North America)
    1,790,365       100       794,692       100  
Emerging Alliance Fund, L.P. (Emerging Alliance)
    1,050,087       99       820,765       99  
VentureTech Alliance Fund II, L.P. (VTAF II)
    707,835       98       469,749       98  
Global UniChip Corporation (GUC)
    447,762       45       403,208       46  
VentureTech Alliance Fund III, L.P. (VTAF III)
    145,055       98              
Chi Cherng Investment Co., Ltd. (Chi Cherng)
    113,574       36       77,971       36  
Hsin Ruey Investment Co., Ltd. (Hsin Ruey)
    113,246       36       77,256       36  
TSMC Japan K. K. (TSMC-Japan)
    96,536       100       95,013       100  
Taiwan Semiconductor Manufacturing Company Europe B.V. (TSMC-Europe)
    36,909       100       22,491       100  
(Continued)

- 20 -


 

                                 
    June 30  
    2006     2005  
            % of             % of  
    Carrying     Owner-     Carrying     Owner-  
    Amount     ship     Amount     ship  
Taiwan Semiconductor Manufacturing Company Korea (TSMC-Korea)
  $ 13,752       100     $        
VisEra Technologies Company, Ltd. (VisEra)
                62,668       25  
 
                           
 
                               
 
  $ 54,000,233             $ 48,351,666          
 
                           
    For the six months ended June 30, 2006 and 2005, net equity in earnings of NT$3,404,382 thousand and net equity in losses of NT$786,018 thousand were recognized, respectively. The carrying amounts of the investments accounted for using the equity method and the related equity in earnings or losses of equity method investees were determined based on the audited financial statements of the investees as of and for the same periods ended as the Company.
 
    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 changes in investment structure.
 
11.   PROPERTY, PLANT AND EQUIPMENT
 
    Accumulated depreciation consisted of the following:
                 
    June 30  
    2006     2005  
Buildings
  $ 46,538,174     $ 39,229,473  
Machinery and equipment
    335,618,032       286,453,058  
Office equipment
    6,072,555       5,171,727  
 
           
 
               
 
  $ 388,228,761     $ 330,854,258  
 
           
    No interest was capitalized during the six months ended June 30, 2006 and 2005.
 
12.   DEFERRED CHARGES, NET
                 
    June 30  
    2006     2005  
Technology license fees
  $ 4,708,484     $ 5,836,060  
Software and system design costs
    1,401,428       1,942,091  
Others
    54,080       96,402  
 
           
 
               
 
  $ 6,163,992     $ 7,874,553  
 
           

- 21 -


 

13.   BONDS PAYABLE
                 
    June 30  
    2006     2005  
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
    (2,500,000 )     (10,500,000 )
 
           
 
               
 
  $ 17,000,000     $ 19,500,000  
 
           
    As of June 30, 2006, 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  
 
     
14.   OTHER LONG-TERM PAYABLES
 
    Most of the payables resulted from license agreements for certain semiconductor-related patents. As of June 30, 2006, future payments for other long-term payables were as follows:
         
Year of Payment   Amount  
2006 (3rd to 4th quarter)
  $ 493,300  
2007
    641,216  
2008
    335,006  
2009
    335,006  
2010
    335,006  
2011 and thereafter
    259,192  
 
     
 
    2,398,726  
 
       
Current portion (classified under accrued expenses and other current liabilities)
    (940,123 )
 
     
 
       
 
  $ 1,458,603  
 
     
15.   PENSION PLANS
 
    The Labor Pension Act (the Act) became effective on July 1, 2005. The employees who were subject to the Labor Standards Law prior to July 1, 2005 were allowed to choose to be subject to the pension mechanism under the Act with their seniority as of July 1, 2005 retained or continue to be subject to the pension mechanism under the Labor Standards Law. Employees who joined the Company after July 1, 2005 can only be subject to the pension mechanism under the Act.

- 22 -


 

    The pension mechanism under the Act is deemed a defined contribution plan. Pursuant to the Act, the Company has made monthly contributions equal to 6% of each employee’s monthly salary to employees’ pension accounts starting from July 1, 2005, and recognized pension costs of NT$309,709 thousand for the six months ended June 30, 2006.
 
    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 the pension fund monitoring committee (the Committee) and deposited in the Committee’s name in the Central Trust of China.
 
    Changes in the Fund and accrued pension cost under the defined benefit plan are summarized as follows:
                 
    Six Months Ended June 30  
    2006     2005  
The Fund
               
Balance, beginning of period
  $ 1,658,864     $ 1,428,001  
Contributions
    131,250       122,103  
Interest
    34,384       15,629  
Payment
    (4,677 )     (8,419 )
 
           
 
               
Balance, end of period
  $ 1,819,821     $ 1,557,314  
 
           
 
               
Accrued pension cost
               
Balance, beginning of period
  $ 3,461,392     $ 3,101,196  
Accruals
    22,958       309,054  
 
           
 
               
Balance, end of period
  $ 3,484,350     $ 3,410,250  
 
           
16.   INCOME TAX
  a.   A reconciliation of income tax expense based on “income before income tax” at statutory rate and income tax currently payable was as follows:
                 
    Six Months Ended June 30  
    2006     2005  
Income tax expense based on “income before income tax” at statutory rate (25%)
  $ (17,726,514 )   $ (8,499,431 )
Tax effect of the following:
               
Tax-exempt income
    6,411,975       4,734,183  
Temporary and permanent differences
    721,070       (635,273 )
Additional tax at 10% on unappropriated earnings
    (1,156,130 )     (1,489,709 )
Cumulative effect of changes in accounting principles
    82,062        
Income tax credits
    7,462,975       5,890,230  
 
           
 
               
Income tax currently payable
  $ (4,204,562 )   $  
 
           
(Continued)

- 23 -


 

  b.   Income tax benefit (expense) consisted of the following:
                 
    Six Months Ended June 30  
    2006     2005  
Income tax currently payable
  $ (4,204,562 )   $  
Other income tax adjustments
    447,043       39,788  
Net change in deferred income tax assets
               
Investment tax credits
    (2,756,331 )     2,512,133  
Temporary differences
    1,423,579       1,708,642  
Adjustment in valuation allowance
    1,039,030       (3,070,953 )
 
           
 
               
Income tax benefit (expense)
  $ (4,051,241 )   $ 1,189,610  
 
           
  c.   Net deferred income tax assets consisted of the following:
                 
    June 30  
    2006     2005  
Current deferred income tax assets
               
Investment tax credits
  $ 6,084,277     $ 5,330,000  
 
           
 
               
Noncurrent deferred income tax assets, net
               
Investment tax credits
  $ 15,025,163     $ 23,066,717  
Temporary differences
    741,309       (741,893 )
Valuation allowance
    (8,371,516 )     (16,010,999 )
 
           
 
               
 
  $ 7,394,956     $ 6,313,825  
 
           
  d.   Integrated income tax information:
 
      The balance of the imputation credit account as of June 30, 2006 and 2005 was NT$743,590 thousand and NT$15,569 thousand, respectively.
 
      The expected and actual creditable ratios for distribution of earnings of 2005 and 2004 were 2.88% 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 imputation credits is made.
 
  e.   All earnings generated prior to December 31, 1997 have been appropriated.

- 24 -


 

  f.   As of June 30, 2006, investment tax credits consisted of the following:
                             
        Total     Remaining        
        Creditable     Creditable     Expiry  
Regulation   Item   Amount     Amount     Year  
Statute for Upgrading Industries
  Purchase of machinery and equipment   $ 2,685,805     $       2006  
 
    4,113,449       1,144,070       2007  
 
        6,809,054       6,809,054       2008  
 
        6,049,452       6,049,452       2009  
 
        1,722,682       1,722,682       2010  
 
                       
 
                           
 
      $ 21,380,442     $ 15,725,258          
 
                       
 
                           
Statute for Upgrading Industries
  Research and development expenditures   $ 1,780,480     $       2006  
 
    1,243,821       1,243,821       2007  
 
        1,627,535       1,627,535       2008  
 
        1,534,670       1,534,670       2009  
 
        797,450       797,450       2010  
 
                       
 
                           
 
      $ 6,983,956     $ 5,203,476          
 
                       
 
                           
Statute for Upgrading Industries
  Personnel training   $ 27,311     $       2006  
        26,780       26,780       2007  
 
        37,207       37,207       2008  
 
        36,915       36,915       2009  
 
                       
 
                           
 
      $ 128,213     $ 100,902          
 
                       
 
                           
Statute for Upgrading Industries
  Investments in important technology-based enterprises   $ 79,804     $ 79,804       2010  
 
                       
  g.   The profits generated from the following expansion and construction projects are exempt from income tax:
         
    Tax-Exemption Period
Construction of Fab 8 - modules 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 2002.

- 25 -


 

17.   LABOR COST, DEPRECIATION AND AMORTIZATION
                         
    Six Months Ended June 30, 2006  
            Classified as        
    Classified as     Operating        
    Cost of Sales     Expenses     Total  
Labor cost
                       
Salary
  $ 5,183,360     $ 2,144,658     $ 7,328,018  
Labor and health insurance
    340,274       167,998       508,272  
Pension
    309,451       152,942       462,393  
Meal
    225,304       76,220       301,524  
Welfare
    94,186       48,784       142,970  
Others
    103,858       12,901       116,759  
 
                 
 
                       
 
  $ 6,256,433     $ 2,603,503     $ 8,859,936  
 
                 
 
                       
Depreciation
  $ 29,319,569     $ 1,617,095     $ 30,936,664  
 
                 
Amortization
  $ 722,358     $ 479,323     $ 1,201,681  
 
                 
                         
    Six Months Ended June 30, 2005  
            Classified as        
    Classified as     Operating        
    Cost of Sales     Expenses     Total  
Labor cost
                       
Salary
  $ 4,091,113     $ 1,678,438     $ 5,769,551  
Labor and health insurance
    303,436       144,065       447,501  
Pension
    295,506       140,296       435,802  
Meal
    208,186       67,904       276,090  
Welfare
    72,159       40,344       112,503  
Others
    51,139       45,032       96,171  
 
                 
 
                       
 
  $ 5,021,539     $ 2,116,079     $ 7,137,618  
 
                 
 
                       
Depreciation
  $ 31,158,607     $ 1,489,769     $ 32,648,376  
 
                 
Amortization
  $ 814,069     $ 859,118     $ 1,673,187  
 
                 
18.   SHAREHOLDERS’ EQUITY
 
    The Company has issued a total of 863,834 thousand ADSs which are traded on the NYSE as of June 30, 2006. The number of common shares represented by the ADSs is 4,319,169 thousand (one ADS represents five common shares).
 
    Capital surplus can only be used to offset a deficit under the Company Law. However, the capital surplus generated from donations and the excess of the issuance price over the par value of capital stock (including the stock issued for new capital, mergers, convertible bonds and the surplus from treasury stock transactions) may be appropriated as stock dividends, which is limited to a certain percentage of the Company’s paid-in capital.

- 26 -


 

    Capital surplus consisted of the following:
                 
    June 30  
    2006     2005  
From merger
  $ 24,003,546     $ 24,003,546  
Additional paid-in capital
    19,788,594       23,139,481  
From convertible bonds
    9,360,424       9,360,424  
From treasury stock transactions
    389,188       91,241  
From long-term investments
    280,679       126,128  
Donations
    55       55  
 
           
 
               
 
  $ 53,822,486     $ 56,720,875  
 
           
    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 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 of not more than 0.3% and not less than 1% of the remainder, respectively. Directors who also serve as executive officers of the Company are not entitled to receive the bonus to directors 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 that the ratio for stock dividend shall not exceed 50% of the total distribution.
 
    Any appropriations of the profits are recorded in the year of shareholder approval and given effect to in the financial statements of that year.
 
    The appropriation for legal capital reserve shall be made until the reserve equals the Company’s paid-in capital. The reserve may be used to offset a deficit, or be distributed as dividends and bonuses for the portion in excess of 50% of the paid-in capital if the Company has no unappropriated earnings and the reserve balance has exceeded 50% of the Company’s paid-in capital. The Company Law also prescribes that, when the reserve has reached 50% of the Company’s paid-in capital, up to 50% of the reserve may be transferred to capital.
 
    A special capital reserve equivalent to the net debit balance of the other components of shareholders’ equity (for example, cumulative translation adjustments and unrealized loss on financial assets, 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.

- 27 -


 

    The appropriations of earnings for 2005 and 2004 had been approved in the shareholders’ meetings held on May 16, 2006 and May 10, 2005, 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 2005     Year 2004     Year 2005     Year 2004  
Legal capital reserve
  $ 9,357,503     $ 8,820,201                  
Special capital reserve
    (1,585,685 )     2,226,427                  
Employees’ profit sharing — in cash
    3,432,129       3,086,215                  
Employees’ profit sharing — in stock
    3,432,129       3,086,215                  
Cash dividends to shareholders
    61,825,061       46,504,097     $ 2.50     $ 2.00  
Stock dividends to shareholders
    3,709,504       11,626,024       0.15       0.50  
Bonus to directors and supervisors
    257,410       231,466                  
 
                           
 
                               
 
  $ 80,428,051     $ 75,580,645                  
 
                           
    The amounts of the above appropriations of earnings for 2005 and 2004 are consistent with the resolutions of the meetings of the Board of Directors held on February 14, 2006 and February 22, 2005, respectively. If the above bonus to employees, directors and supervisors had been paid entirely in cash and charged to earnings of 2005 and 2004, the basic earnings per share (after income tax) for the years ended December 31, 2005 and 2004 would have decreased from NT$3.79 to NT$3.50 and NT$3.97 to NT$3.70, respectively.
 
    The shares distributed as a bonus to employees represented 1.39% and 1.33% of the Company’s total outstanding common shares as of December 31, 2005 and 2004, respectively.
 
    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.
 
19.   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 of the aforementioned Plans that had never been granted or had been granted but subsequently canceled had expired as of June 30, 2006.

- 28 -


 

    Information about outstanding stock options for the six months ended June 30, 2006 and 2005 was as follows:
                 
            Weighted-
            Average
    Number of   Exercise
    Options   Price
    (in Thousands)   (NT$)
Six months ended June 30, 2006
               
 
               
Balance, beginning of period
    67,758     $ 39.4  
Options granted
    2,517       39.7  
Options exercised
    (8,219 )     39.7  
Options canceled
    (2,304 )     44.5  
 
               
 
               
Balance, end of period
    59,752       39.6  
 
               
 
               
Six months ended June 30, 2005
               
 
               
Balance, beginning of period
    64,367       40.5  
Options granted
    14,864       48.4  
Options exercised
    (2,941 )     39.9  
Options canceled
    (2,931 )     42.7  
 
               
 
               
Balance, end of period
    73,359       42.1  
 
               
    The number of outstanding options and exercise prices have been adjusted to reflect the appropriations of dividends in accordance with the plans.
 
    As of June 30, 2006, information about outstanding and exercisable options was as follows:
                                         
    Options Outstanding   Options Exercisable
            Weighted-   Weighted-           Weighted-
            average   average           average
Range of   Number of   Remaining   Exercise   Number of   Exercise
Exercise   Options (in   Contractual   Price   Options (in   Price
Price (NT$)   Thousands)   Life (Years)   (NT$)   Thousands)   (NT$)
$27.6-$39.7
    39,415       5.64     $ 35.6       29,458     $ 35.6  
$45.1-$52.3
    20,337       7.34       47.3       312       45.5  
 
                                       
 
                                       
 
    59,752                       29,770          
 
                                       

- 29 -


 

    No compensation cost was recognized under the intrinsic value method for the six months ended June 30, 2006 and 2005. 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 six months ended June 30, 2006 and 2005 would have been as follows:
                 
    Six Months Ended June 30
    2006   2005
Assumptions:
               
Expected dividend yield
    1.00%-3.44 %     1.00%-3.44 %
Expected volatility
    43.77%-46.15 %     43.77%-46.15 %
Risk free interest rate
    3.07%-3.85 %     3.07%-3.85 %
Expected life
    5 years       5 years  
 
               
Net income:
               
Net income as reported
  $ 66,608,628     $ 35,187,334  
Pro forma net income
    66,552,140       35,140,859  
 
               
Earnings per share (EPS) — after income tax (NT$):
               
Basic EPS as reported
  $ 2.58     $ 1.37  
Pro forma basic EPS
    2.58       1.36  
Diluted EPS as reported
    2.58       1.37  
Pro forma diluted EPS
    2.58       1.36  
20.   TREASURY STOCK
(Shares in Thousands)
                                 
    Beginning   Increase/           Ending
    Shares   Dividend   Disposal   Shares
Six months ended June 30, 2006
                               
 
                               
Parent company stock held by subsidiaries
    32,938       988             33,926  
 
                               
 
                               
Six months ended June 30, 2005
                               
 
                               
Parent company stock held by subsidiaries
    45,521       2,242       901       46,862  
 
                               
    Proceeds from sales of treasury stock for the six months ended June 30, 2005 were NT$49,364 thousand. As of June 30, 2006 and 2005, the book value of the treasury stock was NT$918,075 thousand and NT$1,552,573 thousand, respectively; the market value was NT$1,952,452 thousand and NT$2,648,643 thousand, respectively. The Company’s stock held by its subsidiaries is 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 vote in shareholders’ meetings.

- 30 -


 

21. EARNINGS PER SHARE
                                 
    Six Months Ended June 30  
    2006     2005  
    Before     After     Before     After  
    Income     Income     Income     Income  
    Tax     Tax     Tax     Tax  
Basic EPS (NT$)
                               
Income before cumulative effect of changes in accounting principles
  $ 2.75     $ 2.59     $ 1.32     $ 1.37  
Cumulative effect of changes in accounting principles
    (0.01 )     (0.01 )            
 
                       
 
                               
Income for the period
  $ 2.74     $ 2.58     $ 1.32     $ 1.37  
 
                       
 
                               
Diluted EPS (NT$)
                               
Income before cumulative effect of change in accounting principles
  $ 2.74     $ 2.59     $ 1.32     $ 1.37  
Cumulative effect of changes in accounting principles
    (0.01 )     (0.01 )            
 
                       
 
                               
Income for the period
  $ 2.73     $ 2.58     $ 1.32     $ 1.37  
 
                       
EPS is computed as follows:
                                         
                    Number of     EPS (NT$)  
    Amounts (Numerator)     Shares     Before     After  
    Before     After     (Denominator)     Income     Income  
    Income Tax     Income Tax     (in Thousands)     Tax     Tax  
Six months ended June 30, 2006
                                       
 
                                       
Basic EPS
                                       
Income available to common shareholders
  $ 70,577,807     $ 66,608,628       25,784,890     $ 2.74     $ 2.58  
 
                                   
Effect of dilutive potential common stock — stock options
                23,529                  
 
                                 
 
                                       
Diluted EPS
                                       
Income available to common shareholders (including effect of dilutive potential common stock)
  $ 70,577,807     $ 66,608,628       25,808,419     $ 2.73     $ 2.58  
 
                             
 
                                       
Six months ended June 30, 2005
                                       
 
                                       
Basic EPS
                                       
Income available to common shareholders
  $ 33,997,724     $ 35,187,334       25,759,865     $ 1.32     $ 1.37  
 
                                   
Effect of dilutive potential common stock — stock options
                10,032                  
 
                                 
 
                                       
Diluted EPS
                                       
Income available to common shareholders (including effect of dilutive potential common stock)
  $ 33,997,724     $ 35,187,334       25,769,897     $ 1.32     $ 1.37  
 
                             

- 31 -


 

22. DISCLOSURES FOR FINANCIAL INSTRUMENTS
  a.   Fair values of financial instruments were as follows:
                                 
    June 30  
    2006     2005  
    Carrying             Carrying        
    Amount     Fair Value     Amount     Fair Value  
Assets
                               
 
                               
Available-for-sale financial assets
  $ 66,976,357     $ 66,976,357     $ 48,298,762     $ 48,298,762  
Held-to-maturity financial assets
    29,262,804       28,857,510       28,407,811       28,299,261  
Long-term investments accounted for using equity method (with market price)
    5,087,101       9,567,918       5,115,164       12,449,270  
 
                               
Liabilities
                               
 
                               
Forward exchange contracts, net
    8,265       8,265       39,969       36,560  
Cross currency swap contracts, net
    269,188       269,188       674,894       452,530  
Bonds payable (including current portion)
    19,500,000       19,888,147       30,000,000       30,429,929  
  b.   Methods and assumptions used in the determination of fair values of financial instruments
  1)   The aforementioned financial instruments do not include cash and cash equivalents, receivables, other financial assets, payables, and payables to contractors and equipment suppliers. The carrying amounts of these financial instruments approximate their fair values.
 
  2)   The aforementioned financial instruments do not include long-term payables either. The fair value was determined using the discounted value of expected cash flows, which approximates their carrying amount.
 
  3)   Fair values of available-for-sale and held-to-maturity financial assets were based on their quoted market prices; while fair values of structured time deposits were estimated using valuation techniques.
 
  4)   Fair value of bonds payable was based on their quoted market price.
 
  5)   Fair values of derivatives were determined using valuation techniques incorporating estimates and assumptions that were consistent with prevailing market conditions.
  c.   Losses recognized for the changes in fair value of derivatives estimated using valuation techniques were NT$277,453 thousand for the six months ended June 30, 2006.
 
  d.   As of June 30, 2006 and 2005, financial assets exposed to fair value interest rate risk were NT$96,561,617 thousand and NT$76,801,791 thousand, respectively, financial liabilities exposed to fair value interest rate risk were NT$599,909 thousand and NT$836,704 thousand, respectively, and financial assets exposed to cash flow interest rate risk were NT$7,127,780 thousand and NT$6,955,960 thousand, respectively.
 
  e.   The Company recognized an unrealized loss of NT$191,469 thousand in shareholder’s equity for the changes in fair value of available-for-sale financial assets for the six months ended June 30, 2006. The Company also recognized an unrealized gain of NT$308,023 thousand in shareholders’ equity for the changes in available-for-sale financial assets held by equity method investees for the six months ended June 30, 2006.

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  f.   Information about financial risks
  1)   Market risk. The derivative financial instruments categorized as financial assets at fair value through profit or loss are mainly used to hedge the exchange rate fluctuations of foreign-currency- denominated assets and liabilities. Therefore, the market risk of derivatives will be offset by the foreign exchange risk of these assets and liabilities. Available-for-sale financial assets held by the Company are mainly fixed-interest-rate debt securities. Therefore, the fluctuations in market interest rates would result in changes in fair values of these debt instruments.
 
  2)   Credit risk. Credit risk represents the potential loss that would be incurred by the Company if the counter-parties or third-parties breached contracts. Financial instruments with positive fair values at the balance sheet date are evaluated for credit risk. The counter-parties or third-parties to the foregoing financial instruments are reputable financial institutions, business organizations, and government agencies. Management believes its exposure to default by those parties is low.
 
  3)   Liquidity risk. The Company has sufficient operating capital to meet cash needs upon settlement of derivative financial instruments and bonds payable. Therefore, the cash flow risk is low.
 
  4)   Cash flow interest rate risk. The Company mainly engages in investments in fixed-interest-rate debt securities. Therefore, cash flows are not expected to fluctuate significantly due to changes in market interest rates.
23. RELATED PARTY TRANSACTIONS
The Company engages in business transactions with the following related parties:
  a.   Industrial Technology Research Institute (ITRI), the chairman of the Company is one of its supervisors.
 
  b.   Philips, a major shareholder of the Company.
 
  c.   Subsidiaries
 
      TSMC-North America
TSMC-Shanghai
TSMC-Europe
TSMC-Japan
TSMC-Korea
 
  d.   Investees
 
      GUC (with a controlling financial interest)
VIS (accounted for using equity method)
SSMC (accounted for using equity method)
 
  e.   Indirect subsidiaries
 
      WaferTech, LLC (WaferTech)
TSMC Technology, Inc. (TSMC Technology)
 
  f.   Indirect investee
 
      VisEra, originally an investee over which the Company had a controlling interest; beginning in November 2005, VisEra became an indirect investee accounted for using the equity method due to changes in investment structure.

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Transactions with the aforementioned parties, other than those disclosed in other notes, are summarized as follows:
                                 
    2006     2005  
    Amount     %     Amount     %  
Six months ended June 30
                               
 
                               
Sales
                               
TSMC-North America
  $ 94,075,632       58     $ 64,760,945       56  
Philips
    2,318,898       2       1,147,115       1  
Others
    406,336             186,880        
 
                       
 
                               
 
  $ 96,800,866       60     $ 66,094,940       57  
 
                       
 
                               
Purchases
                               
WaferTech
  $ 6,505,148       28     $ 5,117,622       31  
SSMC
    3,718,466       16       2,094,617       13  
TSMC-Shanghai
    1,918,584       8       234,333       1  
VIS
    1,712,082       7       2,168,998       13  
 
                       
 
                               
 
  $ 13,854,280       59     $ 9,615,570       58  
 
                       
 
                               
Manufacturing expenses — technical assistance fees
                               
Philips (Note 26a)
  $ 377,952       1     $ 202,334        
 
                       
 
                               
Marketing expenses — commission
                               
TSMC-Japan
  $ 125,553       12     $ 133,765       22  
TSMC-Europe
    116,934       11       116,034       18  
TSMC-Korea
    1,118                    
 
                       
 
                               
 
  $ 243,605       23     $ 249,799       40  
 
                       
 
                               
General and administrative expenses — rental expense
                               
GUC
  $ 7,659           $ 8,162        
 
                       
 
                               
Research and development expenses
                               
GUC
  $ 19,582           $ 3,089        
 
                       
 
                               
Sales of property, plant, and equipment
                               
TSMC-Shanghai
  $ 173,299       42     $ 106,412       38  
 
                       
 
                               
Non-operating income and gains
                               
SSMC (primarily technical service income, see Note 26e)
  $ 147,219       2     $ 146,655       4  
VisEra
    140,079       2       10,752        
TSMC-Shanghai
    123,891       2       75,743       2  
VIS (primarily technical service income, see Note 26h)
    105,937       2       77,504       2  
 
                       
 
                               
 
  $ 517,126       8     $ 310,654       8  
 
                       
(Continued)

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    2006     2005  
    Amount     %     Amount     %  
As of June 30
                               
 
                               
Receivables
                               
TSMC-North America
  $ 22,374,338       98     $ 14,513,699       97  
Philips
    382,251       2       467,843       3  
Others
    153,300             18,136        
 
                       
 
                               
 
  $ 22,909,889       100     $ 14,999,678       100  
 
                       
 
                               
Other receivables
                               
VIS
  $ 688,807       42     $ 46,399       3  
TSMC Technology
    485,449       29       715,306       46  
TSMC-North America
    205,327       12       415,650       27  
TSMC-Shanghai
    167,585       10       271,905       17  
SSMC
    92,700       6       115,460       7  
Others
    19,614       1       1,064        
 
                       
 
                               
 
  $ 1,659,482       100     $ 1,565,784       100  
 
                       
 
                               
Payables
                               
WaferTech
  $ 1,155,023       35     $ 793,200       37  
VIS
    943,129       29       883,144       41  
SSMC
    662,385       20       284,080       13  
TSMC-Shanghai
    401,379       12       70,080       3  
Others
    119,507       4       115,813       6  
 
                       
 
                               
 
  $ 3,281,423       100     $ 2,146,317       100  
 
                       
 
                               
Other long-term payables
                               
Philips (Note 26a)
  $ 1,085,366       100     $ 1,727,133       100  
 
                       
 
                               
Deferred credits
                               
TSMC-Shanghai
  $ 635,124       54     $ 708,941       100  
VisEra
    155,437       13              
 
                       
 
                               
 
  $ 790,561       67     $ 708,941       100  
 
                       
The terms of sales to related parties were not significantly different from those of sales to third parties. For other related party transactions, prices are determined in accordance with mutual agreements.
The Company deferred the gains (classified under the deferred credits) derived from sales of property, plant, and equipment to TSMC-Shanghai and VisEra, and then recognized such gains (classified under the non-operating income and gains) over the depreciable lives of the disposed assets.
The Company leased part of its office space from GUC with a quarterly rental of NT$4,186 thousand. The Company also leased certain buildings and facilities to VisEra with a monthly rental of NT$7,684 (classified under the non-operating income and gains).
24. SIGNIFICANT LONG-TERM LEASES
The Company leases several parcels of land from the Science Park Administration. These operating leases expire on various dates from March 2008 to December 2020 and can be renewed upon expiration.

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As of June 30, 2006, future lease payments were as follows:
         
Year
  Amount  
2006 (3rd to 4th quarter)
  $ 132,607  
2007
    248,185  
2008
    222,450  
2009
    213,872  
2010
    166,803  
2011 and thereafter
    1,103,708  
 
     
 
       
 
  $ 2,087,625  
 
     
25. 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$175,000 thousand over six years to resolve TSMC’s claims. As of June 30, 2006, SMIC has paid US$45,000 thousand in accordance with the terms of this settlement agreement.
26. SIGNIFICANT COMMITMENTS AND CONTINGENCIES
The significant commitments and contingencies of the Company as of June 30, 2006, excluding those disclosed in other notes, 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 a 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 June 30, 2006, the Company had a total of US$102,966 thousand of guarantee deposits.

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  d.   Under a Shareholders Agreement entered into with Philips and EDB Investments Pte Ltd. on March 30, 1999, the parties formed a joint venture company, SSMC, which is an integrated circuit foundry in Singapore. The Company’s equity interest in SSMC was 32%. 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 fall 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 Technical Cooperation Agreement (the Agreement) entered into on May 12, 1999. The Company receives compensation for such services computed at a specific percentage of net selling price of all products sold by SSMC. The Agreement shall remain in force for ten years and may be automatically renewed for successive periods of five years each unless pre-terminated by either party under certain conditions.
 
  f.   Under a Technology Transfer Agreement (TTA) with National Semiconductor Corporation (National) entered into on June 27, 2000, the Company shall receive payments for the licensing of certain technology to National. The agreement was to remain in force for ten years and could be automatically renewed for successive periods of two years thereafter unless either party gives written notice for early termination under certain conditions. In January 2003, the Company and National entered into a Termination Agreement whereby the TTA was terminated. Under the Termination Agreement, the Company will be relieved of any further obligation to transfer any additional technology. In addition, the Company granted National an option to request the transfer of certain technologies under the same terms and conditions as the terminated TTA. The option will expire in January 2008.
 
  g.   In December 2003, the Company entered into a Technology Development and License Agreement with Freescale Semiconductor, Inc. to jointly develop 65-nm SOI (silicon on insulator) technology. The Company will also license related 90-nm SOI technology from Freescale Semiconductor, Inc. Any intellectual properties arising out of the co-development project shall be jointly owned by the parties. In accordance with the agreement, the Company will pay royalties to Freescale Semiconductor, Inc. and will share a portion of the costs associated with the joint development project.
 
  h.   The Company provides a technology transfer to VIS under a Manufacturing License and Technology Transfer Agreement entered into on April 1, 2004. The Company receives compensation for such technology transfer in the form of royalty payments from VIS computed at specific percentages of net selling price of certain products sold by VIS. VIS agreed to reserve its certain capacity to manufacture for the Company certain products at prices as agreed by the parties.
 
  i.   Amounts available under unused letters of credit as of June 30, 2006 were NT$6,480 thousand.
27. ADDITIONAL DISCLOSURES
Following are the additional disclosures required by the SFB for the Company and its investees:
  a.   Financing provided: 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;

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  e.   Acquisition of individual real estate properties at costs of at least NT$100 million or 20% of the paid-in capital: Please see Table 5 attached;
 
  f.   Disposal of individual real estate properties at prices of at least NT$100 million or 20% of the paid-in capital: None;
 
  g.   Total purchases from or sales to related parties of at least NT$100 million or 20% of the paid-in capital: Please see Table 6 attached;
 
  h.   Receivable from related parties amounting to at least NT$100 million or 20% of the paid-in capital: Please see Table 7 attached;
 
  i.   Names, locations, and related information of investees on which the Company exercises significant influence: Please see Table 8 attached;
 
  j.   Information about derivatives of investees over which the Company has a controlling interest:
 
      TSMC-Shanghai entered into forward exchange contracts during the six months ended June 30, 2006 to manage exposures related to foreign exchange rate fluctuations.
 
      Outstanding forward exchange contracts as of June 30, 2006:
                     
            Contract  
            Amount  
    Currency   Maturity Date   (in Thousands)  
Sell
  US$/JPY   Jul 2006   JPY     13,500  
 
  US$/EUR   Jul 2006   EUR     1,134  
Valuation losses arising from forward transactions for the six months ended June 30, 2006 were NT$1,177 thousand.
  k.   Information on investment in Mainland China
  1)   The name of the investee in mainland China, the main businesses and products, its issued capital, method of investment, information on inflow or outflow of capital, percentage of ownership, equity in the net gain or net loss, ending balance, amount received as dividends from the investee, and the limitation on investee: Please see Table 9 attached.
 
  2)   Significant direct or indirect transactions with the investee, its prices and terms of payment, unrealized gain or loss, and other related information which is helpful to understand the impact of investment in mainland China on financial reports: Please see Note 23.

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TABLE 1
Taiwan Semiconductor Manufacturing Company Limited and Investees
FINANCING PROVIDED
FOR THE SIX MONTHS ENDED JUNE 30, 2006
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
                                                                                                                 
                                                                                                            Financing
                                                                                                            Company’s
                            Maximum                                                                   Financing   Financing
                            Balance for   Ending                                                           Limit for   Amount
                    Financial   the Period   Balance           Type of           Reasons for   Allowance for                   Each   Limits
                    Statement   (US$ in   (US$ in   Interest   Financing   Transaction   Short-term   Doubtful   Collateral   Borrowing   (US$ in
No.   Financing Name   Counter-party   Account   Thousands)   Thousands)   Rate   (Note 1)   Amounts   Financing   Accounts   Item   Value   Company   Thousands)
  1
  TSMC International   TSMC Development   Other receivables   $1,133,965(US$35,000 )   $       1.50 %     2     $     Operating capital   $           $       N/A     $32,009,175
( US$987,968 )
(Note 2)
 
Note 1:   The type No. 2 represents necessary for short-term financing.
 
Note 2:   Not exceeding the issued capital of the Company.

- 39 -


 

TABLE 2
Taiwan Semiconductor Manufacturing Company Limited
ENDORSEMENT/GUARANTEE PROVIDED
FOR THE SIX MONTHS ENDED JUNE 30, 2006
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
                                                                         
                                                            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     TSMC   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     $     $           $ 111,708,087  
                                  (US$ 40,000 )                                
                                                                       
                TSMC Development     3         1,943,940       1,943,940             0.44 %        
                                  (US$ 60,000 )   (US$ 60,000 )                        
 
Note 1:   25% of the net worth of the Company as of June 30, 2006.
 
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.

- 40 -


 

TABLE 3
Taiwan Semiconductor Manufacturing Company Limited and Investees
MARKETABLE SECURITIES HELD
JUNE 30, 2006
(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Specified)
                                                     
                June 30, 2006    
                                        Market Value or    
Held Company       Relationship with the   Financial Statement   Shares/Units (in   Carrying Value   Percentage of   Net Asset Value    
Name   Marketable Securities Type and Name   Company   Account   Thousands)   (US$ in Thousands)   Ownership   (US$ in Thousands)   Note
The Company   Government bond  
 
                                           
    United States Treas NTS    
Available-for-sale financial assets
        US$ 118,345       N/A     US$ 118,345          
    2004 Government Bond Series B     ²         $ 997,583       N/A     $ 997,583          
    2005 Government Bond Series A    
Held-to-maturity financial assets
          2,749,071       N/A       2,744,234          
    2006 Government Bond Series D     ²           999,583       N/A       1,000,562          
    2004 Kaohsiung Municipal Series A     ²           620,000       N/A       618,140          
    European Investment Bank Bonds     ²           368,482       N/A       400,000          
    2002 Government Bond Series B     ²           353,208       N/A       352,496          
    2003 Government Bond Series F     ²           149,548       N/A       148,514          
           
 
                                       
    Beneficiary certificates of open-end funds  
 
                                           
    NITC Bond Fund    
Available-for-sale financial assets
    22,219       3,630,743       N/A       3,630,743          
    ABN AMRO Bond Fund     ²     175,156       2,620,910       N/A       2,620,910          
    Prudential Financial Bond Fund     ²     103,751       1,505,992       N/A       1,505,992          
    Cathay Bond     ²     122,762       1,406,342       N/A       1,406,342          
    NITC Taiwan Bond     ²     93,312       1,305,711       N/A       1,305,711          
    ABN AMRO Select Bond Fund     ²     111,974       1,260,332       N/A       1,260,332          
    Dresdner Bond DAM Fund     ²     104,217       1,199,200       N/A       1,199,200          
    JF Taiwan Bond Fund     ²     75,286       1,140,778       N/A       1,140,778          
    President James Bond     ²     72,002       1,103,437       N/A       1,103,437          
    JF Taiwan First Bond Fund     ²     77,530       1,082,117       N/A       1,082,117          
    Shinkong Chi Shin Bond Fund     ²     72,680       1,034,238       N/A       1,034,238          
    ABN AMRO Income     ²     63,947       1,004,697       N/A       1,004,697          
    Fuhwa Albatross Fund     ²     89,510       1,003,570       N/A       1,003,570          
    Fuh Hwa Bond     ²     60,642       802,844       N/A       802,844          
    HSBC Taiwan Money Management     ²     40,864       602,784       N/A       602,784          
    Taishin Lucky Fund     ²     54,132       551,429       N/A       551,429          
    TIIM High Yield     ²     40,639       500,864       N/A       500,864          
    INVESCO Income Fund     ²     35,359       401,136       N/A       401,136          
(Continued)

- 41 -


 

                                                 
                June 30, 2006    
                                        Market Value or    
Held Company       Relationship with the   Financial Statement   Shares/Units (in   Carrying Value   Percentage of   Net Asset Value    
Name   Marketable Securities Type and Name   Company   Account   Thousands)   (US$ in Thousands)   Ownership   (US$ in Thousands)   Note
    Stock      
 
                                   
    TSMC International   Subsidiary  
Investments accounted for using equity method
    987,968     $ 25,984,419       100     $ 25,984,419      
    SSMC  
Equity method investee
 
²
    382       5,094,733       32       5,094,733      
    VIS   Equity method investee  
²
    437,891       5,087,101       27       9,567,918      
    TSMC Partners   Subsidiary  
²
    300       4,225,071       100       4,225,071      
    TSMC-North America   Subsidiary  
²
    11,000       1,790,365       100       1,790,365      
    GUC  
Investee over which the company had a controlling interest
 
²
    40,147       447,762       45       462,618      
    TSMC-Japan   Subsidiary  
²
    6       96,536       100       96,536      
    TSMC-Europe   Subsidiary  
²
          36,909       100       36,909      
    TSMC-Korea   Subsidiary  
²
    80       13,752       100       13,752      
    United Industrial Gases Co., Ltd.    
Financial assets carried at cost
    16,783       193,584       10       285,173      
    Shin-Etsu Handotai Taiwan Co., Ltd.    
²
    10,500       105,000       7       194,038      
    Hontung Venture Capital Co., Ltd.    
²
    8,392       83,916       10       53,129      
    Gobaltop Partner I Venture Capital Corp.    
²
    5,000       50,000       1       50,092      
    W.K. Technology Fund IV    
²
    4,000       40,000       2       50,392      
           
 
                                   
    Capital      
 
                                   
    TSMC-Shanghai   Subsidiary  
Investments accounted for using equity method
          9,093,788       100       9,093,788      
           
                                   
    Emerging Alliance   Subsidiary  
²
          1,050,087       100       1,050,087      
    VTAF II   Subsidiary  
²
          707,835       98       707,002      
    VTAF III   Subsidiary  
²
          145,055       98       143,575      
    Chi Cheng   Subsidiary  
²
          113,574       36       572,138    
Treasury stock of NT$458,564 thousand is deducted from the carrying value
    Hsin Ruey   Subsidiary  
²
          113,246       36       572,757    
Treasury stock of NT$459,511 thousand is deducted from the carrying value
           
 
                                   
    Agency bond      
 
                                   
    Fed Hm Ln Pc Pool 1h2520    
Available-for-sale financial assets
        US$ 3,348       N/A     US$ 3,348      
    Fed Hm Ln Pc Pool 1h2524    
²
        US$ 2,575       N/A     US$ 2,575      
    Fed Hm Ln Pc Pool 781959    
²
        US$ 6,640       N/A     US$ 6,640      
    Fed Hm Ln Pc Pool E89857    
²
        US$ 1,680       N/A     US$ 1,680      
    Fed Hm Ln Pc Pool G11295    
²
        US$ 1,492       N/A     US$ 1,492      
    Fed Hm Ln Pc Pool M80855    
²
        US$ 3,520       N/A     US$ 3,520      
(Continued)

- 42 -


 

                                                                 
                            June 30, 2006    
                                                    Market Value or    
Held Company       Relationship with the   Financial Statement   Shares/Units (in   Carrying Value   Percentage of   Net Asset Value    
Name   Marketable Securities Type and Name   Company   Account   Thousands)   (US$ in Thousands)   Ownership   (US$ in Thousands)   Note
       
Federal Home Ln Mtg
       
Available-for-sale financial assets
        US$ 3,420       N/A     US$ 3,420          
       
Federal Home Ln Mtg Corp.
          ²           US$ 2,786       N/A     US$ 2,786          
       
Federal Home Ln Mtg Corp.
          ²           US$ 3,916       N/A     US$ 3,916          
       
Federal Home Ln Mtg Corp.
          ²           US$ 4,665       N/A     US$ 4,665          
       
Federal Home Ln Mtg Corp.
          ²           US$ 4,897       N/A     US$ 4,897          
       
Federal Home Ln Mtg Corp.
          ²           US$ 2,278       N/A     US$ 2,278          
       
Federal Home Ln Mtg Corp.
          ²           US$ 4,117       N/A     US$ 4,117          
       
Federal Home Ln Mtg Corp.
          ²           US$ 3,671       N/A     US$ 3,671          
       
Federal Home Ln Mtg Corp.
          ²           US$ 1,426       N/A     US$ 1,426          
       
Federal Home Ln Mtg Corp.
          ²           US$ 9,168       N/A     US$ 9,168          
       
Federal Home Ln Mtg Corp.
          ²           US$ 4,182       N/A     US$ 4,182          
       
Federal Home Ln Mtg Corp.
          ²           US$ 3,358       N/A     US$ 3,358          
       
Federal Home Ln Mtg Corp.
          ²           US$ 3,347       N/A     US$ 3,347          
       
Federal Home Ln Mtg Corp.
          ²           US$ 3,834       N/A     US$ 3,834          
       
Federal Home Ln Mtg Corp.
          ²           US$ 4,956       N/A     US$ 4,956          
       
Federal Home Loan Mtg
          ²           US$ 5,009       N/A     US$ 5,009          
       
Federal Natl Mtg Assn
          ²           US$ 3,193       N/A     US$ 3,193          
       
Federal Natl Mtg Assn
          ²           US$ 1,035       N/A     US$ 1,035          
       
Federal Natl Mtg Assn
          ²           US$ 3,673       N/A     US$ 3,673          
       
Federal Natl Mtg Assn
          ²           US$ 3,256       N/A     US$ 3,256          
       
Federal Natl Mtg Assn
          ²           US$ 1,976       N/A     US$ 1,976          
       
Federal Natl Mtg Assn
          ²           US$ 1,085       N/A     US$ 1,085          
       
Federal Natl Mtg Assn Gtd
          ²           US$ 2,403       N/A     US$ 2,403          
       
Federal Natl Mtg Assn Gtd
          ²           US$ 2,915       N/A     US$ 2,915          
       
Fnma Pool 254507
          ²           US$ 1,867       N/A     US$ 1,867          
       
Fnma Pool 254834
          ²           US$ 1,527       N/A     US$ 1,527          
       
Fnma Pool 255883
          ²           US$ 3,538       N/A     US$ 3,538          
       
Fnma Pool 685116
          ²           US$ 635       N/A     US$ 635          
       
Fnma Pool 687863
          ²           US$ 2,979       N/A     US$ 2,979          
       
Fnma Pool 696485
          ²           US$ 3,533       N/A     US$ 3,533          
       
Fnma Pool 725095
          ²           US$ 1,315       N/A     US$ 1,315          
       
Fnma Pool 730033
          ²           US$ 1,581       N/A     US$ 1,581          
       
Fnma Pool 740934
          ²           US$ 1,540       N/A     US$ 1,540          
       
Fnma Pool 790828
          ²           US$ 2,965       N/A     US$ 2,965          
       
Fnma Pool 793025
          ²           US$ 2,761       N/A     US$ 2,761          
       
Fnma Pool 793932
          ²           US$ 664       N/A     US$ 664          
       
Fnma Pool 794040
          ²           US$ 832       N/A     US$ 832          
       
Fnma Pool 795548
          ²           US$ 501       N/A     US$ 501          
       
Fnma Pool 806642
          ²           US$ 1,401       N/A     US$ 1,401          
       
Fnma Pool 815626
          ²           US$ 3,272       N/A     US$ 3,272          
(Continued)

- 43 -


 

                                                                 
                            June 30, 2006    
                                        Market Value or    
Held Company       Relationship with the   Financial Statement   Shares/Units (in   Carrying Value   Percentage of   Net Asset Value    
Name   Marketable Securities Type and Name   Company   Account   Thousands)   (US$ in Thousands)   Ownership   (US$ in Thousands)   Note
       
Fnma Pool 816594
       
Available-for-sale financial assets
        US$ 2,298       N/A     US$ 2,298          
       
Fnma Pool 825395
          ²           US$ 2,910       N/A     US$ 2,910          
       
Fnma Pool 825398
          ²           US$ 4,541       N/A     US$ 4,541          
       
Fnma Pool 841069
          ²           US$ 3,281       N/A     US$ 3,281          
       
Fnma Pool 879906
          ²           US$ 1,815       N/A     US$ 1,815          
       
Gnma II Pool 081150
          ²           US$ 699       N/A     US$ 699          
       
Gnma II Pool 081153
          ²           US$ 2,485       N/A     US$ 2,485          
       
Federal Farm Cr Bks
          ²           US$ 3,919       N/A     US$ 3,919          
       
Federal Home Ln Bank
          ²           US$ 3,938       N/A     US$ 3,938          
       
Federal Home Ln Bks
          ²           US$ 3,965       N/A     US$ 3,965          
       
Federal Home Ln Bks
          ²           US$ 4,916       N/A     US$ 4,916          
       
Federal Home Ln Bks
          ²           US$ 8,650       N/A     US$ 8,650          
       
Federal Home Ln Bks
          ²           US$ 4,123       N/A     US$ 4,123          
       
Federal Home Ln Bks
          ²           US$ 4,855       N/A     US$ 4,855          
       
Federal Home Ln Bks
          ²           US$ 8,609       N/A     US$ 8,609          
       
Federal Home Ln Bks
          ²           US$ 4,779       N/A     US$ 4,779          
       
Federal Home Ln Bks
          ²           US$ 5,772       N/A     US$ 5,772          
       
Federal Home Ln Bks
          ²           US$ 7,482       N/A     US$ 7,482          
       
Federal Home Ln Bks
          ²           US$ 4,818       N/A     US$ 4,818          
       
Federal Home Ln Bks
          ²           US$ 2,963       N/A     US$ 2,963          
       
Federal Home Ln Bks
          ²           US$ 7,960       N/A     US$ 7,960          
       
Federal Home Ln Bks
          ²           US$ 6,034       N/A     US$ 6,034          
       
Federal Home Ln Bks
          ²           US$ 12,145       N/A     US$ 12,145          
       
Federal Home Ln Bks
          ²           US$ 3,936       N/A     US$ 3,936          
       
Federal Home Ln Bks
          ²           US$ 6,817       N/A     US$ 6,817          
       
Federal Home Ln Bks
          ²           US$ 5,800       N/A     US$ 5,800          
       
Federal Home Ln Bks
          ²           US$ 3,292       N/A     US$ 3,292          
       
Federal Home Ln Bks
          ²           US$ 7,475       N/A     US$ 7,475          
       
Federal Home Ln Bks
          ²           US$ 2,378       N/A     US$ 2,378          
       
Federal Home Ln Mtg Corp.
          ²           US$ 3,442       N/A     US$ 3,442          
       
Federal Home Ln Mtg Corp.
          ²           US$ 9,759       N/A     US$ 9,759          
       
Federal Home Ln Mtg Corp.
          ²           US$ 5,876       N/A     US$ 5,876          
       
Federal Home Ln Mtg Corp.
          ²           US$ 6,398       N/A     US$ 6,398          
       
Federal Home Ln Mtg Corp.
          ²           US$ 14,166       N/A     US$ 14,166          
       
Federal Home Ln Mtg Corp.
          ²           US$ 9,887       N/A     US$ 9,887          
       
Federal Home Ln Mtg Corp. Mtn
          ²           US$ 4,898       N/A     US$ 4,898          
       
Federal Home Loan Bank
          ²           US$ 3,442       N/A     US$ 3,442          
       
Federal Home Loan Mtg Assn
          ²           US$ 4,885       N/A     US$ 4,885          
       
Federal Home Loan Mtg Corp.
          ²           US$ 4,912       N/A     US$ 4,912          
       
Federal Natl Mtg Assn
          ²           US$ 4,292       N/A     US$ 4,292          
(Continued)

- 44 -


 

                                                                 
                            June 30, 2006    
                                                    Market Value or    
Held Company       Relationship with the   Financial Statement   Shares/Units (in   Carrying Value   Percentage of   Net Asset Value    
Name   Marketable Securities Type and Name   Company   Account   Thousands)   (US$ in Thousands)   Ownership   (US$ in Thousands)   Note
       
Federal Natl Mtg Assn
       
Available-for-sale financial assets
        US$ 5,847       N/A     US$ 5,847          
       
Federal Natl Mtg Assn
          ²           US$ 7,763       N/A     US$ 7,763          
       
Federal Natl Mtg Assn
          ²           US$ 19,565       N/A     US$ 19,565          
       
Federal Natl Mtg Assn
          ²           US$ 4,104       N/A     US$ 4,104          
       
Federal Natl Mtg Assn
          ²           US$ 10,413       N/A     US$ 10,413          
       
Federal Natl Mtg Assn
          ²           US$ 7,963       N/A     US$ 7,963          
       
Federal Natl Mtg Assn Mtn
          ²           US$ 2,873       N/A     US$ 2,873          
       
Federal Natl Mtg Assn Mtn
          ²           US$ 2,852       N/A     US$ 2,852          
       
Federal Natl Mtg Assn Mtn
          ²           US$ 5,553       N/A     US$ 5,553          
       
Freddie Mac
          ²           US$ 9,273       N/A     US$ 9,273          
       
 
                                                       
       
Corporate issued asset-backed securities
                                                       
       
American Home Mtg Invt Tr
       
Available-for-sale financial assets
        US$ 266       N/A     US$ 266          
       
Americredit Auto Rec Tr
          ²           US$ 996       N/A     US$ 996          
       
Americredit Automobile Rec Tr
          ²           US$ 690       N/A     US$ 690          
       
Americredit Automobile Rec Tr
          ²           US$ 1,983       N/A     US$ 1,983          
       
Americredit Automobile Rec Tr
          ²           US$ 2,591       N/A     US$ 2,591          
       
Americredit Automobile Receiva
          ²           US$ 4,942       N/A     US$ 4,942          
       
Americredit Automobile Receivb
          ²           US$ 4,021       N/A     US$ 4,021          
       
Atlantic City Elc Trns Fdgllc
          ²           US$ 548       N/A     US$ 548          
       
Banc Amer Coml Mtg Inc.
          ²           US$ 3,327       N/A     US$ 3,327          
       
Banc Amer Mtg Secs Inc.
          ²           US$ 1,840       N/A     US$ 1,840          
       
Bank Of Amer Lease Equip Tr
          ²           US$ 1,943       N/A     US$ 1,943          
       
Bear Stearns Alt A Tr
          ²           US$ 788       N/A     US$ 788          
       
Bear Stearns Arm Tr
          ²           US$ 3,635       N/A     US$ 3,635          
       
Bear Stearns Arm Tr
          ²           US$ 1,906       N/A     US$ 1,906          
       
Bear Stearns Coml Mtg Secs Inc.
          ²           US$ 6,362       N/A     US$ 6,362          
       
California Infrastructure Dev
          ²           US$ 180       N/A     US$ 180          
       
Capital Auto Receivables Asset
          ²           US$ 3,217       N/A     US$ 3,217          
       
Capital One Auto Fin Tr
          ²           US$ 2,599       N/A     US$ 2,599          
       
Capital One Auto Fin Tr
          ²           US$ 2,968       N/A     US$ 2,968          
       
Capital One Auto Fin Tr
          ²           US$ 4,979       N/A     US$ 4,979          
       
Capital One Multi Asset Execut
          ²           US$ 4,815       N/A     US$ 4,815          
       
Capital One Multi Asset Execut
          ²           US$ 3,904       N/A     US$ 3,904          
       
Capital One Multi Asset Execut
          ²           US$ 2,933       N/A     US$ 2,933          
       
Capitial One Prime Auto Receiv
          ²           US$ 2,767       N/A     US$ 2,767          
       
Caterpillar Finl Asset Tr
          ²           US$ 2,783       N/A     US$ 2,783          
       
Caterpillar Finl Asset Tr
          ²           US$ 8,059       N/A     US$ 8,059          
       
Cendant Rent Car Fdg Aesop LLC
          ²           US$ 9,186       N/A     US$ 9,186          
       
Centex Home Equity Ln Tr
          ²           US$ 336       N/A     US$ 336          
(Continued)

- 45 -


 

                                                                 
                            June 30, 2006    
                                                    Market Value or    
Held Company       Relationship with the   Financial Statement   Shares/Units (in   Carrying Value   Percentage of   Net Asset Value    
Name   Marketable Securities Type and Name   Company   Account   Thousands)   (US$ in Thousands)   Ownership   (US$ in Thousands)   Note
       
Cit Equip Coll Tr
       
Available-for-sale financial assets
        US$ 3,291       N/A     US$ 3,291          
       
Cit Equip Coll Tr
          ²           US$ 3,941       N/A     US$ 3,941          
       
Citibank Cr Card Issuance Tr
          ²           US$ 9,739       N/A     US$ 9,739          
       
Citicorp Mtg Secs
          ²           US$ 682       N/A     US$ 682          
       
Cnh Equip Tr
          ²           US$ 3,778       N/A     US$ 3,778          
       
Credit Suisse First Boston Mtg
          ²           US$ 4,752       N/A     US$ 4,752          
       
Credit Suisse First Boston Mtg
          ²           US$ 953       N/A     US$ 953          
       
Credit Suisse First Boston Mtg
          ²           US$ 3,715       N/A     US$ 3,715          
       
Credit Suisse First Boston Mtg
          ²           US$ 3,554       N/A     US$ 3,554          
       
Cwabs Inc.
          ²           US$ 414       N/A     US$ 414          
       
Cwabs Inc.
          ²           US$ 1,280       N/A     US$ 1,280          
       
Cwabs Inc.
          ²           US$ 2,175       N/A     US$ 2,175          
       
Cwalt Inc.
          ²           US$ 243       N/A     US$ 243          
       
Cwmbs Inc.
          ²           US$ 1,054       N/A     US$ 1,054          
       
Daimlerchrysler Auto Tr
          ²           US$ 2,933       N/A     US$ 2,933          
       
Deere John Owner Tr
          ²           US$ 2,425       N/A     US$ 2,425          
       
Drive Auto Receivables Tr
          ²           US$ 3,174       N/A     US$ 3,174          
       
Fifth Third Auto Tr
          ²           US$ 1,543       N/A     US$ 1,543          
       
First Horizon Abs Tr
          ²           US$ 712       N/A     US$ 712          
       
First Union Lehman Bros Mtg Tr
          ²           US$ 2,180       N/A     US$ 2,180          
       
Ford Cr Auto Owner Tr
          ²           US$ 2,826       N/A     US$ 2,826          
       
Granite Mtgs Plc
          ²           US$ 2,398       N/A     US$ 2,398          
       
Gs Auto Ln Tr
          ²           US$ 746       N/A     US$ 746          
       
Gs Mtg Secs Corp.
          ²           US$ 4,124       N/A     US$ 4,124          
       
Gsamp Tr
          ²           US$ 4,232       N/A     US$ 4,232          
       
Harley Davidson Motorcycle Tr
          ²           US$ 781       N/A     US$ 781          
       
Harley Davidson Motorcycle Tr
          ²           US$ 5,783       N/A     US$ 5,783          
       
Hertz Veh Fing LLC
          ²           US$ 5,256       N/A     US$ 5,256          
       
Holmes Fing No 8 Plc
          ²           US$ 5,002       N/A     US$ 5,002          
       
HSBC Automotive Tr
          ²           US$ 2,962       N/A     US$ 2,962          
       
Hyundai Auto Receivables Tr
          ²           US$ 6,328       N/A     US$ 6,328          
       
Hyundai Auto Receivables Tr
          ²           US$ 3,186       N/A     US$ 3,186          
       
Hyundai Auto Receivables Tr
          ²           US$ 3,886       N/A     US$ 3,886          
       
Impac Cmb Tr
          ²           US$ 494       N/A     US$ 494          
       
Impac Cmb Tr
          ²           US$ 371       N/A     US$ 371          
       
Impac Secd Assets Corp.
          ²           US$ 43       N/A     US$ 43          
       
Lb Ubs Coml Mtg Tr
          ²           US$ 3,747       N/A     US$ 3,747          
       
Long Beach Accep Auto Receivab
          ²           US$ 1,858       N/A     US$ 1,858          
       
Long Beach Mtg Ln Tr
          ²           US$ 3,188       N/A     US$ 3,188          
       
Massachusetts Rrb Spl Purp Tr
          ²           US$ 3,820       N/A     US$ 3,820          
(Continued)

- 46 -


 

                                                                 
                            June 30, 2006    
                                        Market Value or    
Held Company       Relationship with the   Financial Statement   Shares/Units (in   Carrying Value   Percentage of   Net Asset Value    
Name   Marketable Securities Type and Name   Company   Account   Thousands)   (US$ in Thousands)   Ownership   (US$ in Thousands)   Note
       
Mastr Asset Backed Secs Tr
       
Available-for-sale financial assets
        US$ 3,504       N/A     US$ 3,504          
       
Mbna Master Cr Card Tr II
          ²           US$ 7,567       N/A     US$ 7,567          
       
Merrill Lynch Mtg Invs Inc.
          ²           US$ 6,635       N/A     US$ 6,635          
       
Monumentl Global Fdg II
          ²           US$ 1,002       N/A     US$ 1,002          
       
National City Auto Receivables
          ²           US$ 457       N/A     US$ 457          
       
Navistar Finl 2003 A Owner Tr
          ²           US$ 4,242       N/A     US$ 4,242          
       
Nissan Auto Receivables
          ²           US$ 1,437       N/A     US$ 1,437          
       
Nomura Asset Accep Corp.
          ²           US$ 4,131       N/A     US$ 4,131          
       
Onyx Accep Owner Tr
          ²           US$ 4,875       N/A     US$ 4,875          
       
Pg+E Energy Recovery Fdg LLC
          ²           US$ 4,628       N/A     US$ 4,628          
       
Providian Gateway Owner Tr
          ²           US$ 3,899       N/A     US$ 3,899          
       
Reliant Energy Transition Bd
          ²           US$ 3,989       N/A     US$ 3,989          
       
Residential Asset Mtg Prods
          ²           US$ 2,626       N/A     US$ 2,626          
       
Residential Asset Sec Mtg Pass
          ²           US$ 2,918       N/A     US$ 2,918          
       
Residential Asset Sec Mtg Pass
          ²           US$ 3,692       N/A     US$ 3,692          
       
Residential Fdg Mtg Secs I Inc.
          ²           US$ 2,217       N/A     US$ 2,217          
       
Residential Fdg Mtg Secs I Inc.
          ²           US$ 4,358       N/A     US$ 4,358          
       
Revolving Home Equity Ln Tr
          ²           US$ 2,096       N/A     US$ 2,096          
       
Sequoia Mtg Tr
          ²           US$ 948       N/A     US$ 948          
       
Sequoia Mtg Tr
          ²           US$ 735       N/A     US$ 735          
       
Sequoia Mtg Tr
          ²           US$ 794       N/A     US$ 794          
       
Structured Adj Rate Mtg Ln Tr
          ²           US$ 1,641       N/A     US$ 1,641          
       
Structured Adj Rate Mtg Ln Tr
          ²           US$ 555       N/A     US$ 555          
       
Structured Asset Invt Ln Tr
          ²           US$ 93       N/A     US$ 93          
       
Terwin Mtg Tr
          ²           US$ 4,014       N/A     US$ 4,014          
       
Toyota Auto Receivables 2003 B
          ²           US$ 4,898       N/A     US$ 4,898          
       
TW Hotel Fdg 2005 LLC
          ²           US$ 4,097       N/A     US$ 4,097          
       
Txu Elec Delivery Transition
          ²           US$ 2,619       N/A     US$ 2,619          
       
Usaa Auto Owner Tr
          ²           US$ 3,678       N/A     US$ 3,678          
       
Wachovia Auto Owner Tr
          ²           US$ 2,768       N/A     US$ 2,768          
       
Washington Mut Mtg Secs Corp.
          ²           US$ 3,354       N/A     US$ 3,354          
       
Wells Fargo Finl Auto Owner Tr
          ²           US$ 5,230       N/A     US$ 5,230          
       
Wells Fargo Finl Auto Owner Tr
          ²           US$ 4,885       N/A     US$ 4,885          
       
Wells Fargo Mtg Backed Secs
          ²           US$ 777       N/A     US$ 777          
       
Wells Fargo Mtg Bkd Secs
          ²           US$ 3,128       N/A     US$ 3,128          
       
Wells Fargo Mtg Bkd Secs
          ²           US$ 3,519       N/A     US$ 3,519          
       
WFS Financial Owner Trust
          ²           US$ 2,723       N/A     US$ 2,723          
       
WFS Finl
          ²           US$ 916       N/A     US$ 916          
       
WFS Finl 2004 2 Owner Tr
          ²           US$ 4,880       N/A     US$ 4,880          
       
WFS Finl 2004 4 Owner Tr
          ²           US$ 1,672       N/A     US$ 1,672          
(Continued)

- 47 -


 

                                                                 
                            June 30, 2006    
                                                    Market Value or    
Held Company       Relationship with the   Financial Statement   Shares/Units (in   Carrying Value   Percentage of   Net Asset Value    
Name   Marketable Securities Type and Name   Company   Account   Thousands)   (US$ in Thousands)   Ownership   (US$ in Thousands)   Note
       
WFS Finl 2005 2 Oner Tr
       
Available-for-sale financial assets
        US$ 2,205       N/A     US$ 2,205          
       
Whole Auto Ln Tr
          ²           US$ 1,978       N/A     US$ 1,978          
       
Whole Auto Ln Tr
          ²           US$ 3,803       N/A     US$ 3,803          
       
Whole Auto Ln Tr
          ²           US$ 2,920       N/A     US$ 2,920          
       
World Omni Auto Receivables Tr
          ²           US$ 5,848       N/A     US$ 5,848          
       
 
                                                       
       
Corporate bond
                                                       
       
Hua Nan Bank
       
Available-for-sale financial assets
        $      1,532,448       N/A     $      1,532,448          
       
Cathay United Bank
          ²             1,149,382       N/A       1,149,382          
       
Formosa Petrochemical Corporation
          ²             397,332       N/A       397,332          
       
Taiwan Power Company
          ²             299,034       N/A       299,034          
       
Taiwan Power Company
       
Held-to-maturity financial assets
          4,217,617       N/A       4,219,522          
       
Formosa Petrochemical Corporation
          ²             2,488,834       N/A       2,485,390          
       
Nan Ya Plastics Corporation
          ²             2,379,459       N/A       2,381,576          
       
Chinese Petroleum Corporation
          ²             1,703,676       N/A       1,702,082          
       
China Steel Corporation
          ²             1,602,604       N/A       1,602,685          
       
Far Eastone Telecommunications Co. Ltd.
          ²             300,012       N/A       299,989          
       
Formosa Plastic Corporation
          ²             135,306       N/A       137,054          
       
Formosa Chemicals & Fiber Corporation
          ²             67,624       N/A       69,791          
       
Abbott Labs
       
Available-for-sale financial assets
        US$ 1,496       N/A     US$ 1,496          
       
Abbott Labs
          ²           US$ 2,541       N/A     US$ 2,541          
       
Ace Ltd.
          ²           US$ 1,001       N/A     US$ 1,001          
       
AIG Sunamerica Global Fing Ix
          ²           US$ 996       N/A     US$ 996          
       
Allstate Life Global Fdg Secd
          ²           US$ 2,927       N/A     US$ 2,927          
       
Alltel Corp.
          ²           US$ 595       N/A     US$ 595          
       
American Express Co.
          ²           US$ 3,420       N/A     US$ 3,420          
       
American Gen Fin Corp.
          ²           US$ 1,616       N/A     US$ 1,616          
       
American Gen Fin Corp. Mtn
          ²           US$ 1,001       N/A     US$ 1,001          
       
American Honda Fin Corp. Mtn
          ²           US$ 3,046       N/A     US$ 3,046          
       
American Honda Fin Corp. Mtn
          ²           US$ 802       N/A     US$ 802          
       
Ameritech Capital Funding Co.
          ²           US$ 481       N/A     US$ 481          
       
Amgen Inc.
          ²           US$ 2,851       N/A     US$ 2,851          
       
Amsouth Bk Birmingham Ala
          ²           US$ 1,982       N/A     US$ 1,982          
       
Anz Cap Tr I
          ²           US$ 944       N/A     US$ 944          
       
Associates Corp. North Amer
          ²           US$ 2,529       N/A     US$ 2,529          
       
Bank New York Inc.
          ²           US$ 1,475       N/A     US$ 1,475          
       
Bank One Corp.
          ²           US$ 3,303       N/A     US$ 3,303          
       
Bank Utd Houston Tx Mtbn
          ²           US$ 528       N/A     US$ 528          
       
Bear Stearns Cos Inc.
          ²           US$ 3,319       N/A     US$ 3,319          
(Continued)

- 48 -


 

                                                                 
                            June 30, 2006    
                                                    Market Value or    
Held Company       Relationship with the   Financial Statement   Shares/Units (in   Carrying Value   Percentage of   Net Asset Value    
Name   Marketable Securities Type and Name   Company   Account   Thousands)   (US$ in Thousands)   Ownership   (US$ in Thousands)   Note
       
Bear Stearns Cos Inc.
       
Available-for-sale financial assets
        US$ 3,585       N/A     US$ 3,585          
       
Beneficial Corp. Mtn Bk Entry
          ²           US$ 2,289       N/A     US$ 2,289          
       
Berkshire Hathaway Fin Corp.
          ²           US$ 1,470       N/A     US$ 1,470          
       
Caterpillar Finl Svcs Mtn
          ²           US$ 5,752       N/A     US$ 5,752          
       
Chase Manhattan Corp. New
          ²           US$ 1,512       N/A     US$ 1,512          
       
Chase Manhattan Corp. New
          ²           US$ 2,106       N/A     US$ 2,106          
       
Chubb Corp.
          ²           US$ 2,103       N/A     US$ 2,103          
       
Cit Group Hldgs Inc.
          ²           US$ 3,011       N/A     US$ 3,011          
       
Citicorp
          ²           US$ 1,382       N/A     US$ 1,382          
       
Cogentrix Energy Inc.
          ²           US$ 3,777       N/A     US$ 3,777          
       
Colonial Pipeline Co.
          ²           US$ 1,506       N/A     US$ 1,506          
       
Consolidated Edison Inc.
          ²           US$ 2,866       N/A     US$ 2,866          
       
Corestates Cap Corp.
          ²           US$ 1,006       N/A     US$ 1,006          
       
Countrywide Fdg Corp. Mtn
          ²           US$ 2,019       N/A     US$ 2,019          
       
Credit Suisse Fincl Products
          ²           US$ 1,508       N/A     US$ 1,508          
       
Credit Suisse First Boston
          ²           US$ 734       N/A     US$ 734          
       
Credit Suisse First Boston USA
          ²           US$ 2,135       N/A     US$ 2,135          
       
Daimlerchrysler North Amer
          ²           US$ 966       N/A     US$ 966          
       
Daimlerchrysler North Amer Hld
          ²           US$ 753       N/A     US$ 753          
       
Dayton Hudson Corp.
          ²           US$ 2,013       N/A     US$ 2,013          
       
Deere John Cap Corp.
          ²           US$ 4,880       N/A     US$ 4,880          
       
Dell Computer Corp.
          ²           US$ 2,822       N/A     US$ 2,822          
       
Den Danske Bk Aktieselskab
          ²           US$ 2,034       N/A     US$ 2,034          
       
Diageo Plc
          ²           US$ 3,405       N/A     US$ 3,405          
       
European Invt Bk
          ²           US$ 3,918       N/A     US$ 3,918          
       
European Invt Bk
          ²           US$ 5,945       N/A     US$ 5,945          
       
Federal Home Ln Bks
          ²           US$ 7,937       N/A     US$ 7,937          
       
Fifth Third Bk Cincinnati Oh
          ²           US$ 2,393       N/A     US$ 2,393          
       
First Data Corp.
          ²           US$ 2,827       N/A     US$ 2,827          
       
Fleet Boston Corp.
          ²           US$ 2,634       N/A     US$ 2,634          
       
Fleet Finl Group Inc. New
          ²           US$ 905       N/A     US$ 905          
       
Fpl Group Cap Inc.
          ²           US$ 843       N/A     US$ 843          
       
Gannett Co. Inc.
          ²           US$ 2,907       N/A     US$ 2,907          
       
General Elec Cap Corp. Mtn
          ²           US$ 3,363       N/A     US$ 3,363          
       
General Elec Cap Corp. Mtn
          ²           US$ 3,824       N/A     US$ 3,824          
       
General Elec Cap Corp. Mtn
          ²           US$ 8,678       N/A     US$ 8,678          
       
General Re Corp.
          ²           US$ 3,307       N/A     US$ 3,307          
       
Genworth Finl Inc.
          ²           US$ 3,417       N/A     US$ 3,417          
       
Goldman Sachs Group Inc.
          ²           US$ 4,910       N/A     US$ 4,910          
(Continued)

- 49 -


 

                                                                 
                            June 30, 2006    
                                                    Market Value or    
Held Company       Relationship with the   Financial Statement   Shares/Units (in   Carrying Value   Percentage of   Net Asset Value    
Name   Marketable Securities Type and Name   Company   Account   Thousands)   (US$ in Thousands)   Ownership   (US$ in Thousands)   Note
       
Goldman Sachs Group Inc.
       
Available-for-sale financial assets
        US$ 3,426       N/A     US$ 3,426          
       
Goldman Sachs Group LP
          ²           US$ 1,509       N/A     US$ 1,509          
       
Greenpoint Finl Corp.
          ²           US$ 954       N/A     US$ 954          
       
Hancock John Global Fdg II Mtn
          ²           US$ 3,481       N/A     US$ 3,481          
       
Hancock John Global Fdg Mtn
          ²           US$ 961       N/A     US$ 961          
       
Hartford Finl Svcs Group Inc.
          ²           US$ 1,342       N/A     US$ 1,342          
       
Hbos Plc Medium Term Sr Nts
          ²           US$ 3,172       N/A     US$ 3,172          
       
Hbos Plc Medium Term Sr Nts
          ²           US$ 2,921       N/A     US$ 2,921          
       
Heller Finl Inc.
          ²           US$ 1,923       N/A     US$ 1,923          
       
Hershey Foods Corp.
          ²           US$ 1,513       N/A     US$ 1,513          
       
Honeywell Inc.
          ²           US$ 3,031       N/A     US$ 3,031          
       
Household Fin Corp.
          ²           US$ 2,848       N/A     US$ 2,848          
       
Household Fin Corp.
          ²           US$ 504       N/A     US$ 504          
       
Household Intl Inc.
          ²           US$ 2,848       N/A     US$ 2,848          
       
HSBC Fin Corp. Mtn
          ²           US$ 5,045       N/A     US$ 5,045          
       
HSBC USA Inc. New
          ²           US$ 1,076       N/A     US$ 1,076          
       
Huntington Natl Bk Columbus Oh
          ²           US$ 2,977       N/A     US$ 2,977          
       
ING Sec Life Instl Fdg
          ²           US$ 2,445       N/A     US$ 2,445          
       
International Business Machs
          ²           US$ 2,194       N/A     US$ 2,194          
       
Intl Lease Fin Corp. Mtn
          ²           US$ 2,889       N/A     US$ 2,889          
       
Intl Lease Fin Corp. Mtn
          ²           US$ 4,100       N/A     US$ 4,100          
       
Intl Lease Fin Corp. Mtn
          ²           US$ 2,968       N/A     US$ 2,968          
       
JP Morgan Chase + Co.
          ²           US$ 3,285       N/A     US$ 3,285          
       
Jackson Natl Life Global Fdg
          ²           US$ 998       N/A     US$ 998          
       
Key Bk Na Med Term Nts Bk Entr
          ²           US$ 4,364       N/A     US$ 4,364          
       
Keycorp Mtn Book Entry
          ²           US$ 2,975       N/A     US$ 2,975          
       
Kraft Foods Inc.
          ²           US$ 748       N/A     US$ 748          
       
Kraft Foods Inc.
          ²           US$ 997       N/A     US$ 997          
       
Lehman Brothers Hldgs Inc.
          ²           US$ 1,599       N/A     US$ 1,599          
       
Lehman Brothers Hldgs Inc.
          ²           US$ 478       N/A     US$ 478          
       
Lehman Brothers Hldgs Inc.
          ²           US$ 1,075       N/A     US$ 1,075          
       
Lincoln Natl Corp. In
          ²           US$ 498       N/A     US$ 498          
       
Merita Bk Ltd. Ny Brh
          ²           US$ 505       N/A     US$ 505          
       
Merrill Lynch + Co. Inc.
          ²           US$ 3,415       N/A     US$ 3,415          
       
Merrill Lynch + Co. Inc.
          ²           US$ 1,972       N/A     US$ 1,972          
       
Merrill Lynch + Co. Inc.
          ²           US$ 4,822       N/A     US$ 4,822          
       
Metropolitan Life Global Mtn
          ²           US$ 3,306       N/A     US$ 3,306          
       
Monumental Global Fdg II
          ²           US$ 1,446       N/A     US$ 1,446          
       
Monumental Global Fdg II 2002A
          ²           US$ 998       N/A     US$ 998          
       
Morgan Stanley
          ²           US$ 2,087       N/A     US$ 2,087          
(Continued)

- 50 -


 

                                                                 
                            June 30, 2006    
                                                    Market Value or    
Held Company       Relationship with the   Financial Statement   Shares/Units (in   Carrying Value   Percentage of   Net Asset Value    
Name   Marketable Securities Type and Name   Company   Account   Thousands)   (US$ in Thousands)   Ownership   (US$ in Thousands)   Note
       
Morgan Stanley Group Inc.
       
Available-for-sale financial assets
        US$ 4,385       N/A     US$ 4,385          
       
National City Corp.
          ²           US$ 3,360       N/A     US$ 3,360          
       
National Westminster Bk Plc
          ²           US$ 1,330       N/A     US$ 1,330          
       
Nationwide Bldg Soc
          ²           US$ 3,484       N/A     US$ 3,484          
       
Nationwide Bldg Soc Mtn
          ²           US$ 3,004       N/A     US$ 3,004          
       
Nationwide Life Global Mtn
          ²           US$ 1,463       N/A     US$ 1,463          
       
Nucor Corp.
          ²           US$ 2,513       N/A     US$ 2,513          
       
Pepsico Inc. Mtn Book Entry
          ²           US$ 3,620       N/A     US$ 3,620          
       
Pnc Fdg Corp.
          ²           US$ 1,012       N/A     US$ 1,012          
       
Popular North Amer Inc.
          ²           US$ 2,880       N/A     US$ 2,880          
       
Praxair Inc.
          ²           US$ 3,141       N/A     US$ 3,141          
       
Premark Intl Inc.
          ²           US$ 2,721       N/A     US$ 2,721          
       
Pricoa Global Fdg 1 Mtn
          ²           US$ 3,504       N/A     US$ 3,504          
       
Protective Life Secd Trs
          ²           US$ 2,869       N/A     US$ 2,869          
       
Prudential Ins Co. Amer
          ²           US$ 2,502       N/A     US$ 2,502          
       
Prudential Ins Co. Amer
          ²           US$ 2,652       N/A     US$ 2,652          
       
Public Svc Elec Gas Co.
          ²           US$ 3,631       N/A     US$ 3,631          
       
Regions Finl Corp. New
          ²           US$ 2,347       N/A     US$ 2,347          
       
Safeco Corp.
          ²           US$ 718       N/A     US$ 718          
       
Sbc Communications Inc.
          ²           US$ 1,020       N/A     US$ 1,020          
       
Sbc Communications Inc.
          ²           US$ 682       N/A     US$ 682          
       
Scotland Intl Fin B V 144a
          ²           US$ 1,416       N/A     US$ 1,416          
       
Slm Corp.
          ²           US$ 498       N/A     US$ 498          
       
Slm Corp. Medium Term Nts
          ²           US$ 8,889       N/A     US$ 8,889          
       
Sp Powerassests Ltd. Global
          ²           US$ 956       N/A     US$ 956          
       
St Paul Cos Inc. Mtn Bk Ent
          ²           US$ 2,536       N/A     US$ 2,536          
       
Suntrust Bks Inc.
          ²           US$ 1,000       N/A     US$ 1,000          
       
Swedbank Sparbanken Svenge Ab
          ²           US$ 1,006       N/A     US$ 1,006          
       
Tiaa Global Mkts Inc.
          ²           US$ 498       N/A     US$ 498          
       
Unitedhealth Group Inc.
          ²           US$ 2,993       N/A     US$ 2,993          
       
Us Bk Natl Assn Cincinnati Oh
          ²           US$ 2,692       N/A     US$ 2,692          
       
Virginia Elec + Pwr Co.
          ²           US$ 2,652       N/A     US$ 2,652          
       
Vodafone Group Plc New
          ²           US$ 2,483       N/A     US$ 2,483          
       
Washington Mut Inc.
          ²           US$ 4,502       N/A     US$ 4,502          
       
Washington Post Co.
          ²           US$ 2,970       N/A     US$ 2,970          
       
Wells Fargo + Co. New
          ²           US$ 6,040       N/A     US$ 6,040          
       
Westfield Cap Corp. Ltd.
          ²           US$ 2,008       N/A     US$ 2,008          
       
Wps Resources Corp.
          ²           US$ 1,042       N/A     US$ 1,042          
(Continued)

- 51 -


 

                                                 
                June 30, 2006    
                            Market Value or    
Held Company       Relationship with the   Financial Statement   Shares/Units (in   Carrying Value   Percentage of   Net Asset Value    
Name   Marketable Securities Type and Name   Company   Account   Thousands)   (US$ in Thousands)   Ownership   (US$ in Thousands)   Note
   
Corporate notes
                                           
   
Canadian Imperial BK
   
Available-for-sale
financial assets
        US$ 3,015       N/A     US$ 3,015      
   
 
                                           
   
Money market funds
                                           
   
SSGA Cash Mgmt Global Offshore
   
Available-for-sale
financial assets
        US$ 11,912       N/A     US$ 11,912      
   
 
                                           
   
Fund
                                           
   
Horizon Ventures Fund I, L.P.
   
Financial assets
carried at cost
        $      280,179       N/A     $      280,179      
   
 
                                           
   
Crimson Asia Capital Ltd., L.P.
    ²           66,290       N/A       66,290      
   
 
                                           
Chi Cherng  
Stock
                                           
   
TSMC
  Parent company  
Available-for-sale
financial assets
    16,947       989,720             989,720      
   
VIS
  Equity method investee  
Investments
accounted for using
equity method
    341       7,905             7,905      
   
 
                                           
   
Stock
                                           
Hsin Ruey  
TSMC
  Parent company  
Available-for-sale
financial assets
    16,979       991,575             991,575      
   
VIS
  Equity method investee  
Investments
accounted for using
equity method
    1,748       40,179             40,179      
   
 
                                           
TSMC International  
Stock
                                           
   
InveStar
  Subsidiary  
Investments
accounted for using
equity method
    14,476     US$ 43,604       97     US$ 43,604      
   
InveStar II
  Subsidiary   ²     51,300     US$ 45,910       97     US$ 45,910      
   
TSMC Development
  Subsidiary   ²     1     US$ 627,773       100     US$ 627,773      
   
TSMC Technology
  Subsidiary   ²     1     US$ 5,665       100     US$ 5,665      
   
 
                                           
Emerging Alliance  
Common stock
                                           
   
NetLogic Microsystems, Inc.
   
Financial assets at
fair value through
profit or loss
    84     US$ 2,718           US$ 2,718      
   
Ikanos Communication, Inc.
   
Available-for-sale
financial assets
    515     US$ 7,819       2     US$ 7,819      
   
RichWave Technology Corp.
   
Financial assets
carried at cost
    4,247     US$ 1,648       13     US$ 1,648      
   
Quake Technologies, Inc.
    ²     46     US$ 35           US$ 35      
   
Pixim, Inc.
    ²     1,924     US$ 512       4     US$ 512      
   
Global Investment Holding Inc.
    ²     10,800     $ 100,000       6     $ 100,000      
(Continued)

- 52 -


 

                                                                 
                            June 30, 2006    
                                                    Market Value or    
Held Company   Marketable Securities   Relationship with the   Financial Statement   Shares/Units (in   Carrying Value   Percentage of   Net Asset Value    
Name   Type and Name   Company   Account   Thousands)   (US$ in Thousands)   Ownership   (US$ in Thousands)   Note
       
Preferred stock
                                                       
       
Quake Technologies, Inc.
        Financial assets carried at cost     555     US$ 415       1     US$ 415          
       
Quickilver Technology, Inc.
          ²       1,049     US$       4     US$          
       
Mosaic Systems, Inc.
          ²       2,481     US$ 12       6     US$ 12          
       
Zenesis Technologies, Inc.
          ²       2,410     US$ 1,399       5     US$ 1,399          
       
Reflectivity, Inc.
          ²       4,848     US$ 2,479       4     US$ 2,479          
       
Miradia, Inc.
          ²       3,040     US$ 1,000       4     US$ 1,000          
       
Axiom Microdevices, Inc.
          ²       1,000     US$ 1,000       3     US$ 1,000          
       
Optichron, Inc.
          ²       714     US$ 1,000       4     US$ 1,000          
       
NuCORE Technology Inc.
          ²       2,254     US$ 1,455       2     US$ 1,455          
       
Next IO, Inc.
          ²       800     US$ 500       2     US$ 500          
       
Audience, Inc.
          ²       1,654     US$ 250       2     US$ 250          
       
Centrality Comunications
          ²       1,325     US$ 1,800       2     US$ 1,800          
       
Britestream Networks, Inc.
          ²       2,444     US$ 1,172       2     US$ 1,172          
       
Teknovus, Inc.
          ²       6,977     US$ 1,327       3     US$ 1,327          
       
Optimal Corporation
          ²       485     US$ 500       6     US$ 500          
       
Mobilygen
          ²       1,415     US$ 750       1     US$ 750          
       
Pixim, Inc.
          ²       2,193     US$ 583           US$ 583          
       
 
                                                       
       
Warrants
                                                       
       
Pixim, Inc.
        Financial assets carried at cost     242             N/A                
       
 
                                                       
Partners  
Common stock
                                                       
       
VisEra Holding Company
  Equity method investee   Investments accounted for using equity method     18,931     US$ 24,113       48     US$ 24,113          
       
 
                                                       
VTAF II  
Common stock
                                                       
       
Beceem Communications
        Financial assets carried at cost     500     US$ 1,000       1     US$ 1,000          
       
 
                                                       
       
Yobon Technologies, Inc.
          ²       1,675     US$ 787       13     US$ 787          
       
Sentelic Corp.
          ²       1,200     US$ 2,040       15     US$ 2,040          
       
 
                                                       
       
Preferred stock
                                                       
       
Powerprecise Solutions, Inc.
        Financial assets carried at cost     1,445     US$ 1,400       11     US$ 1,400          
       
 
                                                       
       
Tzero Technologies, Inc.
          ²       730     US$ 1,500       2     US$ 1,500          
       
Miradia, Inc.
          ²       1,809     US$ 1,600       2     US$ 1,600          
       
Axiom Microdevices, Inc.
          ²       761     US$ 776       2     US$ 776          
       
Next IO, Inc.
          ²       216     US$ 182           US$ 182          
       
Ageia Technologies, Inc.
          ²       2,030     US$ 2,074       2     US$ 2,074          
(Continued)

- 53 -


 

                                                                 
                            June 30, 2006    
                                                    Market Value or    
Held Company   Marketable Securities   Relationship with the   Financial Statement   Shares/Units (in   Carrying Value   Percentage of   Net Asset Value    
Name   Type and Name   Company   Account   Thousands)   (US$ in Thousands)   Ownership   (US$ in Thousands)   Note
       
Audience, Inc.
        Financial assets carried at cost     2,208     US$ 474       1     US$ 474          
       
GemFire Corporation
          ²       600     US$ 600       1     US$ 600          
       
Optichron, Inc.
          ²       353     US$ 869       2     US$ 869          
       
Xceive
          ²       714     US$ 1,000       2     US$ 1,000          
       
5V Technologies, Inc.
          ²       2,357     US$ 1,768       11     US$ 1,768          
       
Power Analog Microelectronics
          ²       2,000     US$ 1,500       13     US$ 1,500          
       
Impinj, Inc.
          ²       257     US$ 500           US$ 500          
       
RichWave Technology Corp.
          ²       500     US$ 231       2     US$ 231          
       
Aquantia
          ²       1,264     US$ 1,150       5     US$ 1,150          
       
Leadtrend Technology, Inc.
          ²       900     US$ 431       5     US$ 431          
       
Teknorus, Inc.
          ²       518     US$ 119           US$ 119          
       
 
                                                       
VTAF III  
Common stock
                                                       
       
Quellan, Inc.
        Financial assets carried at cost     2,231     US$ 2,500       7     US$ 2,500          
       
 
                                                       
TSMC Development  
WaferTech stock
  Subsidiary   Investments accounted for using equity method         US$ 391,196       100     US$ 391,196          
       
 
                                                       
Investar  
Common stock
                                                       
       
Rich Tek Technology Corp.
        Financial assets at fair value through profit or loss     477     US$ 3,198           US$ 3,198          
       
Advanced Power Electronics Corp.
          ²       236     US$ 202       2     US$ 202          
       
Broadtek Electronics Corp.
          ²       29     US$ 9           US$ 9          
       
Monolithic Power Systems, Inc.
          ²       1,975     US$ 23,361       7     US$ 23,361          
       
Global Testing Corp.
          ²       51,010     US$ 9,006       8     US$ 9,006          
       
Advanced Power Electronics Corp.
        Available-for-sale financial assets     674     US$ 576       2     US$ 576          
       
Broadtek Electronics Corp.
          ²       116     US$ 35           US$ 35          
       
Rich Tek Technology Corp.
          ²       421     US$ 2,823           US$ 2,823          
       
Capella Microsystems (Taiwan), Inc
        Financial assets carried at cost     530     US$ 154       3     US$ 154          
       
 
                                                       
       
Preferred stock
                                                       
       
Integrated Memory Logic, Inc.
        Financial assets carried at cost     1,831     US$ 1,221       9     US$ 1,221          
       
IP Unity, Inc.
          ²       1,008     US$ 494       1     US$ 494          
       
Sonics, Inc.
          ²       1,843     US$ 3,530       3     US$ 3,530          
       
NanoAmp Solutions, Inc.
          ²       541     US$ 853       2     US$ 853          
       
Memsic, Inc.
          ²       2,724     US$ 1,500       10     US$ 1,500          
(Continued)

- 54 -


 

                                                                 
                            June 30, 2006    
                                                    Market Value or    
Held Company   Marketable Securities   Relationship with the   Financial Statement   Shares/Units (in   Carrying Value   Percentage of   Net Asset Value    
Name   Type and Name   Company   Account   Thousands)   (US$ in Thousands)   Ownership   (US$ in Thousands)   Note
Investar II  
Common stock
                                                       
       
Monolithic Power Systems, Inc.
        Financial assets at fair value through profit or loss     864     US$ 10,227       3     US$ 10,227          
       
Geo Vision, Inc.
          ²       46     US$ 165       1     US$ 165          
       
RichTek Technology Corp.
          ²       296     US$ 1,988           US$ 1,988          
       
Ralink Technology (Taiwan), Inc.
        Financial assets carried at cost     1,833     US$ 791       3     US$ 791          
       
Capella Microsystems (Taiwan), Inc.
          ²       419     US$ 122       2     US$ 122          
       
Auden Technology MFG. Co., Ltd.
          ²       953     US$ 410       4     US$ 410          
       
EoNEX Technologies, Inc.
          ²       55     US$ 3,048       5     US$ 3,048          
       
Conwise Technology Corporation, Ltd.
          ²       700     US$ 204       9     US$ 204          
       
Goyatek Technology, Corp.
          ²       2,088     US$ 545       7     US$ 545          
       
Trendchip Technologies Corp.
          ²       2,000     US$ 574       5     US$ 574          
       
EON Technology, Corp.
          ²       4,247     US$ 1,175       7     US$ 1,175          
       
eChannelOpen Holding, Inc.
          ²       358     US$ 251       4     US$ 251          
       
Epic Communications, Inc.
          ²       191     US$ 37       1     US$ 37          
 
       
Preferred stock
                                                       
       
Memsic, Inc.
        Financial assets carried at cost     2,289     US$ 1,560       8     US$ 1,560          
       
NanoAmp Solutions, Inc.
          ²       375     US$ 1,500       1     US$ 1,500          
       
Sonics, Inc.
          ²       4,335     US$ 3,082       4     US$ 3,082          
       
Kilopass Technology, Inc.
          ²       3,887     US$ 2,000       9     US$ 2,000          
       
FangTek, Inc.
          ²       6,931     US$ 3,250       21     US$ 3,250          
       
eLCOS Microdisplay Technology, Ltd.
          ²       2,937     US$ 3,527       9     US$ 3,527          
       
Alchip Technologies Limited
          ²       3,531     US$ 2,950       14     US$ 2,950          
 
GUC  
Stock
                                                       
       
Global Unichip Corporation — North America
  Subsidiary   Investments accounted for using equity method     100       5,427       100       5,427          
       
Global Unichip Japan
  Subsidiary     ²             2,523       100       2,523          

- 55 -


 

TABLE 4
Taiwan Semiconductor Manufacturing Company Limited
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 SIX MONTHS ENDED JUNE 30, 2006
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
                                                                                                                 
                                    Beginning Balance   Acquisition   Disposal (Note 1)   Ending Balance
                                                                                    Carrying Value   Gain (Loss) on           Amount (US$ in
        Marketable Securities   Financial Statement           Nature of   Shares/Units (in   Amount (US$ in   Shares/Units (in   Amount (US$ in   Shares/Units (in   Amount (US$ in   (US$ in   Disposal (US$   Shares/Units (in   Thousands)
Company Name   Type and Name   Account   Counter-party   Relationship   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   in Thousands)   Thousands)   (Note 2)
The Company  
Government bond
                                                                                                       
       
2004 Government Bond Series B
 
Available-for-sale financial assets
 
KGI Securities Co., Ltd. and several financial institutions
              $           $ 1,005,115           $     $     $           $ 997,583  
       
2005 Government Bond Series A
 
Held-to-maturity financial assets
 
KGI Securities Co., Ltd. and several financial institutions
                2,548,977             199,579                                     2,749,071  
       
2006 Government Bond Series D
    ²    
KGI Securities Co., Ltd. and several financial institutions
                            999,553                                     999,583  
       
European Investment Bank Bonds
    ²    
KGI Securities Co., Ltd. and several financial institutions
                            367,600                                     368,482  
       
United States Treas NTS
 
Available-for-sale financial assets
                    US$ 46,173           US$ 250,828           US$ 173,695     US$ 174,336     US$ (641 )         US$ 118,345  
       
 
                                                                                                       
       
Kreditanatalt Fur Wiederaufbau
    ²                       US$ 6,881                       US$ 6,866     US$ 6,881     US$ (15 )            
       
 
                                                                                                       
       
Beneficiary certificates of open-end funds
                                                                                                       
       
NITC Bond Fund
 
Available-for-sale financial assets
 
National Investment Trust Co., Ltd.
          3,764     $ 610,864       18,455     $ 3,000,000                               22,219     $ 3,630,743  
       
ABN AMRO Bond Fund
    ²    
ABN-AMRO Securities Investment Trust (Taiwan)Ltd.
          134,906       2,004,862       40,250       600,000                               175,156       2,620,910  
       
Prudential Financial Bond Fund
    ²    
Reliance Securities Investment Trust Co., Ltd.
                      103,751       1,500,000                               103,751       1,505,992  
       
Cathay Bond
    ²    
Cathay Securities Investment Trust Co., Ltd.
                      122,762       1,400,000                               122,762       1,406,342  
       
NITC Taiwan Bond
    ²    
National Investment Trust Co., Ltd.
                      93,312       1,300,000                               93,312       1,305,711  
       
Dresdner Bond DAM Fund
    ²    
Allianz Dresdner Securities Investment Consulting Co.,Ltd.
          69,303       792,068       34,914       400,000                               104,217       1,199,200  
       
JF Taiwan Bond Fund
    ²    
JF Asset Management (Taiwan) Ltd.
          62,009       933,430       13,277       200,000                               75,286       1,140,778  
       
JF Taiwan First Bond Fund
    ²    
JF Asset Management (Taiwan) Ltd.
          63,131       875,416       14,399       200,000                               77,530       1,082,117  
       
ABN AMRO Select Bond Fund
    ²    
ABN-AMRO Securities Investment Trust (Taiwan)Ltd.
          18,235       203,860       93,739       1,050,000                               111,974       1,260,332  
       
ABN AMRO Income
    ²    
ABN-AMRO Securities Investment Trust (Taiwan)Ltd.
                      63,947       1,000,000                               63,947       1,004,697  
       
Fuhwa Albatross Fund
    ²    
Fuh Hwa Investment Trust Co.
                      89,510       1,000,000                               89,510       1,003,570  
       
Fuh Hwa Bond
    ²    
Fuh Hwa Investment Trust Co.
                      60,642       800,000                               60,642       802,844  
       
HSBC Taiwan Money Management
    ²    
HSBC Investment (Taiwan) Ltd.
                      47,667       700,000       6,803     $ 100,004     $ 99,905     $ 99       40,864       602,784  
       
President James Bond
    ²    
Uni-President Assets Management Corp.
                      72,002       1,100,000                               72,002       1,103,437  
       
TIIM High Yield
    ²    
Taiwan International Securities Corp.
                      40,639       500,000                               40,639       500,864  
       
Shinkong Chi Shin Bond Fund
    ²    
Shinkong Investment Trust Co., Ltd.
          55,063       778,482       17,617       250,000                               72,680       1,034,238  
       
Taishin Lucky Fund
    ²    
Taishin Investment Trust Co., Ltd.
                      54,132       550,000                               54,132       551,429  
       
INVESCO Income Fund
    ²    
INVESCO Taiwan Ltd.
                      44,180       500,000       8,821       100,000       99,833       167       35,359       401,136  
(Continued)

- 56 -


 

                                                                                                                 
                                    Beginning Balance   Acquisition   Disposal (Note 1)   Ending Balance
                                                                                    Carrying Value   Gain (Loss) on           Amount (US$ in
        Marketable Securities   Financial Statement           Nature of   Shares/Units (in   Amount (US$ in   Shares/Units (in   Amount (US$ in   Shares/Units (in   Amount (US$ in   (US$ in   Disposal (US$   Shares/Units (in   Thousands)
Company Name   Type and Name   Account   Counter-party   Relationship   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   in Thousands)   Thousands)   (Note 2)
       
Corporate bond
                                                                                                       
       
Taiwan Power Company
  Held-to-maturity financial assets   KGI Securities Co., Ltd.               $ 3,263,349           $ 1,092,832           $     $     $           $ 4,217,617  
       
Formosa Petrochemical Corporation
    ²     KGI Securities Co., Ltd.                 1,093,283             1,695,273                                     2,488,834  
       
Nan Ya Plastics Corporation
    ²     KGI Securities Co., Ltd.                 2,150,842             499,073                                     2,379,459  
       
Chinese Petroleum Corporation
    ²    
KGI Securities Co., Ltd. and several financial institutions
                705,436             1,000,441                                     1,703,676  
       
China Steel Corporation
    ²     KGI Securities Co., Ltd.                 1,010,532             1,000,000                                     1,602,604  
       
Formosa Plastic Corporation
    ²    
KGI Securities Co., Ltd. and several financial institutions
                268,855                                                 135,306  
       
Formosa Chemicals &Fiber Corporation
    ²     KGI Securities Co., Ltd.                 134,369                                                 67,624  
       
Hua Nan Bank
  Available-for-sale financial assets   HSBC                             1,526,049                                     1,532,448  
       
Cathay United Bank
    ²     HSBC and other financial institutions                             1,144,877                                     1,149,382  
       
Formosa Petrochemical Corporation
    ²     KGI Securities Co., Ltd.                             397,076                                     397,332  
       
Taiwan Power Company
    ²     KGI Securities Co., Ltd.                             298,918                                     299,034  
       
American Honda Fin Corp. Mtn
    ²                                   US$ 3,087                                   US$ 3,046  
       
American Honda Fin Corp. Mtn
    ²                       US$ 3,800                       US$ 3,004     US$ 3,000     US$ 4           US$ 802  
       
Bank One Corp.
    ²                                   US$ 3,326                                   US$ 3,303  
       
Countrywide Home Lns Inc.
    ²                       US$ 5,210                       US$ 5,001     US$ 5,210     US$ (209 )            
       
Credit Suisse Fb USA Inc.
    ²                       US$ 4,141                       US$ 4,003     US$ 4,141     US$ (138 )            
       
Deere John Cap Corp.
    ²                                   US$ 4,911                                   US$ 4,880  
       
Deere John Cap Corp.
    ²                       US$ 5,079                       US$ 5,013     US$ 5,079     US$ (66 )            
       
European Invt Bk
    ²                                   US$ 5,995           US$                       US$ 5,945  
       
European Invt Bk
    ²                       US$ 8,315                       US$ 8,002     US$ 8,315     US$ (313 )            
       
Federal Home Ln Bks
    ²                                   US$ 7,937                                   US$ 7,937  
       
General Elec Cap Corp. Mtn
    ²                                   US$ 3,351                                   US$ 3,363  
       
Hewlett Packard Co.
    ²                       US$ 3,373                       US$ 3,177     US$ 3,373     US$ (196 )            
       
Intl Lease Fin Corp. Mtn
    ²                       US$ 2,471           US$ 4,100           US$ 2,461     US$ 2,471     US$ (10 )         US$ 4,100  
       
Jp Morgan Chase + Co.
    ²                       US$ 3,663                       US$ 3,519     US$ 3,663     US$ (144 )            
       
Keycorp Mtn Book Entry
    ²                       US$ 3,500                       US$ 3,508     US$ 3,500     US$ 8              
       
Keycorp Mtn Book Entry
    ²                                   US$ 3,006                                   US$ 2,975  
       
Praxair Inc.
    ²                                   US$ 3,180                                   US$ 3,141  
       
Santander Us Debt S A Uniperso
    ²                       US$ 4,998                       US$ 4,957     US$ 4,998     US$ (41 )            
       
Slm Corp. Medium Term Nts
    ²                       US$ 2,950           US$ 6,012                                   US$ 8,889  
       
Wells Fargo + Co. New
    ²                                   US$ 6,076                                   US$ 6,040  
       
Wells Fargo + Co. New
    ²                       US$ 3,697                       US$ 3,512     US$ 3,697     US$ (185 )            
       
Agency bonds
                                                                                                       
       
Fed Hm Ln Pc Pool M80855
  Available-for-sale financial assets                                 US$ 3,882                                   US$ 3,520  
       
Federal Home Ln Mtg Corp.
    ²                                   US$ 4,962                                   US$ 4,897  
       
Federal Home Ln Mtg Corp.
    ²                                   US$ 4,317                                   US$ 4,117  
(Continued)

- 57 -


 

                                                                                                                 
                                    Beginning Balance   Acquisition   Disposal (Note 1)   Ending Balance
                                                                                    Carrying Value   Gain (Loss) on           Amount (US$ in
        Marketable Securities   Financial Statement           Nature of   Shares/Units (in   Amount (US$ in   Shares/Units (in   Amount (US$ in   Shares/Units (in   Amount (US$ in   (US$ in   Disposal (US$   Shares/Units (in   Thousands)
Company Name   Type and Name   Account   Counter-party   Relationship   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   in Thousands)   Thousands)   (Note 2)
       
Federal Home Ln Mtg Corp.
  Available-for-sale financial assets                     US$           US$ 3,349           US$     US$     US$           US$ 3,347  
       
Federal Home Ln Mtg Corp.
    ²                                   US$ 3,857                                   US$ 3,834  
       
Federal Home Ln Mtg Corp.
    ²                                   US$ 5,380                                   US$ 4,956  
       
Federal Home Loan Mtg
    ²                                   US$ 5,009                                   US$ 5,009  
       
Federal Home Ln Bks
    ²                       US$ 3,976                       US$ 3,964     US$ 3,976     US$ (12 )            
       
Federal Home Ln Bks
    ²                                   US$ 8,628                                   US$ 8,650  
       
Federal Home Ln Bks
    ²                       US$ 4,965                       US$ 4,944     US$ 4,965     US$ (21 )            
       
Federal Home Ln Bks
    ²                                   US$ 5,740                                   US$ 5,772  
       
Federal Home Ln Bks
    ²                                   US$ 4,823                                   US$ 4,818  
       
Federal Home Ln Bks
    ²                       US$ 8,594                       US$ 8,519     US$ 8,594     US$ (75 )            
       
Federal Home Ln Bks
    ²                                   US$ 12,227                                   US$ 12,145  
       
Federal Home Ln Bks
    ²                       US$ 7,887                       US$ 7,758     US$ 7,887     US$ (129 )            
       
Federal Home Ln Bks
    ²                       US$ 19,846                       US$ 19,800     US$ 19,846     US$ (46 )            
       
Federal Home Ln Bks
    ²                       US$ 9,134                       US$ 8,968     US$ 9,134     US$ (166 )            
       
Federal Home Ln Bks
    ²                                   US$ 7,490                                   US$ 7,475  
       
Federal Home Ln Mtg Corp.
    ²                       US$ 6,980                       US$ 6,941     US$ 6,980     US$ (39 )            
       
Federal Home Ln Mtg Corp.
    ²                                   US$ 6,415                                   US$ 6,398  
       
Federal Home Ln Mtg Corp.
    ²                                   US$ 14,175                                   US$ 14,166  
       
Federal Home Ln Mtg Corp.
    ²                                   US$ 9,974                                   US$ 9,887  
       
Federal Natl Mtg Assn
    ²                       US$ 4,921                       US$ 4,916     US$ 4,921     US$ (5 )            
       
Federal Natl Mtg Assn
    ²                       US$ 7,892                       US$ 7,908     US$ 7,892     US$ 16              
       
Federal Natl Mtg Assn
    ²                       US$ 4,943                       US$ 4,944     US$ 4,943     US$ 1              
       
Federal Natl Mtg Assn
    ²                       US$ 8,971                       US$ 8,940     US$ 8,971     US$ (31 )            
       
Federal Natl Mtg Assn
    ²                       US$ 17,888                       US$ 17,782     US$ 17,888     US$ (106 )            
       
Federal Natl Mtg Assn
    ²                                   US$ 19,539                                   US$ 19,565  
       
Federal Natl Mtg Assn
    ²                                   US$ 4,123                                   US$ 4,104  
       
Federal Natl Mtg Assn
    ²                                   US$ 10,430                                   US$ 10,413  
       
Federal Natl Mtg Assn
    ²                                   US$ 7,966                                   US$ 7,963  
       
Federal Natl Mtg Assn Mtn
    ²                       US$ 9,758                       US$ 9,781     US$ 9,758     US$ 23              
       
Federal Natl Mtg Assn Mtn
    ²                       US$ 15,787                       US$ 15,851     US$ 15,787     US$ 64              
       
Federal Natl Mtg AssnMtn
    ²                       US$ 7,000                       US$ 6,925     US$ 7,000     US$ (75 )            
       
Freddie Mac
    ²                                   US$ 9,391                                   US$ 9,273  
       
 
                                                                                                       
       
Corporate issued asset-backed securities
                                                                                                       
       
Bear Stearns Arm Tr
  Available-for-sale financial assets                                 US$ 3,826                                   US$ 3,635  
       
Capital Auto Receivables Asset
    ²                                   US$ 3,250                                   US$ 3,217  
       
Capital One Auto Fin Tr
    ²                                   US$ 5,000                                   US$ 4,979  
       
Cit Equip Coll Tr
    ²                                   US$ 3,975                                   US$ 3,941  
       
Credit Suisse First Boston Mtg
    ²                                   US$ 4,773                                   US$ 4,752  
(Continued)

- 58 -


 

                                                                                                                 
                                    Beginning Balance   Acquisition   Disposal (Note 1)   Ending Balance
                                                                                    Carrying Value   Gain (Loss) on           Amount (US$ in
        Marketable Securities   Financial Statement           Nature of   Shares/Units (in   Amount (US$ in   Shares/Units (in   Amount (US$ in   Shares/Units (in   Amount (US$ in   (US$ in   Disposal (US$   Shares/Units (in   Thousands)
Company Name   Type and Name   Account   Counter-party   Relationship   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   Thousands)   in Thousands)   Thousands)   (Note 2)
       
Credit Suisse First Boston Mtg
  Available-for-sale financial assets                     US$           US$ 3,750           US$     US$     US$           US$ 3,715  
       
Credit Suisse First Boston Mtg
    ²                                   US$ 3,572                                   US$ 3,554  
       
Ford Cr Auto Owner Tr
    ²                       US$ 10,908                       US$ 4,181     US$ 4,225     US$ (44 )         US$ 2,826  
       
Gs Mtg Secs Corp.
    ²                                   US$ 4,150                                   US$ 4,124  
       
Gsamp Tr
    ²                                   US$ 4,250                                   US$ 4,232  
       
Long Beach Mtg Ln Tr
    ²                                   US$ 3,200                                   US$ 3,188  
       
Merrill Lynch Mtg Invs Inc.
    ²                                   US$ 6,665                                   US$ 6,635  
       
Nissan Auto Receivables
    ²                       US$ 7,000                       US$ 4,944     US$ 5,000     US$ (56 )         US$ 1,437  
       
Nomura Asset Accep Corp.
    ²                                   US$ 4,150                                   US$ 4,131  
       
Terwin Mtg Tr
    ²                                   US$ 4,050                                   US$ 4,014  
       
Wells Fargo Finl Auto Owner Tr
    ²                                   US$ 4,893                                   US$ 4,885  
       
Wells Fargo Mtg Bkd Secs
    ²                                   US$ 3,772                                   US$ 3,128  
       
WFS Finl 2004 4 Owner Tr
    ²                       US$ 5,399                       US$ 3,346     US$ 3,400     US$ (54 )         US$ 1,672  
Note 1:   The proceeds of bond investments matured are excluded.
Note 2:   The ending balance included the amortization of premium or discount on bond investments and valuation gain or loss.

- 59 -


 

TABLE 5
Taiwan Semiconductor Manufacturing Company Limited
ACQUISITION OF INDIVIDUAL REAL ESTATES AT COSTS OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
FOR THE SIX MONTHS ENDED JUNE 30, 2006
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
                                                         
Company   Types of       Transaction             Nature of   Prior Transaction of Related Counter-party   Price   Purpose of    
Name   Property   Transaction Date   Amount     Payment Term   Counter-party   Relationship   Owner   Relationship   Transfer Date   Amount   Reference   Acquisition   Other Terms
The Company   Fab. 14   January 6, 2006   854,000     By the construction progress  
M+W Zander Facility Engineering Co., Ltd.
    N/A   N/A   N/A   N/A   Public bidding   Manufacturing purpose   None
    Fab. 12   March 30, 2006   US $ 3,340     By the construction progress  
M+W Zander Facility Engineering Co., Ltd.
    N/A   N/A   N/A   N/A   Public bidding   Manufacturing purpose   None
    Fab. 14   June 2, 2006   197,500     By the construction progress  
China Steel Structure Co., Ltd.
    N/A   N/A   N/A   N/A   Public bidding   Manufacturing purpose   None
    Fab. 14   June 26, 2006   EUR  2,733     By the construction progress  
Siemens Limited
    N/A   N/A   N/A   N/A   Public bidding   Manufacturing purpose   None
    Fab. 14   June 30, 2006   517,500     By the construction progress  
United Steel Engineering & Construction Corp.
    N/A   N/A   N/A   N/A   Public bidding   Manufacturing purpose   None

- 60 -


 

TABLE 6
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 SIX MONTHS ENDED JUNE 30, 2006
(Amounts in Thousands of New Taiwan Dollars)
                                                             
                                            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   $ 94,075,632       58     Net 30 days after invoice date       $ 22,374,338       52      
    Philips  
Major shareholder
  Sales     2,318,898       2     Net 30 days after monthly closing         382,251       1      
    GUC  
Investee over which the Company had a controlling interest
  Sales     332,080           Net 30 days after monthly closing         148,386            
    WaferTech  
Indirect subsidiary
  Purchases     6,505,148       28     Net 30 days after monthly closing         (1,155,023 )     11      
    SSMC  
Investee accounted for using equity method
  Purchases     3,718,466       16     Net 30 days after monthly closing         (662,385 )     7      
    TSMC-Shanghai  
Subsidiary
  Purchases     1,918,584       8     Net 30 days after monthly closing         (401,379 )     4      
    VIS  
Investee accounted for using equity method
  Purchases     1,712,082       7     Net 30 days after monthly closing         (943,129 )     9      
       
 
                                                   
GUC   TSMC-North America  
The same Parent
  Purchases     253,238       51     Net 30 days after invoice date         (75,348 )     27      
Note:   The terms of sales to related parties were 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.

- 61 -


 

TABLE 7
Taiwan Semiconductor Manufacturing Company Limited
RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
JUNE 30, 2006
(Amounts in Thousands of New Taiwan Dollars)
                                                 
                                    Amounts Received    
                        Overdue   in Subsequent   Allowance for Bad
Company Name   Related Party   Nature of Relationship   Ending Balance   Turnover Rate   Amounts   Action Taken   Period   Debts
The Company   TSMC-North America  
Subsidiary
  $ 22,579,665     42 days   $ 5,809,994       $ 8,734,125     $  
    Philips  
Major shareholder
    382,251     38 days     21,743     Accelerate demand on account receivables     20,826        
    GUC  
Investee over which the Company had a controlling interest
    148,386     54 days     2,019         60,991        
    VIS  
Investee accounted for using equity method
    688,807     Note     6,668     Accelerate demand on account receivables            
    TSMC Technology  
Indirect subsidiaries
    485,449     Note     495     Accelerate demand on account receivables            
    TSMC-Shanghai  
Subsidiary
    167,585     Note     32,343     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.

- 62 -


 

TABLE 8
Taiwan Semiconductor Manufacturing Company Limited
NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES ON WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE
JUNE 30, 2006
(Amounts in Thousands of New Taiwan Dollars)
                                                                         
                Original Investment Amount   Balance as of June 30, 2006   Net Income   Equity in the    
                        December 31,   Shares (in   Percentage of   Carrying   (Losses) of the   Earnings    
Investor Company   Investee Company   Location   Main Businesses and Products   June 30, 2006   2005   Thousands)   Ownership   Value (Note)   Investee   (Losses)   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     $ 25,984,419     $ 2,264,286     $ 2,264,286     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       12,180,367             100       9,093,788       (302,853 )     (302,853 )   Subsidiary
    SSMC   Singapore  
Fabrication and supply of integrated circuits
    6,408,190       6,408,190       382       32       5,094,733       2,916,458       933,267    
Investee accounted for using equity method
    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       5,087,101       1,043,109       231,525    
Investee accounted for using equity method
    TSMC Partners   Tortola, British Virgin Islands  
Investment activities
    10,350       10,350       300       100       4,225,071       137,223       137,223     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       1,790,365       24,647       24,647     Subsidiary
    Emerging Alliance   Cayman Islands  
Investing in new start-up technology companies
    1,455,564       1,545,288             99       1,050,087       114,784       114,211     Subsidiary
    VTAF II   Cayman Islands  
Investing in new start-up technology companies
    736,934       654,509             98       707,835       (9,355 )     (9,169 )   Subsidiary
    GUC   Hsin-Chu, Taiwan  
Researching, developing, manufacturing, testing and marketing of integrated circuits
    409,920       409,920       40,147       45       447,762       31,320       14,971    
Investee over which the Company had a controlling interest
    VTAF III   Cayman Islands  
Investing in new start-up technology companies
    146,454                   98       145,055       (5,744 )     (5,630 )   Subsidiary
    Chi Cherng   Taipei, Taiwan  
Investment activities
    300,000       300,000             36       113,574       99,216       (5,687 )   Subsidiary
    Hsin Ruey   Taipei, Taiwan  
Investment activities
    300,000       300,000             36       113,246       100,327       (5,367 )   Subsidiary
    TSMC-Japan   Yokohama, Japan  
Marketing activities
    83,760       83,760       6       100       96,536       798       798     Subsidiary
    TSMC-Europe   Amsterdam, the Netherlands  
Marketing activities
    15,749       15,749             100       36,909       12,048       12,048     Subsidiary
    TSMC-Korea   Seoul, Korea  
Marketing activities
    13,656             80       100       13,752       112       112     Subsidiary
Note:   The treasury stock is deducted from the carrying value.

- 63 -


 

TABLE 9
Taiwan Semiconductor Manufacturing Company Limited
INFORMATION OF INVESTMENT IN MAINLAND CHINA
FOR THE SIX MONTHS ENDED JUNE 30, 2006
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
                                                                                 
                    Accumulated                   Accumulated                            
                    Outflow of                   Outflow of                            
                    Investment                   Investment                            
        Total Amount       from Taiwan as                   from Taiwan as                           Accumulated
        of Paid-in       of   Investment Flows   of           Equity in the           Inward
        Capital       January 1, 2006   Outflow           June 30, 2006           Earnings   Carrying Value   Remittance of
    Main Businesses and   (RMB in   Method of   (US$ in   (US$ in           (US$ in   Percentage of   (Losses)   as of   Earnings as of
Investee Company   Products   Thousand)   Investment   Thousand)   Thousand)   Inflow   Thousand)   Ownership   (Note 2)   June 30, 2006   June 30, 2006
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     (Note 1)   $ 12,180,367     $     $     $ 12,180,367       100 %   $ (302,853 )   $ 9,093,788     $  
(RMB 3,070,623 )     (US$ 371,000 )             (US$ 371,000 )                        
                                                                           
                                                                           
                         
    Accumulated Investment in Mainland   Investment Amounts Authorized by    
    China as of June 30, 2006   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.

- 64 -


 

Taiwan Semiconductor Manufacturing
Company Limited and Subsidiaries
Consolidated Financial Statements for the
Six Months Ended June 30, 2006 and 2005 and
Independent Auditors’ Report

 


 

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 as of June 30, 2006 and 2005, and the related consolidated statements of income, changes in shareholders’ equity and cash flows for the six months 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 June 30, 2006 and 2005, and the results of their consolidated operations and their consolidated cash flows for the six months 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.
July 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 consolidated 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 consolidated financial statements shall prevail.

- 1 -


 

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2006 AND 2005
(In Thousands of New Taiwan Dollars, Except Par Value)
                                 
    2006     2005  
 
  Amount     %     Amount     %  
ASSETS
                               
 
                               
CURRENT ASSETS
                               
Cash and cash equivalents (Notes 2 and 4)
  $ 141,451,709       24     $ 88,405,154       17  
Financial assets at fair value through profit or loss (Notes 2, 3 and 5)
    1,970,690             315,550        
Available-for-sale financial assets (Notes 2, 3 and 6)
    62,429,761       11       48,298,762       10  
Held-to-maturity financial assets (Notes 2, 3 and 7)
    5,738,737       1       1,109,846        
Notes and accounts receivable
    44,231,283       8       36,302,501       7  
Receivables from related parties (Note 25)
    387,388             740,202        
Allowance for doubtful receivables (Note 2)
    (991,840 )           (984,650 )      
Allowance for sales returns and others (Note 2)
    (5,657,954 )     (1 )     (3,963,039 )     (1 )
Other receivables from related parties (Note 25)
    798,883             161,859        
Other financial assets (Note 3)
    1,625,406             1,816,025       1  
Inventories, net (Notes 2 and 8)
    20,051,180       3       15,158,776       3  
Deferred income tax assets (Notes 2 and 18)
    6,258,263       1       5,408,883       1  
Prepaid expenses and other current assets (Note 3)
    1,396,823             1,230,671        
 
                       
 
                               
Total current assets
    279,690,329       47       194,000,540       38  
 
                       
 
                               
LONG-TERM INVESTMENTS (Notes 2, 3, 6, 7, 9 and 10)
                               
Available-for-sale financial assets
    4,955,849       1       24,646       3  
Held-to-maturity financial assets
    23,524,067       4       27,297,965       2  
Financial assets carried at cost
    3,287,050             3,255,358       1  
Investments accounted for using equity method
    11,011,139       2       8,629,444       2  
 
                       
 
                               
Total long-term investments
    42,778,105       7       39,207,413       8  
 
                       
 
                               
PROPERTY, PLANT AND EQUIPMENT (Notes 2 and 11)
                               
Cost
                               
Land and land improvements
    839,539             795,981        
Buildings
    106,751,906       18       102,814,480       20  
Machinery and equipment
    534,997,102       90       488,162,101       95  
Office equipment
    9,901,513       2       9,261,975       2  
Leased assets
    595,172             560,957        
 
                       
 
    653,085,232       110       601,595,494       117  
Accumulated depreciation
    (429,993,526 )     (72 )     (365,018,772 )     (71 )
Advance payments and construction in progress
    28,038,154       5       20,429,713       4  
 
                       
 
                               
Net property, plant and equipment
    251,129,860       43       257,006,435       50  
 
                       
 
                               
GOODWILL (Note 2)
    5,953,802       1       6,441,721       1  
 
                       
 
                               
OTHER ASSETS
                               
Deferred income tax assets (Notes 2 and 18)
    7,428,728       1       6,338,720       1  
Deferred charges, net (Notes 2 and 12)
    6,512,023       1       8,210,644       2  
Refundable deposits
    106,600             114,435        
Others
    143,562             101,340        
 
                       
 
                               
Total other assets
    14,190,913       2       14,765,139       3  
 
                       
 
                               
TOTAL
  $ 593,743,009       100     $ 511,421,248       100  
 
                       
 
                               
LIABILITIES AND SHAREHOLDERS’ EQUITY
                               
 
                               
CURRENT LIABILITIES
                               
Short-term bank loans (Note 13)
  $           $ 316,180        
Financial liabilities at fair value through profit or loss (Notes 2, 3 and 5)
    601,086             841,617        
Accounts payable
    8,676,146       2       6,365,721       1  
Payables to related parties (Note 25)
    1,605,514             1,239,322        
Income tax payable (Notes 2 and 18)
    4,602,621       1       444,303        
Cash dividends and bonus payable (Note 20)
    65,174,870       11       49,506,027       10  
Payables to contractors and equipment suppliers
    17,214,474       3       11,383,836       3  
Accrued expenses and other current liabilities (Notes 2, 3 and 16)
    9,920,464       2       9,459,152       2  
Current portion of bonds payable and long-term bank loans (Notes 14 and 15)
    2,505,489             10,505,489       2  
 
                       
 
                               
Total current liabilities
    110,300,664       19       90,061,647       18  
 
                       
 
                               
LONG-TERM LIABILITIES
                               
Bonds payable (Note 14)
    17,000,000       3       19,500,000       4  
Long-term bank loans (Note 15)
    651,604             957,510        
Other long-term payables (Note 16)
    8,466,995       2       8,020,949       2  
Other payables to related parties (Notes 25 and 28)
    1,085,366             1,727,133        
Obligations under capital leases (Note 2)
    595,172             560,957        
 
                       
 
                               
Total long-term liabilities
    27,799,137       5       30,766,549       6  
 
                       
 
                               
OTHER LIABILITIES
                               
Accrued pension cost (Notes 2 and 17)
    3,495,542       1       3,424,325       1  
Guarantee deposits (Note 28)
    3,357,528             1,518,850        
Deferred credits (Notes 2 and 25)
    1,219,120             673,746        
Others
    71,794             35,297        
 
                       
 
                               
Total other liabilities
    8,143,984       1       5,652,218       1  
 
                       
 
                               
Total liabilities
    146,243,785       25       126,480,414       25  
 
                       
 
                               
EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT
                               
Capital stock — $10 par value
                               
Authorized: 27,050,000 thousand shares
                               
Issued: 25,823,357 thousand shares in 2006,
                               
24,726,129 thousand shares in 2005
    258,233,569       43       247,261,288       48  
 
                       
Capital surplus (Notes 2 and 20)
    53,822,486       9       56,720,875       11  
 
                       
Retained earnings (note 20)
                               
Appropriated as legal capital reserve
    43,705,711       7       34,348,208       7  
Appropriated as special capital reserve
    640,742             2,226,427       1  
Unappropriated earnings
    92,376,976       16       47,808,698       9  
 
                       
 
    136,723,429       23       84,383,333       17  
 
                       
 
                               
Others (Notes 2 and 3)
                               
Cumulative translation adjustments
    (1,145,616 )           (2,612,996 )     (1 )
Unrealized gain on financial instruments
    116,554                    
 
                       
 
    (1,029,062 )           (2,612,996 )     (1 )
 
                       
 
                               
Treasury stock (at cost, Notes 2 and 22)
                               
33,926 thousand shares in 2006 and 46,862 thousand shares in 2005
    (918,075 )           (1,552,573 )      
 
                       
 
                               
Equity attributable to shareholders of the parent
    446,832,347       75       384,199,927       75  
 
                               
MINORITY INTERESTS (Note 2)
    666,877             740,907        
 
                       
 
                               
Total shareholders’ equity
    447,499,224       75       384,940,834       75  
 
                       
 
                               
TOTAL
  $ 593,743,009       100     $ 511,421,248       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 SIX MONTHS ENDED JUNE 30, 2006 AND 2005
(In Thousands of New Taiwan Dollars, Except Consolidated Earnings Per Share)
                                 
    2006     2005  
    Amount     %     Amount     %  
GROSS SALES (Notes 2 and 25)
  $ 163,304,513             $ 118,589,458          
 
                               
SALES RETURNS AND ALLOWANCES (Note 2)
    3,336,353               1,753,728          
 
                           
 
                               
NET SALES
    159,968,160       100       116,835,730       100  
 
                               
COST OF SALES (Notes 19 and 25)
    79,742,976       50       70,903,582       61  
 
                       
 
                               
GROSS PROFIT
    80,225,184       50       45,932,148       39  
 
                       
 
                               
OPERATING EXPENSES (Notes 19)
                               
Research and development
    7,839,586       5       6,973,117       5  
General and administrative
    4,046,885       3       4,766,049       4  
Marketing
    2,113,687       1       1,810,727       2  
 
                       
 
                               
Total operating expenses
    14,000,158       9       13,549,893       11  
 
                       
 
                               
INCOME FROM OPERATIONS
    66,225,026       41       32,382,255       28  
 
                       
 
                               
NON-OPERATING INCOME AND GAINS
                               
Interest income (Notes 2 and 3)
    2,136,142       1       1,307,115       1  
Equity in earnings of equity method investees, net (Notes 2 and 10)
    1,249,875       1       623,046       1  
Gain on disposal of financial instruments, net (Notes 2, 3, 5 and 24)
    812,356       1       1,442,104       1  
Settlement income (Note 27)
    483,840             786,750       1  
Subsidy income
    329,312             311,846        
Technical service income (Notes 25 and 28)
    302,720             186,962        
Gain on disposal of property, plant and equipment and other assets (Notes 2 and 25)
    176,277             35,808        
Others (Note 25)
    227,921             220,040        
 
                       
 
                               
Total non-operating income and gains
    5,718,443       3       4,913,671       4  
 
                       
 
                               
NON-OPERATING EXPENSES AND LOSSES
                               
Foreign exchange loss, net (Notes 2 and 3)
    1,244,308       1       2,004,430       2  
Valuation loss on financial instruments, net (Notes 2, 3, 5 and 24)
    770,634             40,971        
Interest expense (Notes 2 and 3)
    437,365             718,599       1  
Loss on impairment of financial assets (Note 2)
    171,394             88,486        
Loss on idle assets
    37,283             106,972        
(Continued)

- 3 -


 

                                 
    2006     2005  
    Amount     %     Amount     %  
Loss on disposal of property, plant and equipment (Note 2)
  $ 9,211           $ 53,625        
Others
    82,734             75,003        
 
                       
 
                               
Total non-operating expenses and losses
    2,752,929       1       3,088,086       3  
 
                       
 
                               
INCOME BEFORE INCOME TAX
    69,190,540       43       34,207,840       29  
 
                               
INCOME TAX BENEFIT (EXPENSE) (Notes 2 and 18)
    (4,135,397 )     (2 )     1,003,785       1  
 
                       
 
                               
NET INCOME BEFORE CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES
    65,055,143       41       35,211,625       30  
 
                               
CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES, NET OF INCOME TAX BENEFIT OF NT$82,062 THOUSAND (Note 3)
    1,606,749       1              
 
                       
 
                               
NET INCOME
  $ 66,661,892       42     $ 35,211,625       30  
 
                       
 
                               
ATTRIBUTABLE TO:
                               
Shareholders of the parent
  $ 66,608,628       42     $ 35,187,334       30  
Minority interests
    53,264             24,291        
 
                       
 
  $ 66,661,892       42     $ 35,211,625       30  
 
                       
                                 
    2006     2005  
    Before     After     Before     After  
    Income     Income     Income     Income  
    Tax     Tax     Tax     Tax  
CONSOLIDATED EARNINGS PER SHARE (NT$, Note 23)
                               
Basic earnings per share
  $ 2.74     $ 2.58     $ 1.33     $ 1.37  
 
                       
Diluted earnings per share
  $ 2.74     $ 2.58     $ 1.33     $ 1.37  
 
                       
     
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 SIX MONTHS ENDED JUNE 30, 2006 AND 2005
(In Thousands of New Taiwan Dollars, Except Dividends Per Share)
                                                                                                                 
    Equity Attributable to Shareholders of the Parent                
                                                            Others                                
                            Retained Earnings             Unrealized                                        
    Capital Stock                     Special                     Cumulative     Gain on                                     Total  
    Shares             Capital     Legal Capital     Capital     Unappropriated             Translation     Financial             Treasury             Minority     Shareholders’  
    (Thousand)     Amount     Surplus     Reserve     Reserve     Earnings     Total     Adjustments     Instruments     Total     Stock     Total     Interests     Equity  
BALANCE, JANUARY 1, 2006
    24,730,025     $ 247,300,246     $ 57,117,886     $ 34,348,208     $ 2,226,427     $ 106,196,399     $ 142,771,034     $ (640,742 )   $     $ (640,742 )   $ (918,075 )   $ 445,630,349     $ 608,359     $ 446,238,708  
 
                                                                                                               
Appropriations of prior year’s earnings
                                                                                                               
Legal capital reserve
                      9,357,503             (9,357,503 )                                                
Special capital reserve
                            (1,585,685 )     1,585,685                                                  
Employees’ profit sharing — in cash
                                  (3,432,129 )     (3,432,129 )                             (3,432,129 )           (3,432,129 )
Employees’ profit sharing — in stock
    343,213       3,432,129                         (3,432,129 )     (3,432,129 )                                          
Cash dividends — NT$2.50 per share
                                  (61,825,061 )     (61,825,061 )                             (61,825,061 )           (61,825,061 )
Stock dividends — NT$0.15 per share
    370,950       3,709,504                         (3,709,504 )     (3,709,504 )                                          
Bonus to directors and supervisors
                                  (257,410 )     (257,410 )                             (257,410 )           (257,410 )
 
                                                                                                               
Capital surplus transferred to capital stock
    370,950       3,709,504       (3,709,504 )                                                                  
 
                                                                                                               
Issuance of stock from exercising stock options
    8,219       82,186       243,864                                                       326,050             326,050  
 
                                                                                                               
Adjustment arising from changes in percentage of ownership in investees
                87,920                                                       87,920             87,920  
 
                                                                                                               
Cash dividends received by subsidiaries from parent company
                82,320                                                       82,320             82,320  
 
                                                                                                               
Net income for the six months ended June 30, 2006
                                  66,608,628       66,608,628                               66,608,628       53,264       66,661,892  
 
                                                                                                               
Translation adjustments
                                              (504,874 )           (504,874 )           (504,874 )     8,765       (496,109 )
 
                                                                                                               
Valuation gain on available-for-sale financial assets
                                                    102,614       102,614             102,614       4,614       107,228  
 
                                                                                                               
Equity in valuation gain on available-for-sale financial assets of equity method investees
                                                    13,940       13,940             13,940             13,940  
 
                                                                                                               
Decrease in minority interests
                                                                            (8,125 )     (8,125 )
 
                                                                                   
 
                                                                                                               
BALANCE, JUNE 30, 2006
    25,823,357     $ 258,233,569     $ 53,822,486     $ 43,705,711     $ 640,742     $ 92,376,976     $ 136,723,429     $ (1,145,616 )   $ 116,554     $ (1,029,062 )   $ (918,075 )   $ 446,832,347     $ 666,877     $ 447,499,224  
 
                                                                                   
 
                                                                                                               
BALANCE, JANUARY 1, 2005
    23,251,964     $ 232,519,637     $ 56,537,259     $ 25,528,007     $     $ 88,202,009     $ 113,730,016     $ (2,226,427 )   $     $ (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 — NT$2.00 per share
                                  (46,504,097 )     (46,504,097 )                             (46,504,097 )           (46,504,097 )
Stock dividends — NT$0.50 per share
    1,162,602       11,626,024                         (11,626,024 )     (11,626,024 )                                          
Bonus to directors and supervisors — in cash
                                  (231,466 )     (231,466 )                             (231,466 )           (231,466 )
 
                                                                                                               
Issuance of stock from exercising stock options
    2,941       29,412       87,806                                                       117,218             117,218  
 
                                                                                                               
Adjustment arising from changes in percentage of ownership in investees
                4,774                                                       4,774             4,774  
 
                                                                                                               
Cash dividends received by subsidiaries from parent company
                84,285                                                       84,285             84,285  
 
                                                                                                               
Net income for the six months ended June 30, 2005
                                  35,187,334       35,187,334                               35,187,334       24,291       35,211,625  
 
                                                                                                               
Translation adjustments
                                                (386,569 )           (386,569 )           (386,569 )     (13,668 )     (400,237 )
 
                                                                                                               
Treasury stock transactions — sales of parent company stock held by subsidiaries
                6,751                                                 42,613       49,364             49,364  
 
                                                                                                               
Increase in minority interests
                                                                            654,547       654,547  
 
                                                                                   
 
                                                                                                               
BALANCE, JUNE 30, 2005
    24,726,129     $ 247,261,288     $ 56,720,875     $ 34,348,208     $ 2,226,427     $ 47,808,698     $ 84,383,333     $ (2,612,996 )   $     $ (2,612,996 )   $ (1,552,573 )   $ 384,199,927     $ 740,907     $ 384,940,834  
 
                                                                                   
The accompanying notes are an integral part of the consolidated financial statements.

- 5 -


 

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005
(In Thousands of New Taiwan Dollars)
                 
    2006     2005  
CASH FLOWS FROM OPERATING ACTIVITIES
               
Net income attributable to shareholders of the parent
  $ 66,608,628     $ 35,187,334  
Net income attributable to minority interests
    53,264       24,291  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
    35,621,785       37,917,458  
Amortization of premium/discount of financial assets, net
    43,781       58,771  
Loss on impairment of financial assets
    171,394       88,486  
Loss (gain) on disposal of available-for-sale financial assets
    (51,671 )     111,808  
Gain on disposal of financial assets carried at cost
          (94 )
Equity in earnings of equity method investees, net
    (1,249,875 )     (623,046 )
Gain on disposal of property, plant and equipment and other assets, net
    (167,066 )     17,817  
Loss on idle assets
    37,283       106,972  
Deferred income tax
    250,733       (1,179,638 )
Net changes in operating assets and liabilities:
               
Decrease (increase) in:
               
Financial assets and liabilities at fair value through profit or loss
    166,562       1,905,815  
Notes and accounts receivable
    (1,149,008 )     (4,861,416 )
Receivables from related parties
    305,878       126,139  
Allowance for doubtful receivables
    11,246       (1,847 )
Allowance for sales returns and others
    1,340,541       620,589  
Other receivables from related parties
    413,595       (20,281 )
Other financial assets
    (7,609 )     (842,265 )
Inventories
    (2,322,877 )     454,008  
Prepaid expenses and other current assets
    23,618       1,028,107  
Increase (decrease) in:
               
Accounts payable
    (745,306 )     (1,121,457 )
Payables to related parties
    (137,555 )     (1,572,227 )
Income tax payable
    587,170       33,947  
Accrued expenses and other current liabilities
    (436,589 )     (526,717 )
Accrued pension cost
    21,158       308,978  
Deferred credits
    (84,275 )      
 
           
 
               
Net cash provided by operating activities
    99,304,805       67,241,532  
 
           
 
               
CASH FLOWS FROM INVESTING ACTIVITIES
               
Acquisitions of:
               
Available-for-sale financial assets
    (64,826,510 )     (42,911,838 )
Held-to-maturity financial assets
    (7,754,790 )     (3,485,821 )
Financial assets carried at cost
    (289,572 )     (185,834 )
Property, plant and equipment
    (32,900,861 )     (55,769,360 )
Investments accounted for using equity method
    (48,084 )      
Proceeds from disposal of:
               
Available-for-sale financial assets
    44,169,400       44,244,414  
Redemption of held-to-maturity financial assets upon maturity
    7,837,000       4,914,180  
(Continued)

- 6 -


 

                 
    2006     2005  
Financial assets carried at cost
  $     $ 19,860  
Property, plant and equipment and other assets
    247,133       127,264  
Increase in deferred charges
    (739,933 )     (506,210 )
Decrease (increase) in refundable deposits
    202       (3,147 )
Decrease (increase) in other assets
    (55,749 )     416  
 
           
 
               
Net cash used in investing activities
    (54,361,764 )     (53,556,076 )
 
           
 
               
CASH FLOWS FROM FINANCING ACTIVITIES
               
Repayments of short-term bank loans
    (328,500 )     (63,236 )
Repayments of long-term bank loans
    (2,745 )     (944,100 )
Increase in guarantee deposits
    461,098       1,105,969  
Bonus to directors and supervisors
    (257,410 )     (231,466 )
Proceeds from:
               
Disposal of treasury stock
          49,364  
Exercise of employee stock options
    326,050       117,218  
Increase (decrease) in minority interests
    (8,125 )     11,571  
 
           
 
               
Net cash provided by financing activities
    190,368       45,320  
 
           
 
               
NET INCREASE IN CASH AND CASH EQUIVALENTS
    45,133,409       13,730,776  
 
               
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
    (165,407 )     (109,281 )
 
               
EFFECT OF FIRST INCLUSION FOR CONSOLIDATION OF CERTAIN SUBSIDIARIES
          481,308  
 
               
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    96,483,707       74,302,351  
 
           
 
               
CASH AND CASH EQUIVALENTS, END OF PERIOD
  $ 141,451,709     $ 88,405,154  
 
           
 
               
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
               
Interest paid
  $ 608,339     $ 659,902  
 
           
Income tax paid
  $ 3,391,986     $ 148,831  
 
           
 
               
INVESTING ACTIVITIES AFFECTING BOTH CASH AND NON-CASH ITEMS
               
Acquisition of property, plant and equipment
  $ 41,049,299     $ 34,127,442  
Decrease (increase) in payables to contractors and equipment suppliers
    (8,148,438 )     22,045,021  
Increase in other long-term payables
          (403,103 )
 
           
Cash paid
  $ 32,900,861     $ 55,769,360  
 
           
 
               
NONCASH FINANCING ACTIVITIES
               
Current portion of long-term liabilities
  $ 2,505,489     $ 10,505,489  
 
           
Current portion of other long-term payables (classified under accrued expenses and other current liabilities)
  $ 940,123     $ 1,417,437  
 
           
The accompanying notes are an integral part of the consolidated financial statements. (Concluded)

- 7 -


 

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2006 AND 2005
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
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 June 30, 2006 and 2005, TSMC and its subsidiaries had 23,044 and 20,991 employees, respectively.
2. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements are presented in conformity with the 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 over which TSMC has a controlling interest. All significant intercompany balances and transactions are eliminated upon consolidation.

- 8 -


 

The consolidated entities were as follows:
                 
        Percentage of    
        Ownership at    
Name of Investor   Name of Investee   June 30, 2006   Remark
TSMC  
TSMC North America (TSMC-NA)
    100 %  
   
TSMC Japan K. K. (TSMC-Japan)
    100 %  
   
Taiwan Semiconductor Manufacturing Company Korea (TSMC-Korea)
    100 %  
TSMC-Korea was established in May 2006.
   
TSMC International Investment Ltd. (TSMC International)
    100 %  
   
Taiwan Semiconductor Manufacturing Company Europe B.V. (TSMC-Europe)
    100 %  
   
TSMC Partners, Ltd. (TSMC Partners)
    100 %  
   
TSMC (Shanghai) Company Limited (TSMC-Shanghai)
    100 %  
   
Chi Cherng Investment Co., Ltd. (Chi Cherng)
    36 %  
TSMC and Hsin Ruey held in aggregate a 100% ownership of Chi Cherng. As of June 30, 2006, Chi Cherng held 16,947 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 June 30, 2006, Hsin Ruey held 16,979 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 %  
   
VentureTech Alliance Fund III, L.P. (VTAF III)
    98 %  
VTAF III was established in April 2006.
   
Global Unichip Corporation (GUC)
    45 %  
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.
(Continued)

- 9 -


 

                 
        Percentage of    
        Ownership at    
Name of Investor   Name of Investee   June 30, 2006   Remark
   
VisEra Technology Company, Ltd. (VisEra)
       
VisEra president was assigned by TSMC. However, due to the changes in investment structure, TSMC no longer had a controlling interest in VisEra beginning in November 2005 resulting in VisEra being no longer treated as a consolidated entity.
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  
Global Unichip Corp.-North America (GUC-NA)
    100 %  
GUC-NA, a subsidiary of GUC, became a consolidated entity of TSMC in 2005 since TSMC has control over GUC.
   
Global Unichip Japan Co., Ltd. (GUC-Japan)
    100 %  
GUC-Japan, a subsidiary of GUC, became a consolidated entity of TSMC in 2005 since TSMC has control over GUC.
The following diagram presents information regarding the relationship and ownership percentages between TSMC and its consolidated investees as of June 30, 2006:
(FLOW CHART)

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TSMC-NA is engaged in selling and marketing of integrated circuits and semiconductor devices. TSMC-Japan, TSMC-Korea and TSMC-Europe are engaged mainly in marketing activities. TSMC International is engaged in investment in companies involved in the design, manufacture, and other related business in the semiconductor industry. TSMC-Shanghai is engaged in the manufacturing and selling of integrated circuits and pursuant to the orders from and product design specifications provided by customers. TSMC Partners, TSMC Development, Chi Cherng and Hsin Ruey are engaged in investing activities. Emerging Alliance, VTAF II, VTAF III, ISDF and ISDF II are engaged in investing in new start-up technology companies. TSMC Technology is engaged mainly in engineering support activities. 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, respectively.
TSMC together with its consolidated entities are hereinafter referred to collectively as the “Company”.
Minority interests in subsidiaries aforementioned are presented as a separate component of shareholders’ equity.
Use of Estimates
The preparation of consolidated 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 expected to be due within one year from the balance sheet date. Assets and liabilities that are not classified as current are noncurrent assets and liabilities, respectively.
Cash Equivalents
Repurchase agreements collateralized by government bonds, notes and treasury bills acquired with maturities of less than three months from the date of purchase are classified as cash equivalents. The carrying amount approximates fair value.
Financial Assets/Liabilities at Fair Value Through Profit or Loss
Derivatives that do not meet the criteria for hedge accounting and financial assets acquired principally for the purpose of selling them in the near term are initially recognized at fair value, with transaction costs expensed as incurred. The derivatives and financial assets are remeasured at fair value subsequently with the changes in fair value recognized in current income. A regular way purchase or sale of financial assets is recognized and derecognized using settlement date accounting.
Fair value is determined as follows: Publicly-traded stocks — closing price at the balance sheet date; and derivatives — using valuation techniques incorporating estimates and assumptions that are consistent with prevailing market conditions. When the fair value is positive, the derivative is recognized as a financial asset; when the fair value is negative, the derivative is recognized as a financial liability.

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Available-for-Sale Financial Assets
Investments designated as available-for-sale financial assets include debt securities and equity securities. Available-for-sale financial assets are initially recognized at fair value plus transaction costs that are directly attributable to the acquisition. The changes in fair value from a subsequent remeasurement are reported as a separate component of shareholders’ equity. The corresponding accumulated gains or losses are recognized in earnings when the financial asset is derecognized from the balance sheet. A regular way purchase or sale of financial assets is accounted for using settlement date accounting.
Fair value is determined as follows: Beneficiary certificates of open-end funds — net asset value at the balance sheet date; publicly-traded stocks — closing price at the balance sheet date; and other debt securities — average of bid and asked prices at the balance sheet date.
Cash dividends are recognized as investment income upon resolution of shareholders of an investee but are accounted for as reductions to the original cost of investment if such dividends are declared on the earnings of the investees attributable to periods prior to the purchase of the investments. Stock dividends are recorded as an increase in the number of shares held and do not affect investment income. The cost per share is recalculated based on the new total number of shares. Any difference between the initial carrying amount of a debt security and the amount due at maturity is amortized using the effective interest method, with the amortization recognized in earnings.
If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. If, in a subsequent period, the amount of the impairment loss decreases, for equity securities, the previously recognized impairment loss is reversed to the extent of the decrease and recorded as an adjustment to shareholders’ equity; for debt securities, the amount of the decrease is recognized in earnings, provided that the decrease is clearly attributable to an event which occurred after the impairment loss was recognized.
Held-to-Maturity Financial Assets
Debt securities for which the Company has a positive intention and ability to hold to maturity are categorized as held-to-maturity financial assets and are carried at amortized cost under the effective interest method. Those financial assets are initially recognized at fair value plus transaction costs that are directly attributable to the acquisition. Earnings or losses are recognized at the time of derecognition, impairment or amortization. A regular way purchase or sale of financial assets is accounted for using settlement date accounting.
If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. If, in a subsequent period, the amount of the impairment loss decreases and the decrease is clearly attributable to an event which occurred after the impairment loss was recognized, the previously recognized impairment loss is reversed to the extent of the decrease. The reversal may not result in a carrying amount of the financial asset that exceeds the amortized cost that would have been determined as if no impairment loss had been recognized.
Allowance for Doubtful Receivables
An allowance for doubtful receivables is provided based on a review of the collectibility of accounts receivable. The Company determines the amount of allowance for doubtful receivables by examining the aging analysis of outstanding accounts receivable and current trends in the credit quality of its customers as well as its internal credit policies.

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Revenue Recognition and Allowance for Sales Returns and Others
The Company recognizes revenue when evidence of an arrangement exists, shipment is made, price is fixed or determinable, and collectibility is reasonably assured. Revenues from the design and manufacturing of photo masks, which are used as manufacturing tools in the fabrication process, are recognized when the photo masks are qualified by customers. Provisions for estimated sales returns and other allowances are generally recorded in the period the related revenue is recognized based on historical experience, management’s judgment, and any known factors that would significantly affect the allowance.
Sales prices are determined using fair value taking into account related sales discounts agreed to by the Company and its customers. Sales agreements typically provide that payment is due 30 days from invoice date for a majority of the customers and 30 to 45 days after the end of the month in which sales occur for some customers. Since the receivables from sales are collectible within one year and such transactions are frequent, fair value of the receivables is equivalent to the nominal amount of the cash to be received.
Inventories
Inventories are stated at the lower of cost or market value. Inventories are recorded at standard cost and adjusted to the approximate weighted-average cost at the balance sheet date. Market value represents replacement cost for raw materials, supplies and spare parts and net realizable value for work in process and finished goods. The Company assesses the impact of changing technology on its inventories on hand and writes off inventories that are considered obsolete. Period-end inventories are evaluated for estimated excess quantities and obsolescence based on a demand forecast within a specific time horizon, which is generally 180 days or less. Estimated losses on scrap and slow-moving items are recognized and included in the allowance for losses.
Financial Assets Carried at Cost
Investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured are carried at their original cost, such as non-publicly traded stocks and mutual funds. The costs of funds and non-publicly traded stocks are determined using the weighted-average method. If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. A subsequent reversal of such impairment loss is not allowed.
The accounting treatment for cash dividends and stock dividends arising from financial assets carried at cost is the same as that for cash and stock dividends arising from available-for-sale financial assets.
Investments Accounted for Using Equity Method
Investments in companies wherein the Company exercises significant influence over the operating and financial policy decisions are accounted for using the equity method. The Company’s share of the net income or net loss of an investee is recognized in the “equity in earnings/losses of equity method investees, net” account. The difference, if any, between the cost of investment and the Company’s proportionate share of the investee’s equity was previously amortized by the straight-line method over five years and was also recorded in the “equity in earnings/losses of equity method investees, net” account. Effective January 1, 2006, pursuant to the revised Statement of Financial Accounting Standards No. 5, “Long-term Investments in Equity Securities” (SFAS No. 5), investment premiums, representing goodwill, are no longer being amortized; while investment discounts continue to be amortized over the remaining periods. When an indication of impairment is identified, the carrying amount of the investment is reduced, with the related impairment loss charged to current income.
When the Company subscribes for additional investee’s shares at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment in the investee differs from the amount of the Company’s share in the investee’s net equity. The Company records such a difference as an adjustment to long-term investments with the corresponding amount charged or credited to capital surplus.

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Gains or losses on sales from the Company to equity method investees are deferred in proportion to the Company’s ownership percentage in the investees until such gains or losses are realized through transactions with third parties. Gains or losses on sales from equity method investees to the Company are deferred in proportion to the Company’s ownership percentages in the investees until they are realized through transactions with third parties.
If an investee’s functional currency is a foreign currency, translation adjustments will result from the translation of the investee’s financial statements into the reporting currency of the Company. Such adjustments are accumulated and reported as a separate component of shareholders’ equity.
Property, Plant and Equipment
Property, plant and equipment 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 obligations under capital leases. When an indication of impairment is identified, any excess of the carrying amount of an asset over its recoverable amount is recognized as a loss. If the recoverable amount increases in a subsequent period, the amount previously recognized as impairment would be reversed and recognized as a gain. However, the adjusted amount may not exceed the carrying amount that would have been determined, net of depreciation, as if no impairment loss had been recognized. Significant additions, renewals and betterments incurred during the construction period are capitalized. Maintenance and repairs are expensed as incurred.
Depreciation is computed using the straight-line method over the following estimated service lives: Land improvements — 20 years; buildings — 10 to 20 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 deducted from the corresponding accounts, with any gain or loss credited or charged to non-operating gains or losses in the period of sale or disposal.
Goodwill
Goodwill represents the excess of the consideration paid for acquisition over the fair value of identifiable net assets acquired. Goodwill was previously amortized using the straight-line method over the estimated life of 10 years. Effective January 1, 2006, pursuant to the newly revised SFAS No. 25, “Business Combinations — Accounting Treatment under Purchase Method” (SFAS No. 25), goodwill is no longer amortized and is assessed for impairment at least on an annual basis. If an event occurs or circumstances change which indicated that fair value of goodwill is more likely than not below its carrying amount, an impairment loss is charged to current income. A subsequent recovery in fair value of goodwill is not allowed.
Deferred Charges
Deferred charges consist of technology license fees, software and system design costs and other charges. The amounts are amortized over the following periods: Technology license fees — the shorter of the estimated life of the technology or the term of the technology transfer contract; software and system design costs and other charges — 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 subsequent period, the amount previously recognized as impairment would be reversed and recognized as a gain. However, the adjusted amount may not exceed the carrying amount that would have been determined, net of amortization, as if no impairment loss had been recognized.

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Pension Costs
For employees under defined contribution pension plans, pension costs are recorded based on the actual contributions made to employees’ individual pension accounts during service periods. For employees under defined benefit pension plans, pension costs are recorded based on actuarial calculations.
Income Tax
The Company applies intra-period and inter-period allocations for its income tax whereby (1) a portion of current income tax expense is allocated to the cumulative effect of changes in accounting principles; and (2) deferred income tax assets and liabilities are recognized for the tax effects of temporary differences, 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 period’s tax provision.
Income tax on unappropriated earnings (excluding earnings from foreign consolidating subsidiaries) of 10% is expensed in the year of shareholder approval which is the year subsequent to the year the earnings are generated.
The R.O.C. government enacted the Alternative Minimum Tax Act (AMT Act), which became effective on January 1, 2006. The alternative minimum tax (AMT) imposed under the AMT Act is a supplemental tax levied at a rate of 10% which is payable if the income tax payable determined pursuant to the Income Tax Law is below the minimum amount prescribed under the AMT Act. The taxable income for calculating the AMT includes most of the income that is exempted from income tax under various laws and statutes. The Company has considered the impact of the AMT Act in the determination of its tax liabilities.
Stock-based Compensation
Employee stock option plans that are amended or have options granted on or after January 1, 2004 are accounted for by the interpretations issued by the Accounting Research and Development Foundation. The Company adopted the intrinsic value method and any compensation cost determined using this method is charged to expense over the employee vesting period.
Treasury Stock
TSMC’s stock held by its subsidiaries is treated as treasury stock and reclassified from investments accounted for using equity method to treasury stock. The gains resulted from disposal of the treasury stock held by 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 balance sheet date, monetary assets and liabilities denominated in foreign currencies are revalued at the prevailing exchange rates with the resulting gains or losses recognized in current income.

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Translation of Foreign-currency Financial Statements
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 — spot rate at period-end; shareholders’ equity — historical rates; income and expenses — average rate during the period. The resulting translation adjustments are recorded as a separate component of shareholders’ equity.
3.   ACCOUNTING CHANGES
 
    On January 1, 2006, the Company adopted the newly released SFAS No. 34, “Accounting for Financial Instruments” (SFAS No. 34) and No. 36, “Disclosure and Presentation for Financial Instruments” and related revisions of previously released SFASs.
  a.   Effect of adopting the newly released SFASs and related revisions of previously released SFASs
 
      The Company had properly categorized its financial assets and liabilities upon the initial adoption of the newly released SFASs. The adjustments made to the carrying amounts of the financial instruments categorized as financial assets or liabilities at fair value through profit or loss were included in the cumulative effect of changes in accounting principles; on the other hand, the adjustments made to the carrying amounts of those categorized as available-for-sale financial assets were recognized as adjustments to shareholders’ equity.
 
      The effect of adopting the newly released SFASs is summarized as follows:
                 
    Recognized as        
    Cumulative        
    Effect of     Recognized as  
    Changes in     a Separate  
    Accounting     Component of  
    Principles     Shareholders’  
    (Net of Tax)     Equity  
Financial assets or liabilities at fair value through profit or loss
  $ 1,606,749     $  
Available-for-sale financial assets
          306,531  
 
           
 
               
 
  $ 1,606,749     $ 306,531  
 
           
The adoption of the newly released SFASs resulted in a decrease in net income before cumulative effect of changes in accounting principles of NT$839,900 thousand, an increase in net income of NT$766,849 thousand, and an increase in basic earnings per share (after income tax) of NT$0.03, for the six months ended June 30, 2006.
Effective January 1, 2006, the Company adopted the newly revised SFAS No. 5 and SFAS No. 25, which prescribe that investment premiums, representing goodwill, be assessed for impairment at least on an annual basis instead of being amortized. Such a change in accounting principle did not have a material effect on the Company’s financial statements as of and for the six months ended June 30, 2006.

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  b.   Reclassifications
 
      Upon the adoption of SFAS No. 34, certain accounts in the consolidated financial statements as of and for the six months ended June 30, 2005 were reclassified to conform with the consolidated financial statements as of and for the six months ended June 30, 2006. The previous issued consolidated financial statements as of and for the six months ended June 30, 2005 need not be restated.
 
      Certain accounting policies prior to the adoption of the newly released SFASs are summarized as follows:
  1)   Short-term investments
 
      Short-term investments that were publicly-traded, easily converted to cash, and not acquired for the purpose of controlling the investees or establishing close business relationship with the investees were carried at the lower of cost or market value at the balance sheet date, with any temporary decline in value charged to current income. The market value of publicly-traded stocks was determined using the average-closing prices for the last month of the period.
 
  2)   Derivative financial instruments
 
      The Company entered into forward exchange contracts to manage foreign exchange exposures on foreign-currency-denominated assets and liabilities. The contracts were 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 were amortized over the terms of the forward contracts using the straight-line method. At the end of each period, the receivables or payables arising from forward contracts were 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 were netted with the resulting amount presented as either an asset or a liability. Any resulting gain or loss upon settlement was credited or charged to income in the period of settlement.
 
      The Company entered into cross currency swap contracts to manage currency exposures on foreign-currency-denominated assets and liabilities. The principal amount was recorded using the current rates 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 were amortized over the terms of the contracts using the straight-line method. At the end of each period, the receivables or payables arising from cross-currency swap contracts were 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 were 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 was recorded as an adjustment to the interest income or expense associated with the hedged items. Any resulting gain or loss upon settlement was credited or charged to income in the period of settlement.
 
      The Company entered into interest rate swap contracts to manage exposures to changes in interest rates on existing assets or liabilities. These transactions were accounted for on an accrual basis, in which the cash settlement receivable or payable was recorded as an adjustment to interest income or expense associated with the hedged items.

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      Certain accounts in the consolidated financial statements as of and for the six months ended June 30, 2005 have been reclassified to conform to the classifications prescribed by the newly released and revised SFASs. The reclassifications of the whole or a part of the account balances of certain accounts are summarized as follows:
                 
    Before     After  
    Reclassification     Reclassification  
Balance sheet
               
 
               
Short-term investments, net
  $ 49,558,447     $  
Other financial assets
    78,900        
Prepaid expenses and other current assets
    42,941        
Long-term investments accounted for using cost method
    3,323,874        
Long-term bonds investment
    16,342,005        
Other long-term investments
    10,955,960        
Accrued expenses and other current liabilities
    (841,617 )      
Financial assets at fair value through profit or loss
          315,550  
Financial liabilities at fair value through profit or loss
          (841,617 )
Available-for-sale financial assets
          48,323,408  
Held-to-maturity financial assets
          28,407,811  
Financial assets carried at cost
          3,255,358  
 
           
 
               
 
  $ 79,460,510     $ 79,460,510  
 
           
 
               
Statement of income
               
 
               
Interest income
  $ 449,756     $  
Foreign exchange gain, net
    1,837,806        
Interest expense
    (781,134 )      
Unrealized valuation loss on short-term investments
    (40,971 )      
Loss on disposal of investment, net
    (64,324 )      
Gain on disposal of financial instruments, net
          1,442,104  
Valuation loss on financial instruments, net
          (40,971 )
 
           
 
               
 
  $ 1,401,133     $ 1,401,133  
 
           
4. CASH AND CASH EQUIVALENTS
                 
    June 30  
    2006     2005  
Cash and deposits in bank
  $ 81,433,005     $ 57,966,352  
Repurchase agreements collateralized by government bonds
    59,351,764       29,804,199  
Corporate notes
    666,940       172,291  
Treasury bills
          349,892  
Agency notes
          112,420  
 
           
 
               
 
  $ 141,451,709     $ 88,405,154  
 
           

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5.   FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
                 
    June 30  
    2006     2005  
Trading financial assets
               
Publicly-traded stocks
  $ 1,648,234     $ 193,709  
Forward exchange contracts
          1,123  
Cross currency swap contracts
    322,456       120,718  
 
           
 
               
 
  $ 1,970,690     $ 315,550  
 
           
 
               
Trading financial liabilities
               
Forward exchange contracts
  $ 9,442     $ 46,005  
Cross currency swap contracts
    591,644       795,612  
 
           
 
               
 
  $ 601,086     $ 841,617  
 
           
The Company entered into derivative contracts during the six months ended June 30, 2006 and 2005 to manage exposures due to the fluctuations of foreign exchange rates. The derivative contracts entered into by the Company did not meet the criteria for hedge accounting prescribed by SFAS No. 34. Therefore, effective from January 1, 2006, the Company discontinued applying hedge accounting treatment for its derivative financial instruments.
Outstanding forward contracts as of June 30, 2006 and 2005:
                 
            Contract
            Amount
    Currency   Maturity Date   (in Thousands)
June 30, 2006
               
 
               
Sell
  US$/NT$   July 2006   US$ 10,000  
 
  EUR/US$   July 2006   EUR 10,000  
Buy
  US$/EUR   July 2006   EUR 1,134  
 
  US$/JPY   July 2006   JPY 13,500  
 
               
June 30, 2005
               
 
               
Sell
  US$/NT$   July 2005 to August 2005   US$ 103,000  
 
  US$/NT$   July 2005   US$ 6,500  
Outstanding cross currency swap contracts as of June 30, 2006 and 2005:
                         
    Contract           Range of
    Amount   Range of   Interest Rates
Maturity Date   (in Thousands)   Interest Rates Paid   Received
June 30, 2006
                       
 
                       
July 2006 to September 2006
  US$ 2,266,000       2.40%-5.57 %     0.60%-2.78 %
 
                       
June 30, 2005
                       
 
                       
July 2005 to August 2005
  US$ 2,045,000       3.10%-3.40 %     1.03%-1.22 %

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The Company did not enter into any interest rate swap contracts during the six months ended June 30, 2006. 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 has been reclassified and included in the “losses on disposal of financial instruments” account.
Net gains arising from derivative financial instruments for the six months ended June 30, 2006 were NT$191,799 thousand (including realized settlement gains of NT$470,429 thousand and valuation losses of NT$278,630 thousand).
6.   AVAILABLE-FOR-SALE FINANCIAL ASSETS
                 
    June 30  
    2006     2005  
Beneficiary certificates of open-end funds
  $ 22,157,124     $ 10,300,638  
Corporate bonds
    14,297,001       11,555,183  
Agency bonds
    13,787,394       11,511,740  
Corporate issued asset-backed securities
    10,921,185       11,419,169  
Government bonds
    4,831,843       2,741,122  
Structured time deposits
    498,190        
Publicly-traded stocks
    409,253       51,269  
Money market funds
    385,937       491,465  
Corporate notes
    97,683       158,052  
Commercial papers
          94,770  
 
           
 
    67,385,610       48,323,408  
Current portion
    (62,429,761 )     (48,298,762 )
 
           
 
               
 
  $ 4,955,849     $ 24,646  
 
           
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 June 30, 2006, 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 corporate bonds, agency bonds, asset-backed securities, government bonds and others. Securities acquired with maturities of less than three months from the date of purchase were classified as cash equivalents.
As of June 30, 2006, structured time deposits categorized as available-for-sale financial assets consisted of the following:
                         
    Principal     Carrying     Range of    
    Amount     Amount     Interest Rates   Maturity Date
Step-up callable deposits
                       
Domestic deposits
  $ 500,000     $ 498,190     1.76%   March 2008
 
                   
The interest rate of the step-up callable deposits is pre-determined by the Company and the banks.

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7.   HELD-TO-MATURITY FINANCIAL ASSETS
                 
    June 30  
    2006     2005  
Corporate bonds
  $ 12,895,132     $ 5,634,705  
Structured time deposits
    11,127,780       10,955,960  
Government bonds
    5,239,892       11,817,146  
 
           
 
    29,262,804       28,407,811  
Current portion
    (5,738,737 )     (1,109,846 )
 
           
 
               
 
  $ 23,524,067     $ 27,297,965  
 
           
Structured time deposits categorized as held-to-maturity financial assets consisted of the following:
                             
    Principal     Interest     Range of      
    Amount     Receivable     Interest Rates     Maturity Date
June 30, 2006
                           
 
                           
Step-up callable deposits
                           
Domestic deposits
  $ 4,000,000     $ 27,016       1.40%-2.01 %   June 2007 to March 2009
Callable range accrual deposits
                           
Domestic deposits
    3,887,880       4,725     (See below   September 2009 to December 2009
Foreign deposits
    3,239,900       4,914     (See below   October 2009 to January 2010
 
                       
 
                           
 
  $ 11,127,780     $ 36,655              
 
                       
 
                           
June 30, 2005
                           
 
                           
Step-up callable deposits
                           
Domestic deposits
  $ 4,000,000     $ 18,027       1.40%-2.44 %   July 2006 to August 2007
Callable range accrual deposits
                           
Domestic deposits
    3,794,160       8,266     (See below   September 2009 to December 2009
Foreign deposits
    3,161,800       11,971     (See below   October 2009 to January 2010
 
                       
 
                           
 
  $ 10,955,960     $ 38,264              
 
                       
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 June 30, 2006 and 2005, the principal of the deposits that resided in banks located in Hong Kong amounted to US$80,000 thousand; those resided in banks located in Singapore amounted to US$20,000 thousand.

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8.   INVENTORIES, NET
                 
    June 30  
    2006     2005  
Finished goods
  $ 4,298,472     $ 2,746,425  
Work in process
    14,439,386       12,145,548  
Raw materials
    1,299,483       992,651  
Supplies and spare parts
    1,042,615       1,141,717  
 
           
 
    21,079,956       17,026,341  
Allowance for losses
    (1,028,776 )     (1,867,565 )
 
           
 
               
 
  $ 20,051,180     $ 15,158,776  
 
           
9.   FINANCIAL ASSETS CARRIED AT COST
                 
    June 30  
    2006     2005  
Non-publicly traded stocks
  $ 2,940,582     $ 2,952,919  
Funds
    346,468       302,439  
 
           
 
               
 
  $ 3,287,050     $ 3,255,358  
 
           
10.   INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD
                                 
    June 30  
    2006     2005  
            % of             % of  
    Carrying     Owner-     Carrying     Owner-  
    Amount     ship     Amount     ship  
Vanguard International Semiconductor Corporation (VIS)
  $ 5,135,185       27     $ 5,115,164       27  
Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)
    5,094,733       32       3,514,280       32  
VisEra Holding Company (VisEra Holding)
    781,221       48              
 
                           
 
                               
 
  $ 11,011,139             $ 8,629,444          
 
                           
For the six months ended June 30, 2006 and 2005, net equity in earnings recognized from the equity method investees were NT$1,249,875 thousand and NT$623,046 thousand, respectively. The carrying amounts of the investments accounted for using the equity method and the related equity in earnings or losses of equity method investees were determined based on the audited financial statements of the investees as of and for the same periods as the Company.

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11.   PROPERTY, PLANT AND EQUIPMENT
 
    Accumulated depreciation consisted of the following:
                 
    June 30  
    2006     2005  
Land improvements
  $ 218,267     $ 184,622  
Buildings
    50,653,432       42,260,855  
Machinery and equipment
    371,700,414       316,242,660  
Office equipment
    7,342,367       6,283,931  
Leased assets
    79,046       46,704  
 
           
 
               
 
  $ 429,993,526     $ 365,018,772  
 
           
No interest was capitalized during the six months ended June 30, 2006 and 2005.
12.   DEFERRED CHARGES, NET
                 
    June 30  
    2006     2005  
Technology license fees
  $ 4,809,479     $ 5,929,347  
Software and system design costs
    1,552,297       2,114,718  
Others
    150,247       166,579  
 
           
 
               
 
  $ 6,512,023     $ 8,210,644  
 
           
13.   SHORT-TERM BANK LOANS
                 
    June 30  
    2006     2005  
Unsecured loan:
               
US$10,000 thousand, repayable by June 2006, annual interest at 3.61%
  $     $ 316,180  
 
           
14.   BONDS PAYABLE
                 
    June 30  
    2006     2005  
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
    (2,500,000 )     (10,500,000 )
 
           
 
               
 
  $ 17,000,000     $ 19,500,000  
 
           

- 23 -


 

As of June 30, 2006, future principal repayments for the 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  
 
     
15.   LONG-TERM BANK LOANS
                 
    June 30  
    2006     2005  
Secured loan:
               
US$20,000 thousand, repayable by November 2010 in 5 payments, annual interest at 5.66%
  $ 648,123     $  
Unsecured loans:
               
Science Park Administration (SPA) SOC loan, repayable by July 2008 in 20 installments, interest-free
    6,265       9,050  
SPA DSP loan, repayable by April 2007 in 20 installments, interest-free
    2,705       5,409  
US$30,000 thousand, repaid in December 2005 before original maturities, annual interest at 3.60%
          948,540  
 
           
 
    657,093       962,999  
Current portion
    (5,489 )     (5,489 )
 
           
 
               
 
  $ 651,604     $ 957,510  
 
           
As of June 30, 2006, assets of TSMC-Shanghai with an aggregate carrying amount of NT$4,828,782 thousand (RMB1,191,409 thousand) were provided as collateral for the aforementioned secured loan. Pursuant to the loan agreement, the annual audited financial statements of TSMC-Shanghai must comply with certain financial covenants.
As of June 30, 2006, future principal repayments under the Company’s long-term bank loans were as follows:
         
Year of Repayment   Amount  
2006 (3rd to 4th quarter)
  $ 2,745  
2007
    4,137  
2008
    131,711  
2009
    259,250  
2010
    259,250  
 
     
 
       
 
  $ 657,093  
 
     

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16. OTHER LONG-TERM PAYABLES
                 
    June 30  
    2006     2005  
Payables for acquisition of property, plant and equipment (Note 28j)
  $ 7,008,392     $ 6,376,813  
Payables for royalties
    2,398,726       3,061,573  
 
           
 
    9,407,118       9,438,386  
 
               
Current portion (classified under accrued expenses and other current liabilities)
    (940,123 )     (1,417,437 )
 
           
 
               
 
  $ 8,466,995     $ 8,020,949  
 
           
The payables for royalties were primarily attributable to several license arrangements that the Company entered into for certain semiconductor-related patents.
As of June 30, 2006, future payments for other long-term payables were as follows:
         
Year of Payment   Amount  
2006 (3rd to 4th quarter)
  $ 493,300  
2007
    641,216  
2008
    335,006  
2009
    335,006  
2010
    335,006  
2011 and thereafter
    7,267,584  
 
     
 
       
 
  $ 9,407,118  
 
     
17.   PENSION PLANS
 
    The Labor Pension Act (the Act) became effective on July 1, 2005. The employees of TSMC and GUC who were subject to the Labor Standards Law prior to July 1, 2005 were allowed to choose to be subject to the pension mechanism under the Act with their seniority as of July 1, 2005 retained or continue to be subject to the pension mechanism under the Labor Standards Law. Employees who joined TSMC and GUC after July 1, 2005 can only be subject to the pension mechanism under the Act.
 
    The pension mechanism under the Act is deemed a defined contribution plan. Pursuant to the Act, TSMC and GUC have made monthly contributions equal to 6% of each employee’s monthly salary to employees’ pension accounts starting from July 1, 2005. Furthermore, TSMC-NA and TSMC-Shanghai are required to make monthly contributions, at a certain percentage of the monthly basic salary of its local employees. Pursuant to the aforementioned Act and local regulations, the Company has made monthly contributions and recognized pension costs of NT$342,329 thousand and NT$20,334 thousand for the six months ended June 30, 2006 and 2005, 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 at retirement. TSMC and GUC contribute an amount equal to 2% of salaries paid each month to their respective pension funds (the Funds). The Funds are administered by the pension fund monitoring committees and deposited in the committees’ names in the Central Trust of China.

- 25 -


 

    Changes in the Funds and accrued pension cost under the defined benefit plans for the six months ended June 30, 2006 and 2005 are summarized as follows:
                 
    Six Months Ended June 30  
    2006     2005  
The Funds
               
Balance, beginning of period
  $ 1,669,102     $ 1,435,609  
Contributions
    132,536       123,331  
Interest
    34,467       15,629  
Payments
    (4,677 )     (8,419 )
 
           
 
               
Balance, end of period
  $ 1,831,430     $ 1,566,150  
 
           
Accrued pension cost
               
Balance, beginning of period
  $ 3,473,941     $ 3,113,041  
Accruals
    21,601       310,849  
 
           
 
               
Balance, end of period
  $ 3,495,542     $ 3,423,890  
 
           
18.   INCOME TAX
  a.   A reconciliation of income tax expense based on “income before income tax” at statutory rates and income tax currently payable was as follows:
                 
    Six Months Ended June 30  
    2006     2005  
Income tax expense based on “income before income tax” at statutory rate (25%)
  $ (18,266,397 )   $ (8,486,984 )
Tax-exempt income
    6,411,975       4,734,183  
Temporary and permanent differences
    1,144,388       (863,534 )
Additional tax at 10% on unappropriated earnings
    (1,170,031 )     (1,495,145 )
Cumulative effect of changes in accounting principles
    82,062        
Net operating loss carryforwards
    6,785        
Investment tax credits
    7,462,975       5,896,073  
 
           
 
               
Income tax currently payable
  $ (4,328,243 )   $ (215,407 )
 
           
 
               
b. Income tax benefit (expense) consisted of the following:
               
 
               
Income tax currently payable
  $ (4,328,243 )   $ (215,407 )
Other income tax adjustments
    445,618       39,554  
Net change in deferred income tax assets
               
Investment tax credits
    (2,775,753 )     2,534,406  
Temporary differences
    1,837,418       2,150,088  
Net operating loss carryforwards
    (865,927 )     (409,319 )
Adjustments in valuation allowance
    1,551,490       (3,095,537 )
 
           
 
               
Income tax benefit (expense)
  $ (4,135,397 )   $ 1,003,785  
 
           

- 26 -


 

  c.   Net deferred income tax assets (liabilities) consisted of the following:
                 
    June 30  
    2006     2005  
Current deferred income tax assets, net
               
Investment tax credits
  $ 6,104,899     $ 5,347,938  
Temporary differences
    588,984       373,860  
Net operating loss carryforwards
    9,040       6,660  
Valuation allowance
    (444,660 )     (319,575 )
 
           
 
               
 
  $ 6,258,263     $ 5,408,883  
 
           
 
               
Noncurrent deferred income tax assets, net
               
Investment tax credits
  $ 15,196,138     $ 23,190,292  
Temporary differences
    (3,882,178 )     (5,659,538 )
Net operating loss carryforwards
    5,303,080       6,369,671  
Valuation allowance
    (9,188,312 )     (17,561,705 )
 
           
 
               
 
  $ 7,428,728     $ 6,338,720  
 
           
      As of June 30, 2006, the net operating loss carryforwards were generated by WaferTech, TSMC Development, TSMC Technology and GUC and will expire on various dates through 2026.
 
  d.   Integrated income tax information:
 
      The balance of the imputation credit account (ICA) of TSMC as of June 30, 2006 and 2005 was NT$743,590 thousand and NT$15,569 thousand, respectively.
 
      The expected and actual creditable ratio for distribution of TSMC’s earnings of 2005 and 2004 was 2.88% 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 imputation credits is made.
 
  e.   All of TSMC’s earnings generated prior to December 31, 1997 have been appropriated.
 
  f.   As of June 30, 2006, the Company’s investment tax credits consisted of the following:
                                 
            Total     Remaining        
            Creditable     Creditable     Expiry  
Regulation   Item     Amount     Amount     Year  
Statute for Upgrading Industries
  Purchase of machinery and equipment   $ 2,685,977     $ 172       2006  
 
            4,113,449       1,144,070       2007  
 
            6,809,568       6,809,568       2008  
 
            6,049,452       6,049,452       2009  
 
            1,722,682       1,722,682       2010  
 
                           
 
                               
 
          $ 21,381,128     $ 15,725,944          
 
                           
(Continued)

- 27 -


 

                                 
            Total     Remaining        
            Creditable     Creditable     Expiry  
Regulation   Item     Amount     Amount     Year  
Statute for Upgrading Industries
  Research and development expenditures   $ 1,800,884     $ 20,404       2006  
 
            1,282,439       1,282,439       2007  
 
            1,669,220       1,669,220       2008  
 
            1,605,163       1,605,163       2009  
 
            816,735       816,735       2010  
 
                           
 
 
          $ 7,174,441     $ 5,393,961          
 
                           
Statute for Upgrading Industries
  Personnel training   $ 27,357     $ 46       2006  
 
            26,962       26,962       2007  
 
            37,250       37,250       2008  
 
            36,933       36,933       2009  
 
            137       137       2010  
 
                           
 
                               
 
          $ 128,639     $ 101,328          
 
                           
 
                               
Statute for Upgrading Industries
  Investments in important technology-based enterprises   $ 79,804     $ 79,804       2010  
 
                           
  g.   The profits generated from the following expansion and construction projects of TSMC are exempt from income tax:
         
    Tax-Exemption Periods
Construction of Fab 8 - module B
    2002 to 2005  
Expansion of Fab 2 - modules A and B, Fab 3 and 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 2002.
19.   LABOR COST, DEPRECIATION AND AMORTIZATION
                         
    Six Months Ended June 30, 2006  
            Classified as        
    Classified as     Operating        
    Cost of Sales     Expenses     Total  
Labor cost
                       
Salary
  $ 6,081,251     $ 3,231,766     $ 9,313,017  
Labor and health insurance
    352,183       193,046       545,229  
Pension
    317,709       182,702       500,411  
Meal
    228,844       84,037       312,881  
Welfare
    114,761       85,204       199,965  
Others
    104,187       138,639       242,826  
 
                 
 
                       
 
  $ 7,198,935     $ 3,915,394     $ 11,114,329  
 
                 
 
                       
Depreciation
  $ 32,621,813     $ 1,729,941     $ 34,351,754  
 
                 
Amortization
  $ 725,722     $ 532,234     $ 1,257,956  
 
                 

- 28 -


 

                         
    Six Months Ended June 30, 2005  
            Classified as        
    Classified as     Operating        
    Cost of Sales     Expenses     Total  
Labor cost
                       
Salary
  $ 5,001,599     $ 3,028,345     $ 8,029,944  
Labor and health insurance
    306,336       154,502       460,838  
Pension
    300,353       150,980       451,333  
Meal
    208,373       76,789       285,162  
Welfare
    72,674       42,701       115,375  
Others
    54,134       137,290       191,424  
 
                 
 
                       
 
  $ 5,943,469     $ 3,590,607     $ 9,534,076  
 
                 
 
                       
Depreciation
  $ 34,223,394     $ 1,589,927     $ 35,813,321  
 
                 
Amortization
  $ 814,085     $ 1,350,140     $ 2,164,225  
 
                 
20.   SHAREHOLDERS’ EQUITY
The Company has issued a total of 863,834 thousand ADSs which are traded on the NYSE as of June 30, 2006. The number of common shares represented by the ADSs is 4,319,169 thousand (one ADS represents five common shares).
Capital surplus can only be used to offset a deficit under the Company Law. However, the capital surplus generated from donations and the excess of the issuance price over the par value of capital stock (including the stock issued for new capital, mergers, convertible bonds and the surplus from treasury stock transactions) may be appropriated as stock dividends, which is limited to a certain percentage of the paid-in capital of TSMC.
Capital surplus consisted of the following:
                 
    June 30  
    2006     2005  
From merger
  $ 24,003,546     $ 24,003,546  
Additional paid-in capital
    19,788,594       23,139,481  
From convertible bonds
    9,360,424       9,360,424  
From treasury stock transactions
    389,188       91,241  
From long-term investments
    280,679       126,128  
Donations
    55       55  
 
           
 
               
 
  $ 53,822,486     $ 56,720,875  
 
           
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 net profits left over, until the accumulated legal capital reserve has equaled TSMC’s paid-in capital;
 
  b.   Special capital reserve in accordance with relevant laws or regulations or as requested by the authorities in charge;

- 29 -


 

  c.   Bonus to directors and supervisors and bonus to employees of TSMC of 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.
    The 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 that the ratio for stock dividend shall not exceed 50% of the total distribution.
 
    Any appropriations of the profits are recorded in the year of shareholder approval and given effect to in the financial statements of that year.
 
    The appropriation for legal capital reserve shall be made until the reserve equals TSMC’s paid-in capital. The reserve may be used to offset a deficit, or be distributed as dividends and bonuses for the portion in excess of 50% of the paid-in capital if TSMC has no unappropriated earnings and the reserve balance has exceeded 50% of TSMC’s paid-in capital. The Company Law also prescribes that, when the reserve has reached 50% of TSMC’s paid-in capital, up to 50% of the reserve may be transferred to capital.
 
    A special capital reserve equivalent to the net debit balance of the other components of shareholders’ equity (for example, cumulative translation adjustments and unrealized loss on financial assets, 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 2005 and 2004 had been approved in the shareholders’ meetings held on May 16, 2006 and May 10, 2005, 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 2005     Year 2004     Year 2005     Year 2004  
Legal capital reserve
  $ 9,357,503     $ 8,820,201                  
Special capital reserve
    (1,585,685 )     2,226,427                  
Employees’ profit sharing — in cash
    3,432,129       3,086,215                  
Employees’ profit sharing — in stock
    3,432,129       3,086,215                  
Cash dividends to shareholders
    61,825,061       46,504,097     $ 2.50     $ 2.00  
Stock dividends to shareholders
    3,709,504       11,626,024       0.15       0.50  
Bonus to directors and supervisors
    257,410       231,466                  
 
                           
 
                               
 
  $ 80,428,051     $ 75,580,645                  
 
                           
    The amounts of the above appropriations of earnings for 2005 and 2004 are consistent with the resolutions of the meetings of the Board of Directors held on February 14, 2006 and February 22, 2005, respectively. If the above bonus to employees, directors and supervisors had been paid entirely in cash and charged to earnings of 2005 and 2004, the basic earnings per share (after income tax) for the years ended December 31, 2005 and 2004 would have decreased from NT$3.79 to NT$3.50 and NT$3.97 to NT$3.70, respectively.
 
    The shares distributed as a bonus to employees represented 1.39% and 1.33% of TSMC’s total outstanding common shares as of December 31, 2005 and 2004, respectively.

- 30 -


 

    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 TSMC on earnings generated since January 1, 1998.
 
21.   STOCK-BASED COMPENSATION PLANS
 
    TSMC’s Employee Stock Option Plans under the 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 of the aforementioned TSMC Plans that had never been granted or had been granted but subsequently canceled had expired as of June 30, 2006.
 
    Information about TSMC’s outstanding stock options for the six months ended June 30, 2006 and 2005 was as follows:
                 
            Weighted-
            average
    Number of   Exercise
    Options   Price
    (in Thousands)   (NT$)
Six months ended June 30, 2006
               
 
               
Balance, beginning of period
    67,758     $ 39.4  
Options granted
    2,517       39.7  
Options exercised
    (8,219 )     39.7  
Options canceled
    (2,304 )     44.5  
 
               
 
               
Balance, end of period
    59,752       39.6  
 
               
 
               
Six months ended June 30, 2005
               
 
               
Balance, beginning of period
    64,367       40.5  
Options granted
    14,864       48.4  
Options exercised
    (2,941 )     39.9  
Options canceled
    (2,931 )     42.7  
 
               
 
               
Balance, end of period
    73,359       42.1  
 
               
    The number of outstanding options and exercise prices have been adjusted to reflect the appropriations of dividends in accordance with the plans.

- 31 -


 

    As of June 30, 2006, 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$)
 
  $ 27.6-$39.7       39,415       5.64     $ 35.6       29,458     $ 35.6  
 
  $ 45.1-$52.3       20,337       7.34       47.3       312       45.5  
 
                                               
 
                                               
 
            59,752                       29,770          
 
                                               
    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 at certain percentages subsequent to the second anniversary of the grant date.
 
    Moreover, GUC 2006 Plan and GUC 2004 Plan were approved by the SFB on July 3, 2006 and August 16, 2004 to grant a maximum of 3,665 options and 2,500 options, respectively, 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 the GUC 2006 Plan are valid until August 15, 2011 and the options of the GUC 2004 Plan are valid for six years. Options of both Plans are exercisable at certain percentages subsequent to the second anniversary of the grant date
 
    Options of the aforementioned GUC Plans, except those of the GUC 2006 Plan, that had never been granted, or had been granted but subsequently canceled had expired as of June 30, 2006.
 
    Information about GUC’s outstanding stock options for the six months ended June 30, 2006 and 2005 was as follows:
                 
            Weighted-
            average
    Number of   Exercise
    Options   Prices (NT$)
Six months ended June 30, 2006
               
 
               
Balance, beginning of period
    7,132     $ 10.66  
Options exercised
    (629 )     10.50  
Options canceled
    (216 )     10.90  
 
               
 
               
Balance, end of period
    6,287       10.66  
 
               
 
               
Six months ended June 30, 2005
               
 
               
Balance, beginning of period
    7,889       10.50  
Options exercised
    (1,959 )     10.50  
Options canceled
    (447 )     10.50  
 
               
 
               
Balance, end of period
    5,483       10.50  
 
               

- 32 -


 

    As of June 30, 2006, 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$)
$10.5-$11.0
    6,287       2.08-5.25     $ 10.7       596     $ 10.5  
 
                                       
    No compensation cost was recognized under the intrinsic value method for the six months ended June 30, 2006 and 2005. 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 six months ended June 30, 2006 and 2005 would have been as follows:
             
        2006   2005
Assumptions:
           
TSMC
  Expected dividend yield   1.00%-3.44%   1.00%-3.44%
 
  Expected volatility   43.77%-46.15%       43.77%-46.15%    
 
  Risk free interest rate   3.07%-3.85%   3.07%-3.85%
 
  Expected life   5 years   5 years
 
           
GUC
  Expected dividend yield    
 
  Expected volatility   22.65%-41.74%   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
      $66,608,628   $35,187,334
Pro forma
      66,551,357   35,140,555
 
           
Consolidated earnings per share (EPS) — after income tax (NT$):        
Basic EPS as reported
      $2.58   $1.37
Pro forma basic EPS
      2.58   1.36
Diluted EPS as reported
      2.58   1.37
Pro forma diluted EPS
      2.58   1.36
22.   TREASURY STOCK
(Shares in Thousands)
                                 
    Beginning   Increase/           Ending
    Shares   Dividend   Disposal   Shares
Six months ended June 30, 2006
                               
 
                               
Parent company stock held by subsidiaries
    32,938       988             33,926  
 
                               
 
                               
Six months ended June 30, 2005
                               
 
                               
Parent company stock held by subsidiaries
    45,521       2,242       901       46,862  
 
                               

- 33 -


 

    Proceeds from sales of treasury stock for the six months ended June 30, 2005 were NT$49,364 thousand. As of June 30, 2006 and 2005, the book value of the treasury stock was NT$918,075 thousand and NT$1,552,573 thousand, respectively; the market value was NT$1,952,452 thousand and NT$2,648,643 thousand, respectively. TSMC’s stock held by its subsidiaries is 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 vote in shareholders’ meetings.
 
23.   CONSOLIDATED EARNINGS PER SHARE
                                 
    For the Six Months Ended June 30  
    2006     2005  
    Before     After     Before     After  
    Income     Income     Income     Income  
    Tax     Tax     Tax     Tax  
Consolidated basic EPS (NT$)
                               
Income before cumulative effect of changes in accounting principles attributable to shareholders of the parent
  $ 2.68     $ 2.52     $ 1.33     $ 1.37  
Cumulative effect of changes in accounting principles attributable to shareholders of the parent
    0.06       0.06              
 
                       
 
                               
Income attributable to shareholders of the parent
  $ 2.74     $ 2.58     $ 1.33     $ 1.37  
 
                       
 
                               
Consolidated diluted EPS (NT$)
                               
Income before cumulative effect of changes in accounting principles attributable to shareholders of the parent
  $ 2.68     $ 2.52     $ 1.33     $ 1.37  
Cumulative effect of changes in accounting principles attributable to shareholders of the parent
    0.06       0.06              
 
                       
 
                               
Income attributable to shareholders of the parent
  $ 2.74     $ 2.58     $ 1.33     $ 1.37  
 
                       
    Consolidated EPS for the six months ended June 30, 2006 and 2005 is computed as follows:
                                         
                    Number of     EPS (NT$)  
    Amounts (Numerator)     Shares     Before     After  
    Before     After     (Denominator)     Income     Income  
    Income Tax     Income Tax     (in Thousands)     Tax     Tax  
Six months ended June 30, 2006
                                       
 
                                       
Consolidated basic EPS
                                       
Income attributable to shareholders of the parent
  $ 70,661,864     $ 66,608,628       25,784,890     $ 2.74     $ 2.58  
 
                                   
Effect of dilutive potential common stock — stock options
                23,529                  
 
                                 
 
                                       
Consolidated diluted EPS
                                       
Income attributable to shareholders of the parent (including effect of dilutive potential common stock)
  $ 70,661,864     $ 66,608,628       25,808,419     $ 2.74     $ 2.58  
 
                             
 
                                       
Six months ended June 30, 2005
                                       
 
                                       
Consolidated basic EPS
                                       
Income attributable to shareholders of the parent
  $ 34,177,232     $ 35,187,334       25,759,865     $ 1.33     $ 1.37  
 
                                   
Effect of dilutive potential common stock — stock options
                10,032                  
 
                                 
 
                                       
Consolidated diluted EPS
                                       
Income attributable to shareholders of the parent (including effect of dilutive potential common stock)
  $ 34,177,232     $ 35,187,334       25,769,897     $ 1.33     $ 1.37  
 
                             

- 34 -


 

24.   DISCLOSURES FOR FINANCIAL INSTRUMENTS
  a.   Fair values of financial instruments were as follows:
                                 
    June 30
    2006   2005
    Carrying           Carrying    
    Amount   Fair Value   Amount   Fair Value
Assets
                               
 
                               
Financial assets at fair value through profit or loss (excluding derivatives)
  $ 1,648,234     $ 1,648,234     $ 193,709     $ 1,042,040  
Available-for-sale financial assets
    67,385,610       67,385,610       48,323,408       48,432,034  
Held-to-maturity financial assets
    29,262,804       28,857,510       28,407,811       28,299,261  
Investments accounted for using equity method (with market price)
    5,135,185       9,613,553       5,115,164       12,449,270  
 
                               
Liabilities
                               
 
                               
Forward exchange contracts, net
    9,442       9,442       44,882       41,381  
Cross currency swap contracts, net
    269,188       269,188       674,894       452,530  
Bonds payable (including current portion)
    19,500,000       19,888,147       30,000,000       30,429,929  
Long-term bank loans (including current portion)
    657,093       657,093       962,999       962,999  
Other long-term payables (including current portion)
    10,492,484       10,492,484       11,165,519       11,165,519  
  b.   Methods and assumptions used in the determination of fair values of financial instruments
  1)   The aforementioned financial instruments do not include cash and cash equivalents, receivables, other financial assets, short-term bank loans, payables, and payables to contractors and equipment suppliers. The carrying amounts of these financial instruments approximate their fair values.
 
  2)   Fair values of financial assets at fair value through profit or loss, available-for-sale and held-to-maturity financial assets other than derivatives and structured deposits were based on their quoted market prices.
 
  3)   Fair values of derivatives and structured deposits were determined using valuation techniques incorporating estimates and assumptions that were consistent with prevailing market conditions.
 
  4)   Fair value of bonds payable was based on their quoted market price.
 
  5)   The fair value of long-term bank loans and other long-term payables was based on the present value of expected cash flows, which approximates their carrying amount.
  c.   Losses recognized for the changes in fair value of derivatives estimated using valuation techniques were NT$770,634 thousand for the six months ended June 30, 2006.
 
  d.   As of June 30, 2006 and 2005, financial assets exposed to fair value interest rate risk were NT$96,561,617 thousand and NT$76,801,791 thousand, respectively, financial liabilities exposed to fair value interest rate risk were NT$601,086 thousand and NT$841,617 thousand, respectively, and financial assets exposed to cash flow interest rate risk were NT$7,127,780 thousand and NT$6,955,960 thousand, respectively.
 
  e.   The Company recognized an unrealized gain of NT$107,228 thousand (NT$102,614 thousand attributable to shareholders’ of the parent and NT$4,614 thousand attributable to minority interests) in shareholder’s equity for the changes in fair value of available-for-sale financial assets for the six months ended June 30, 2006. The Company also recognized an unrealized gain of NT$13,940 thousand in shareholders’ equity for the changes in fair value of available-for-sale financial assets held by equity method investees for the six months ended June 30, 2006.

- 35 -


 

  f.   Information about financial risk
  1)   Market risk. The publicly-traded stocks categorized as financial assets at fair value through profit or loss are exposed to the market risk. The derivative financial instruments categorized as financial assets at fair value through profit or loss are mainly used to hedge the exchange rate fluctuations of foreign-currency-denominated assets and liabilities. Therefore, the market risk (exchange rate risk) of derivatives will be offset by the exchange rate risk of these assets and liabilities. Available-for-sale financial assets held by the Company are mainly fixed-interest-rate debt securities. Therefore, the fluctuations in market interest rates would result in changes in fair value of these debt securities.
 
  2)   Credit risk. Credit risk represents the potential loss that would be incurred by the Company if the counter-parties or third-parties breached contracts. Financial instruments with positive fair values at the balance sheet date are evaluated for credit risk. The counter-parties or third-parties to the foregoing financial instruments are reputable financial institutions, business organizations, and government agencies. Management believes its exposure to default by those parties is low.
 
  3)   Liquidity risk. The Company has sufficient operating capital to meet cash needs upon settlement of derivative financial instruments, bonds payable and loans. Therefore, the cash flow risk is low.
 
  4)   Cash flow interest rate risk. The Company mainly invests in fixed-interest-rate debt securities. Therefore, cash flows are not expected to fluctuate significantly due to changes in market interest rates.
25.   RELATED PARTY TRANSACTIONS
 
    Except as disclosed in the consolidated financial statements and other notes, the following is a summary of significant related party transactions:
  a.   Industrial Technology Research Institute (ITRI), the chairman of TSMC is one of ITRI’s supervisors
 
  b.   Philips, a major shareholder of TSMC
 
  c.   Investees of TSMC
 
      VIS (accounted for using equity method)
SSMC (accounted for using equity method)
 
  d.   Indirect investee
 
      VisEra, originally an investee over which the Company had a controlling interest; beginning in November 2005, VisEra became an indirect investee accounted for using the equity method due to changes in investment structure.
 
      XinTec Corporation (XinTec), the chairman of VisEra was previously one of Xintec’s directors. Because VisEra has not been a consolidated entity of the Company since November 2005, XinTec is no longer considered a related party.
 
  e.   Omnivision International Holding, Ltd. (Omnivision), originally a shareholder holding a 25% ownership in VisEra. Because VisEra has not been a consolidated entity of the Company since November 2005, Omnivision is no longer considered a related party.
 
  f.   Huawei Semiconductor (Shanghai) Co., Ltd. (Huawei), same president as VisEra. However, because VisEra has not been a consolidated entity of the Company since in November 2005, Huawei is no longer considered a related party.

- 36 -


 

                                 
    2006     2005  
    Amount     %     Amount     %  
Six months ended June 30
                               
 
                               
Sales
                               
Philips
  $ 2,318,898       1     $ 1,147,115       1  
Omnivision
                1,268,365       1  
Others
    95,062             45,689        
 
                       
 
                               
 
  $ 2,413,960       1     $ 2,461,169       2  
 
                       
 
                               
Purchases
                               
SSMC
  $ 3,718,466       5     $ 2,094,617       3  
VIS
    1,712,082       2       2,168,998       3  
XinTec
                321,924       1  
Others
                86,739        
 
                       
 
                               
 
  $ 5,430,548       7     $ 4,672,278       7  
 
                       
 
                               
Manufacturing expenses — technical assistance fees
                               
Philips (see Note 28a)
  $ 377,952           $ 202,334        
 
                       
 
                               
Non-operating income and gains
                               
SSMC (primarily technical service income; see Note 28e)
  $ 147,219       3     $ 146,655       3  
VisEra
    140,079       2              
VIS (primarily technical service income; see Note 28h)
    105,937       2       77,504       2  
 
                       
 
                               
 
  $ 393,235       7     $ 224,159       5  
 
                       
 
                               
As of June 30
                               
 
                               
Receivables
                               
Philips
  $ 382,251       99     $ 467,843       63  
Omnivision
                266,276       36  
Others
    5,137       1       6,083       1  
 
                       
 
                               
 
  $ 387,388       100     $ 740,202       100  
 
                       
 
                               
Other receivables
                               
VIS
  $ 688,807       86     $ 46,399       29  
SSMC
    92,700       12       115,460       71  
VisEra
    17,376       2              
 
                       
 
                               
 
  $ 798,883       100     $ 161,859       100  
 
                       
(Continued)

- 37 -


 

                                 
    2006     2005  
    Amount     %     Amount     %  
Payables
                               
SSMC
  $ 943,129       59     $ 883,144       71  
VIS
    662,385       41       284,080       23  
XinTec
                45,308       4  
Huawei
                26,790       2  
 
                       
 
                               
 
  $ 1,605,514       100     $ 1,239,322       100  
 
                       
 
                               
Other long-term payables
                               
Philips (see Note 28a)
  $ 1,085,366       100     $ 1,727,133       100  
 
                       
 
                               
Deferred credits
                               
VisEra
  $ 155,437       13     $        
 
                       
    The terms of sales to related parties were not significantly different from those of sales to third parties. For other related party transactions, prices were determined in accordance with mutual agreements.
 
    The Company leased certain buildings and facilities to VisEra at a monthly rental of NT$7,684 (classified under the non-operating income and gains). Furthermore, the Company deferred the gains (classified under deferred credits) derived from sales of property, plant and equipment to VisEra, and then recognized (or will recognize) such gains (classified under non-operating income and gains) over the depreciable lives of the disposed assets.
 
26.   SIGNIFICANT LONG-TERM LEASES
 
    The Company leases several 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.
 
    The Company entered into lease agreements for its office premises and certain equipment located in the North America and Japan. These operating leases expire between 2010 and 2011 and can be renewed upon expiration.
 
    As of June 30, 2006, future lease payments were as follows:
         
Year   Amount  
2006 (3rd to 4th quarter)
  $ 189,234  
2007
    359,990  
2008
    337,423  
2009
    332,109  
2010
    265,747  
2011 and thereafter
    1,129,247  
 
     
 
       
 
  $ 2,613,750  
 
     

- 38 -


 

27.   SETTLEMENT INCOME
 
    The Company 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 the Company’s patents and misappropriated the Company’s trade secrets. These suits were settled out of court on January 30, 2005. As part of the settlement, SMIC shall pay the Company US$175,000 thousand over six years to resolve the Company’s claims. As of June 30, 2006, SMIC has paid US$45,000 thousand in accordance with the terms of this settlement agreement.
 
28.   SIGNIFICANT COMMITMENTS AND CONTINGENCIES
 
    The significant commitments and contingencies of the Company as of June 30, 2006, excluding those disclosed in other notes, 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 a 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 June 30, 2006, the Company had a total of US$102,966 thousand of guarantee deposits.
 
  d.   Under a Shareholders Agreement entered into with Philips and EDB Investments Pte Ltd. on March 30, 1999, the parties formed a joint venture company, SSMC, which is an integrated circuit foundry in Singapore. The Company’s equity interest in SSMC was 32%. 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 fall 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 Technical Cooperation Agreement (the Agreement) entered into on May 12, 1999. The Company receives compensation for such services computed at a specific percentage of net selling price of all products sold by SSMC. The Agreement shall remain in force for ten years and may be automatically renewed for successive periods of five years each unless pre-terminated by either party under certain conditions.

- 39 -


 

  f.   Under a Technology Transfer Agreement (TTA) with National Semiconductor Corporation (National) entered into on June 27, 2000, the Company shall receive payments for the licensing of certain technology to National. The agreement was to remain in force for ten years and could be automatically renewed for successive periods of two years thereafter unless either party gives written notice for early termination under certain conditions. In January 2003, the Company and National entered into a Termination Agreement whereby the TTA was terminated. Under the Termination Agreement, the Company will be relieved of any further obligation to transfer any additional technology. In addition, the Company granted National an option to request the transfer of certain technologies under the same terms and conditions as the terminated TTA. The option will expire in January 2008.
 
  g.   In December 2003, the Company entered into a Technology Development and License Agreement with Freescale Semiconductor, Inc. to jointly develop 65-nm SOI (silicon on insulator) technology. The Company will also license related 90-nm SOI technology from Freescale Semiconductor, Inc. Any intellectual properties arising out of the co-development project shall be jointly owned by the parties. In accordance with the agreement, the Company will pay royalties to Freescale Semiconductor, Inc. and will share a portion of the costs associated with the joint development project.
 
  h.   The Company provides a technology transfer to VIS under a Manufacturing License and Technology Transfer Agreement entered into on April 1, 2004. The Company receives compensation for such technology transfer in the form of royalty payments from VIS computed at specific percentages of net selling price of certain products sold by VIS. VIS agreed to reserve its certain capacity to manufacture for the Company certain products at prices as agreed by the parties.
 
  i.   Effective January 1, 2006, the Company entered into the Joint Technology Cooperation Agreement with Philips, Freescale Semiconductor, Inc. and STMicroelectronics to jointly develop 45-nm and beyond advanced CMOS Logic and e-DRAM technologies. The Company will contribute process technologies and share a portion of the costs associated with this joint development project. This agreement will expire on December 31, 2008.
 
  j.   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 the counterparty for the loss incurred.
 
  k.   Amounts available under unused letters of credit as of June 30, 2006 were NT$6,480 thousand.
29.   ADDITIONAL DISCLOSURES
 
    Following are the additional disclosures required by the SFB for TSMC 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 individual real estate properties at costs of at least NT$100 million or 20% of the paid-in capital: Please see Table 5 attached;
 
  f.   Disposal of individual real estate properties at prices of at least NT$100 million or 20% of the paid-in capital: None;

- 40 -


 

  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 6 attached;
 
  h.   Receivable from related parties amounting to at least NT$100 million or 20% of the paid-in capital: Please see Table 7 attached;
 
  i.   Names, locations, and related information of investees on which the Company exercises significant influence: Please see Table 8 attached;
 
  j.   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 9 attached.
 
  2)   Significant direct or indirect transactions with the investee, its prices and terms of payment, unrealized gain or loss, and other related information which is helpful to understand the impact of investment in mainland China on financial reports: Please see Table 10 attached.
  k.   Intercompany relationships and significant intercompany transactions: Please see Table 10 attached.

- 41 -


 

     
TABLE 1
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
FINANCING PROVIDED
FOR THE SIX MONTHS ENDED JUNE 30, 2006
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
                                                                                                                 
                                                                                                            Financing
                                                                                                            Company’s
                            Maximum                                                                   Financing   Financing
                            Balance for   Ending                                                           Limit for   Amount
                    Financial   the Period   Balance           Type of           Reasons for   Allowance for                   Each   Limits
                    Statement   (US$ in   (US$ in   Interest   Financing   Transaction   Short-term   Doubtful   Collateral   Borrowing   (US$ in
No.   Financing Name   Counter-party   Account   Thousands)   Thousands)   Rate   (Note 1)   Amounts   Financing   Accounts   Item   Value   Company   Thousands)
1
  TSMC International   TSMC Development   Other receivables   $ 1,133,965     $       1.50 %     2     $     Operating capital   $           $       N/A     $ 32,009,175  
 
                            (US$35,000 )                                                                             (US$987,968 )
 
                                                                                                          (Note 2)
 
Note 1:    The type No. 2 represents necessary for short-term financing.
 
Note 2:    Not exceeding the issued capital of the Company.

- 42 -


 

     
TABLE 2
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
ENDORSEMENT/GUARANTEE PROVIDED
FOR THE SIX MONTHS ENDED JUNE 30, 2006
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
                                                         
                                            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   TSMC   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     $     $           $ 111,708,087  
                    (US$40,000 )                                
                                                       
        TSMC Development   3       1,943,940       1,943,940             0.44 %        
                    (US$60,000 )     (US$60,000 )                        
 
Note 1:    25% of the net worth of the Company as of June 30, 2006.
 
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.

- 43 -


 

TABLE 3
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
MARKETABLE SECURITIES HELD
JUNE 30, 2006
(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Specified)
                                             
                June 30, 2006    
                                    Market Value or    
Held Company       Relationship with the   Financial Statement   Shares/Units   Carrying Value   Percentage of   Net Asset Value    
Name   Marketable Securities Type and Name   Company   Account   (in Thousands)   (US$ in Thousands)   Ownership   (US$ in Thousands)   Note
The Company  
Government bond
                                       
   
United States Treas NTS
   
Available-for-sale financial assets
        US$ 118,345     N/A   US$ 118,345      
   
2004 Government Bond Series B
    ²         $ 997,583     N/A   $ 997,583      
   
2005 Government Bond Series A
   
Held-to-maturity financial assets
          2,749,071     N/A     2,744,234      
   
2006 Government Bond Series D
    ²           999,583     N/A     1,000,562      
   
2004 Kaohsiung Municipal Series A
    ²           620,000     N/A     618,140      
   
European Investment Bank Bonds
    ²           368,482     N/A     400,000      
   
2002 Government Bond Series B
    ²           353,208     N/A     352,496      
   
2003 Government Bond Series F
    ²           149,548     N/A     148,514      
   
Beneficiary certificates of open-end funds
                                       
   
NITC Bond Fund
   
Available-for-sale financial assets
    22,219       3,630,743     N/A     3,630,743      
   
ABN AMRO Bond Fund
    ²     175,156       2,620,910     N/A     2,620,910      
   
Prudential Financial Bond Fund
    ²     103,751       1,505,992     N/A     1,505,992      
   
Cathay Bond
    ²     122,762       1,406,342     N/A     1,406,342      
   
NITC Taiwan Bond
    ²     93,312       1,305,711     N/A     1,305,711      
   
ABN AMRO Select Bond Fund
    ²     111,974       1,260,332     N/A     1,260,332      
   
Dresdner Bond DAM Fund
    ²     104,217       1,199,200     N/A     1,199,200      
   
JF Taiwan Bond Fund
    ²     75,286       1,140,778     N/A     1,140,778      
   
President James Bond
    ²     72,002       1,103,437     N/A     1,103,437      
   
JF Taiwan First Bond Fund
    ²     77,530       1,082,117     N/A     1,082,117      
   
Shinkong Chi Shin Bond Fund
    ²     72,680       1,034,238     N/A     1,034,238      
   
ABN AMRO Income
    ²     63,947       1,004,697     N/A     1,004,697      
   
Fuhwa Albatross Fund
    ²     89,510       1,003,570     N/A     1,003,570      
   
Fuh Hwa Bond
    ²     60,642       802,844     N/A     802,844      
   
HSBC Taiwan Money Management
    ²     40,864       602,784     N/A     602,784      
   
Taishin Lucky Fund
    ²     54,132       551,429     N/A     551,429      
   
TIIM High Yield
    ²     40,639       500,864     N/A     500,864      
   
INVESCO Income Fund
    ²     35,359       401,136     N/A     401,136      
(Continued)

- 44 -


 

                                                 
                June 30, 2006    
                                        Market Value or    
Held Company       Relationship with the   Financial Statement   Shares/Units   Carrying Value   Percentage of   Net Asset Value    
Name   Marketable Securities Type and Name   Company   Account   (in Thousands)   (US$ in Thousands)   Ownership   (US$ in Thousands)   Note
   
Stock
                                           
   
 
                                           
   
TSMC International
  Subsidiary   Investments accounted for using equity method     987,968     $ 25,984,419       100     $ 25,984,419      
   
 
                                           
   
SSMC
  Equity method investee   ²     382       5,094,733       32       5,094,733      
   
 
                                           
   
VIS
  Equity method investee   ²     437,891       5,087,101       27       9,567,918      
   
 
                                           
   
TSMC Partners
  Subsidiary   ²     300       4,225,071       100       4,225,071      
   
 
                                           
   
TSMC-North America
  Subsidiary   ²     11,000       1,790,365       100       1,790,365      
   
 
                                           
   
GUC
  Investee over which the company had a controlling interest   ²     40,147       447,762       45       462,618      
   
 
                                           
   
TSMC-Japan
  Subsidiary   ²     6       96,536       100       96,536      
   
 
                                           
   
TSMC-Europe
  Subsidiary   ²           36,909       100       36,909      
   
 
                                           
   
TSMC-Korea
  Subsidiary   ²     80       13,752       100       13,752      
   
 
                                           
   
United Industrial Gases Co., Ltd.
    Financial assets carried at cost     16,783       193,584       10       285,173      
   
 
                                           
   
Shin-Etsu Handotai Taiwan Co., Ltd.
    ²     10,500       105,000       7       194,038      
   
 
                                           
   
Hontung Venture Capital Co., Ltd.
    ²     8,392       83,916       10       53,129      
   
 
                                           
   
Gobaltop Partner I Venture Capital Corp.
    ²     5,000       50,000       1       50,092      
   
 
                                           
   
W.K. Technology Fund IV
    ²     4,000       40,000       2       50,392      
   
 
                                           
   
Capital
                                           
   
TSMC-Shanghai
  Subsidiary   Investments accounted for using equity method           9,093,788       100       9,093,788      
   
 
                                           
   
Emerging Alliance
  Subsidiary   ²           1,050,087       100       1,050,087      
   
 
                                           
   
VTAF II
  Subsidiary   ²           707,835       98       707,002      
   
 
                                           
   
VTAF III
  Subsidiary   ²           145,055       98       143,575      
   
 
                                           
   
Chi Cheng
  Subsidiary   ²           113,574       36       572,138     Treasury stock of NT$458,564 thousand is deducted from the carrying value
   
 
                                           
   
Hsin Ruey
  Subsidiary   ²           113,246       36       572,757     Treasury stock of NT$459,511 thousand is deducted from the carrying value
   
 
                                           
   
Agency bond
                                           
   
Fed Hm Ln Pc Pool 1h2520
   
Available-for-sale financial assets
        US$ 3,348       N/A     US$ 3,348      
   
 
                                           
   
Fed Hm Ln Pc Pool 1h2524
    ²         US$ 2,575       N/A     US$ 2,575      
   
 
                                           
   
Fed Hm Ln Pc Pool 781959
    ²         US$ 6,640       N/A     US$ 6,640      
   
 
                                           
   
Fed Hm Ln Pc Pool E89857
    ²         US$ 1,680       N/A     US$ 1,680      
   
 
                                           
   
Fed Hm Ln Pc Pool G11295
    ²         US$ 1,492       N/A     US$ 1,492      
   
 
                                           
   
Fed Hm Ln Pc Pool M80855
    ²         US$ 3,520       N/A     US$ 3,520      
(Continued)

- 45 -


 

                                                     
                June 30, 2006    
                                        Market Value or    
Held Company       Relationship with the   Financial Statement   Shares/Units   Carrying Value   Percentage of   Net Asset Value    
Name   Marketable Securities Type and Name   Company   Account   (in Thousands)   (US$ in Thousands)   Ownership   (US$ in Thousands)   Note
   
Federal Home Ln Mtg
   
Available-for-sale financial assets
        US$ 3,420       N/A     US$ 3,420          
   
Federal Home Ln Mtg Corp.
    ²         US$ 2,786       N/A     US$ 2,786          
    Federal Home Ln Mtg Corp.     ²         US$ 3,916       N/A     US$ 3,916          
   
Federal Home Ln Mtg Corp.
    ²         US$ 4,665       N/A     US$ 4,665          
   
Federal Home Ln Mtg Corp.
    ²         US$ 4,897       N/A     US$ 4,897          
   
Federal Home Ln Mtg Corp.
    ²         US$ 2,278       N/A     US$ 2,278          
   
Federal Home Ln Mtg Corp.
    ²         US$ 4,117       N/A     US$ 4,117          
   
Federal Home Ln Mtg Corp.
    ²         US$ 3,671       N/A     US$ 3,671          
   
Federal Home Ln Mtg Corp.
    ²         US$ 1,426       N/A     US$ 1,426          
   
Federal Home Ln Mtg Corp.
    ²         US$ 9,168       N/A     US$ 9,168          
   
Federal Home Ln Mtg Corp.
    ²         US$ 4,182       N/A     US$ 4,182          
   
Federal Home Ln Mtg Corp.
    ²         US$ 3,358       N/A     US$ 3,358          
   
Federal Home Ln Mtg Corp.
    ²         US$ 3,347       N/A     US$ 3,347          
   
Federal Home Ln Mtg Corp.
    ²         US$ 3,834       N/A     US$ 3,834          
   
Federal Home Ln Mtg Corp.
    ²         US$ 4,956       N/A     US$ 4,956          
   
Federal Home Loan Mtg
    ²         US$ 5,009       N/A     US$ 5,009          
   
Federal Natl Mtg Assn
    ²         US$ 3,193       N/A     US$ 3,193          
   
Federal Natl Mtg Assn
    ²         US$ 1,035       N/A     US$ 1,035          
   
Federal Natl Mtg Assn
    ²         US$ 3,673       N/A     US$ 3,673          
   
Federal Natl Mtg Assn
    ²         US$ 3,256       N/A     US$ 3,256          
   
Federal Natl Mtg Assn
    ²         US$ 1,976       N/A     US$ 1,976          
   
Federal Natl Mtg Assn
    ²         US$ 1,085       N/A     US$ 1,085          
   
Federal Natl Mtg Assn Gtd
    ²         US$ 2,403       N/A     US$ 2,403          
   
Federal Natl Mtg Assn Gtd
    ²         US$ 2,915       N/A     US$ 2,915          
   
Fnma Pool 254507
    ²         US$ 1,867       N/A     US$ 1,867          
   
Fnma Pool 254834
    ²         US$ 1,527       N/A     US$ 1,527          
   
Fnma Pool 255883
    ²         US$ 3,538       N/A     US$ 3,538          
   
Fnma Pool 685116
    ²         US$ 635       N/A     US$ 635          
   
Fnma Pool 687863
    ²         US$ 2,979       N/A     US$ 2,979          
   
Fnma Pool 696485
    ²         US$ 3,533       N/A     US$ 3,533          
   
Fnma Pool 725095
    ²         US$ 1,315       N/A     US$ 1,315          
   
Fnma Pool 730033
    ²         US$ 1,581       N/A     US$ 1,581          
   
Fnma Pool 740934
    ²         US$ 1,540       N/A     US$ 1,540          
   
Fnma Pool 790828
    ²         US$ 2,965       N/A     US$ 2,965          
   
Fnma Pool 793025
    ²         US$ 2,761       N/A     US$ 2,761          
   
Fnma Pool 793932
    ²         US$ 664       N/A     US$ 664          
   
Fnma Pool 794040
    ²         US$ 832       N/A     US$ 832          
   
Fnma Pool 795548
    ²         US$ 501       N/A     US$ 501          
   
Fnma Pool 806642
    ²         US$ 1,401       N/A     US$ 1,401          
   
Fnma Pool 815626
    ²         US$ 3,272       N/A     US$ 3,272          
(Continued)

- 46 -


 

                                                     
                June 30, 2006    
                                        Market Value or    
Held Company       Relationship with the   Financial Statement   Shares/Units   Carrying Value   Percentage of   Net Asset Value    
Name   Marketable Securities Type and Name   Company   Account   (in Thousands)   (US$ in Thousands)   Ownership   (US$ in Thousands)   Note
   
Fnma Pool 816594
   
Available-for-sale financial assets
        US$ 2,298       N/A     US$ 2,298          
   
Fnma Pool 825395
    ²         US$ 2,910       N/A     US$ 2,910          
   
Fnma Pool 825398
    ²         US$ 4,541       N/A     US$ 4,541          
   
Fnma Pool 841069
    ²         US$ 3,281       N/A     US$ 3,281          
   
Fnma Pool 879906
    ²         US$ 1,815       N/A     US$ 1,815          
   
Gnma II Pool 081150
    ²         US$ 699       N/A     US$ 699          
   
Gnma II Pool 081153
    ²         US$ 2,485       N/A     US$ 2,485          
   
Federal Farm Cr Bks
    ²         US$ 3,919       N/A     US$ 3,919          
   
Federal Home Ln Bank
    ²         US$ 3,938       N/A     US$ 3,938          
   
Federal Home Ln Bks
    ²         US$ 3,965       N/A     US$ 3,965          
   
Federal Home Ln Bks
    ²         US$ 4,916       N/A     US$ 4,916          
   
Federal Home Ln Bks
    ²         US$ 8,650       N/A     US$ 8,650          
   
Federal Home Ln Bks
    ²         US$ 4,123       N/A     US$ 4,123          
   
Federal Home Ln Bks
    ²         US$ 4,855       N/A     US$ 4,855          
   
Federal Home Ln Bks
    ²         US$ 8,609       N/A     US$ 8,609          
   
Federal Home Ln Bks
    ²         US$ 4,779       N/A     US$ 4,779          
   
Federal Home Ln Bks
    ²         US$ 5,772       N/A     US$ 5,772          
   
Federal Home Ln Bks
    ²         US$ 7,482       N/A     US$ 7,482          
   
Federal Home Ln Bks
    ²         US$ 4,818       N/A     US$ 4,818          
   
Federal Home Ln Bks
    ²         US$ 2,963       N/A     US$ 2,963          
   
Federal Home Ln Bks
    ²         US$ 7,960       N/A     US$ 7,960          
   
Federal Home Ln Bks
    ²         US$ 6,034       N/A     US$ 6,034          
   
Federal Home Ln Bks
    ²         US$ 12,145       N/A     US$ 12,145          
   
Federal Home Ln Bks
    ²         US$ 3,936       N/A     US$ 3,936          
   
Federal Home Ln Bks
    ²         US$ 6,817       N/A     US$ 6,817          
   
Federal Home Ln Bks
    ²         US$ 5,800       N/A     US$ 5,800          
   
Federal Home Ln Bks
    ²         US$ 3,292       N/A     US$ 3,292          
   
Federal Home Ln Bks
    ²         US$ 7,475       N/A     US$ 7,475          
   
Federal Home Ln Bks
    ²         US$ 2,378       N/A     US$ 2,378          
   
Federal Home Ln Mtg Corp.
    ²         US$ 3,442       N/A     US$ 3,442          
   
Federal Home Ln Mtg Corp.
    ²         US$ 9,759       N/A     US$ 9,759          
   
Federal Home Ln Mtg Corp.
    ²         US$ 5,876       N/A     US$ 5,876          
   
Federal Home Ln Mtg Corp.
    ²         US$ 6,398       N/A     US$ 6,398          
   
Federal Home Ln Mtg Corp.
    ²         US$ 14,166       N/A     US$ 14,166          
   
Federal Home Ln Mtg Corp.
    ²         US$ 9,887       N/A     US$ 9,887          
   
Federal Home Ln Mtg Corp. Mtn
    ²         US$ 4,898       N/A     US$ 4,898          
   
Federal Home Loan Bank
    ²         US$ 3,442       N/A     US$ 3,442          
   
Federal Home Loan Mtg Assn
    ²         US$ 4,885       N/A     US$ 4,885          
   
Federal Home Loan Mtg Corp.
    ²         US$ 4,912       N/A     US$ 4,912          
   
Federal Natl Mtg Assn
    ²         US$ 4,292       N/A     US$ 4,292          
(Continued)

- 47 -


 

                                                     
                June 30, 2006    
                                        Market Value or    
Held Company       Relationship with the   Financial Statement   Shares/Units   Carrying Value   Percentage of   Net Asset Value    
Name   Marketable Securities Type and Name   Company   Account   (in Thousands)   (US$ in Thousands)   Ownership   (US$ in Thousands)   Note
   
Federal Natl Mtg Assn
   
Available-for-sale financial assets
        US$ 5,847       N/A     US$ 5,847          
   
Federal Natl Mtg Assn
    ²         US$ 7,763       N/A     US$ 7,763          
   
Federal Natl Mtg Assn
    ²         US$ 19,565       N/A     US$ 19,565          
   
Federal Natl Mtg Assn
    ²         US$ 4,104       N/A     US$ 4,104          
   
Federal Natl Mtg Assn
    ²         US$ 10,413       N/A     US$ 10,413          
   
Federal Natl Mtg Assn
    ²         US$ 7,963       N/A     US$ 7,963          
   
Federal Natl Mtg Assn Mtn
    ²         US$ 2,873       N/A     US$ 2,873          
   
Federal Natl Mtg Assn Mtn
    ²         US$ 2,852       N/A     US$ 2,852          
   
Federal Natl Mtg Assn Mtn
    ²         US$ 5,553       N/A     US$ 5,553          
   
Freddie Mac
    ²         US$ 9,273       N/A     US$ 9,273          
   
 
                                               
   
Corporate issued asset-backed securities
                                               
   
American Home Mtg Invt Tr
   
Available-for-sale financial assets
        US$ 266       N/A     US$ 266          
   
Americredit Auto Rec Tr
    ²         US$ 996       N/A     US$ 996          
   
Americredit Automobile Rec Tr
    ²         US$ 690       N/A     US$ 690          
   
Americredit Automobile Rec Tr
    ²         US$ 1,983       N/A     US$ 1,983          
   
Americredit Automobile Rec Tr
    ²         US$ 2,591       N/A     US$ 2,591          
   
Americredit Automobile Receiva
    ²         US$ 4,942       N/A     US$ 4,942          
   
Americredit Automobile Receivb
    ²         US$ 4,021       N/A     US$ 4,021          
   
Atlantic City Elc Trns Fdgllc
    ²         US$ 548       N/A     US$ 548          
   
Banc Amer Coml Mtg Inc.
    ²         US$ 3,327       N/A     US$ 3,327          
   
Banc Amer Mtg Secs Inc.
    ²         US$ 1,840       N/A     US$ 1,840          
   
Bank Of Amer Lease Equip Tr
    ²         US$ 1,943       N/A     US$ 1,943          
   
Bear Stearns Alt A Tr
    ²         US$ 788       N/A     US$ 788          
   
Bear Stearns Arm Tr
    ²         US$ 3,635       N/A     US$ 3,635          
   
Bear Stearns Arm Tr
    ²         US$ 1,906       N/A     US$ 1,906          
   
Bear Stearns Coml Mtg Secs Inc.
    ²         US$ 6,362       N/A     US$ 6,362          
   
California Infrastructure Dev
    ²         US$ 180       N/A     US$ 180          
   
Capital Auto Receivables Asset
    ²         US$ 3,217       N/A     US$ 3,217          
   
Capital One Auto Fin Tr
    ²         US$ 2,599       N/A     US$ 2,599          
   
Capital One Auto Fin Tr
    ²         US$ 2,968       N/A     US$ 2,968          
   
Capital One Auto Fin Tr
    ²         US$ 4,979       N/A     US$ 4,979          
   
Capital One Multi Asset Execut
    ²         US$ 4,815       N/A     US$ 4,815          
   
Capital One Multi Asset Execut
    ²         US$ 3,904       N/A     US$ 3,904          
   
Capital One Multi Asset Execut
    ²         US$ 2,933       N/A     US$ 2,933          
   
Capitial One Prime Auto Receiv
    ²         US$ 2,767       N/A     US$ 2,767          
   
Caterpillar Finl Asset Tr
    ²         US$ 2,783       N/A     US$ 2,783          
   
Caterpillar Finl Asset Tr
    ²         US$ 8,059       N/A     US$ 8,059          
   
Cendant Rent Car Fdg Aesop LLC
    ²         US$ 9,186       N/A     US$ 9,186          
   
Centex Home Equity Ln Tr
    ²         US$ 336       N/A     US$ 336          
(Continued)

- 48 -


 

                                                     
                June 30, 2006    
                                        Market Value or    
Held Company       Relationship with the   Financial Statement   Shares/Units   Carrying Value   Percentage of   Net Asset Value    
Name   Marketable Securities Type and Name   Company   Account   (in Thousands)   (US$ in Thousands)   Ownership   (US$ in Thousands)   Note
   
Cit Equip Coll Tr
   
Available-for-sale financial assets
        US$ 3,291       N/A     US$ 3,291          
   
Cit Equip Coll Tr
    ²         US$ 3,941       N/A     US$ 3,941          
   
Citibank Cr Card Issuance Tr
    ²         US$ 9,739       N/A     US$ 9,739          
   
Citicorp Mtg Secs
    ²         US$ 682       N/A     US$ 682          
   
Cnh Equip Tr
    ²         US$ 3,778       N/A     US$ 3,778          
   
Credit Suisse First Boston Mtg
    ²         US$ 4,752       N/A     US$ 4,752          
   
Credit Suisse First Boston Mtg
    ²         US$ 953       N/A     US$ 953          
   
Credit Suisse First Boston Mtg
    ²         US$ 3,715       N/A     US$ 3,715          
   
Credit Suisse First Boston Mtg
    ²         US$ 3,554       N/A     US$ 3,554          
   
Cwabs Inc.
    ²         US$ 414       N/A     US$ 414          
   
Cwabs Inc.
    ²         US$ 1,280       N/A     US$ 1,280          
   
Cwabs Inc.
    ²         US$ 2,175       N/A     US$ 2,175          
   
Cwalt Inc.
    ²         US$ 243       N/A     US$ 243          
   
Cwmbs Inc.
    ²         US$ 1,054       N/A     US$ 1,054          
   
Daimlerchrysler Auto Tr
    ²         US$ 2,933       N/A     US$ 2,933          
   
Deere John Owner Tr
    ²         US$ 2,425       N/A     US$ 2,425          
   
Drive Auto Receivables Tr
    ²         US$ 3,174       N/A     US$ 3,174          
   
Fifth Third Auto Tr
    ²         US$ 1,543       N/A     US$ 1,543          
   
First Horizon Abs Tr
    ²         US$ 712       N/A     US$ 712          
   
First Union Lehman Bros Mtg Tr
    ²         US$ 2,180       N/A     US$ 2,180          
   
Ford Cr Auto Owner Tr
    ²         US$ 2,826       N/A     US$ 2,826          
   
Granite Mtgs Plc
    ²         US$ 2,398       N/A     US$ 2,398          
   
Gs Auto Ln Tr
    ²         US$ 746       N/A     US$ 746          
   
Gs Mtg Secs Corp.
    ²         US$ 4,124       N/A     US$ 4,124          
   
Gsamp Tr
    ²         US$ 4,232       N/A     US$ 4,232          
   
Harley Davidson Motorcycle Tr
    ²         US$ 781       N/A     US$ 781          
   
Harley Davidson Motorcycle Tr
    ²         US$ 5,783       N/A     US$ 5,783          
   
Hertz Veh Fing LLC
    ²         US$ 5,256       N/A     US$ 5,256          
   
Holmes Fing No 8 Plc
    ²         US$ 5,002       N/A     US$ 5,002          
   
HSBC Automotive Tr
    ²         US$ 2,962       N/A     US$ 2,962          
   
Hyundai Auto Receivables Tr
    ²         US$ 6,328       N/A     US$ 6,328          
   
Hyundai Auto Receivables Tr
    ²         US$ 3,186       N/A     US$ 3,186          
   
Hyundai Auto Receivables Tr
    ²         US$ 3,886       N/A     US$ 3,886          
   
Impac Cmb Tr
    ²         US$ 494       N/A     US$ 494          
   
Impac Cmb Tr
    ²         US$ 371       N/A     US$ 371          
   
Impac Secd Assets Corp.
    ²         US$ 43       N/A     US$ 43          
   
Lb Ubs Coml Mtg Tr
    ²         US$ 3,747       N/A     US$ 3,747          
   
Long Beach Accep Auto Receivab
    ²         US$ 1,858       N/A     US$ 1,858          
   
Long Beach Mtg Ln Tr
    ²         US$ 3,188       N/A     US$ 3,188          
   
Massachusetts Rrb Spl Purp Tr
    ²         US$ 3,820       N/A     US$ 3,820          
(Continued)

- 49 -


 

                                                     
                June 30, 2006    
                                        Market Value or    
Held Company       Relationship with the   Financial Statement   Shares/Units   Carrying Value   Percentage of   Net Asset Value    
Name   Marketable Securities Type and Name   Company   Account   (in Thousands)   (US$ in Thousands)   Ownership   (US$ in Thousands)   Note
   
Mastr Asset Backed Secs Tr
   
Available-for-sale financial assets
        US$ 3,504       N/A     US$ 3,504          
   
Mbna Master Cr Card Tr II
    ²         US$ 7,567       N/A     US$ 7,567          
   
Merrill Lynch Mtg Invs Inc.
    ²         US$ 6,635       N/A     US$ 6,635          
   
Monumentl Global Fdg II
    ²         US$ 1,002       N/A     US$ 1,002          
   
National City Auto Receivables
    ²         US$ 457       N/A     US$ 457          
   
Navistar Finl 2003 A Owner Tr
    ²         US$ 4,242       N/A     US$ 4,242          
   
Nissan Auto Receivables
    ²         US$ 1,437       N/A     US$ 1,437          
   
Nomura Asset Accep Corp.
    ²         US$ 4,131       N/A     US$ 4,131          
   
Onyx Accep Owner Tr
    ²         US$ 4,875       N/A     US$ 4,875          
   
Pg+E Energy Recovery Fdg LLC
    ²         US$ 4,628       N/A     US$ 4,628          
   
Providian Gateway Owner Tr
    ²         US$ 3,899       N/A     US$ 3,899          
   
Reliant Energy Transition Bd
    ²         US$ 3,989       N/A     US$ 3,989          
   
Residential Asset Mtg Prods
    ²         US$ 2,626       N/A     US$ 2,626          
   
Residential Asset Sec Mtg Pass
    ²         US$ 2,918       N/A     US$ 2,918          
   
Residential Asset Sec Mtg Pass
    ²         US$ 3,692       N/A     US$ 3,692          
   
Residential Fdg Mtg Secs I Inc.
    ²         US$ 2,217       N/A     US$ 2,217          
   
Residential Fdg Mtg Secs I Inc.
    ²         US$ 4,358       N/A     US$ 4,358          
   
Revolving Home Equity Ln Tr
    ²         US$ 2,096       N/A     US$ 2,096          
   
Sequoia Mtg Tr
    ²         US$ 948       N/A     US$ 948          
   
Sequoia Mtg Tr
    ²         US$ 735       N/A     US$ 735          
   
Sequoia Mtg Tr
    ²         US$ 794       N/A     US$ 794          
   
Structured Adj Rate Mtg Ln Tr
    ²         US$ 1,641       N/A     US$ 1,641          
   
Structured Adj Rate Mtg Ln Tr
    ²         US$ 555       N/A     US$ 555          
   
Structured Asset Invt Ln Tr
    ²         US$ 93       N/A     US$ 93          
   
Terwin Mtg Tr
    ²         US$ 4,014       N/A     US$ 4,014          
   
Toyota Auto Receivables 2003 B
    ²         US$ 4,898       N/A     US$ 4,898          
   
TW Hotel Fdg 2005 LLC
    ²         US$ 4,097       N/A     US$ 4,097          
   
Txu Elec Delivery Transition
    ²         US$ 2,619       N/A     US$ 2,619          
   
Usaa Auto Owner Tr
    ²         US$ 3,678       N/A     US$ 3,678          
   
Wachovia Auto Owner Tr
    ²         US$ 2,768       N/A     US$ 2,768          
   
Washington Mut Mtg Secs Corp.
    ²         US$ 3,354       N/A     US$ 3,354          
   
Wells Fargo Finl Auto Owner Tr
    ²         US$ 5,230       N/A     US$ 5,230          
   
Wells Fargo Finl Auto Owner Tr
    ²         US$ 4,885       N/A     US$ 4,885          
   
Wells Fargo Mtg Backed Secs
    ²         US$ 777       N/A     US$ 777          
   
Wells Fargo Mtg Bkd Secs
    ²         US$ 3,128       N/A     US$ 3,128          
   
Wells Fargo Mtg Bkd Secs
    ²         US$ 3,519       N/A     US$ 3,519          
   
WFS Financial Owner Trust
    ²         US$ 2,723       N/A     US$ 2,723          
   
WFS Finl
    ²         US$ 916       N/A     US$ 916          
   
WFS Finl 2004 2 Owner Tr
    ²         US$ 4,880       N/A     US$ 4,880          
   
WFS Finl 2004 4 Owner Tr
    ²         US$ 1,672       N/A     US$ 1,672          
(Continued)

- 50 -


 

                                                     
                        June 30, 2006   Market Value or    
Held Company       Relationship with the   Financial Statement   Shares/Units   Carrying Value   Percentage of   Net Asset Value    
Name   Marketable Securities Type and Name   Company   Account   (in Thousands)   (US$ in Thousands)   Ownership   (US$ in Thousands)   Note
   
WFS Finl 2005 2 Oner Tr
   
Available-for-sale financial assets
        US$ 2,205       N/A     US$ 2,205          
   
Whole Auto Ln Tr
    ²         US$ 1,978       N/A     US$ 1,978          
   
Whole Auto Ln Tr
    ²         US$ 3,803       N/A     US$ 3,803          
   
Whole Auto Ln Tr
    ²         US$ 2,920       N/A     US$ 2,920          
   
World Omni Auto Receivables Tr
    ²         US$ 5,848       N/A     US$ 5,848          
   
 
                                               
   
Corporate bond
                                               
   
Hua Nan Bank
   
Available-for-sale financial assets
        $ 1,532,448       N/A     $ 1,532,448          
   
Cathay United Bank
    ²           1,149,382       N/A       1,149,382          
   
Formosa Petrochemical Corporation
    ²           397,332       N/A       397,332          
   
Taiwan Power Company
    ²           299,034       N/A       299,034          
   
Taiwan Power Company
    Held-to-maturity financial assets           4,217,617       N/A       4,219,522          
   
Formosa Petrochemical Corporation
    ²           2,488,834       N/A       2,485,390          
   
Nan Ya Plastics Corporation
    ²           2,379,459       N/A       2,381,576          
   
Chinese Petroleum Corporation
    ²           1,703,676       N/A       1,702,082          
   
China Steel Corporation
    ²           1,602,604       N/A       1,602,685          
   
Far Eastone Telecommunications Co. Ltd.
    ²           300,012       N/A       299,989          
   
Formosa Plastic Corporation
    ²           135,306       N/A       137,054          
   
Formosa Chemicals & Fiber Corporation
    ²           67,624       N/A       69,791          
   
Abbott Labs
   
Available-for-sale financial assets
        US$ 1,496       N/A     US$ 1,496          
   
Abbott Labs
    ²         US$ 2,541       N/A     US$ 2,541          
   
Ace Ltd.
    ²         US$ 1,001       N/A     US$ 1,001          
   
AIG Sunamerica Global Fing Ix
    ²         US$ 996       N/A     US$ 996          
   
Allstate Life Global Fdg Secd
    ²         US$ 2,927       N/A     US$ 2,927          
   
Alltel Corp.
    ²         US$ 595       N/A     US$ 595          
   
American Express Co.
    ²         US$ 3,420       N/A     US$ 3,420          
   
American Gen Fin Corp.
    ²         US$ 1,616       N/A     US$ 1,616          
   
American Gen Fin Corp. Mtn
    ²         US$ 1,001       N/A     US$ 1,001          
   
American Honda Fin Corp. Mtn
    ²         US$ 3,046       N/A     US$ 3,046          
   
American Honda Fin Corp. Mtn
    ²         US$ 802       N/A     US$ 802          
   
Ameritech Capital Funding Co.
    ²         US$ 481       N/A     US$ 481          
   
Amgen Inc.
    ²         US$ 2,851       N/A     US$ 2,851          
   
Amsouth Bk Birmingham Ala
    ²         US$ 1,982       N/A     US$ 1,982          
   
Anz Cap Tr I
    ²         US$ 944       N/A     US$ 944          
   
Associates Corp. North Amer
    ²         US$ 2,529       N/A     US$ 2,529          
   
Bank New York Inc.
    ²         US$ 1,475       N/A     US$ 1,475          
   
Bank One Corp.
    ²         US$ 3,303       N/A     US$ 3,303          
   
Bank Utd Houston Tx Mtbn
    ²         US$ 528       N/A     US$ 528          
   
Bear Stearns Cos Inc.
    ²         US$ 3,319       N/A     US$ 3,319          
(Continued)

- 51 -


 

                                                             
                        June 30, 2006    
                                                Market Value or    
Held Company       Relationship with the   Financial Statement   Shares/Units   Carrying Value   Percentage of   Net Asset Value    
Name   Marketable Securities Type and Name   Company   Account   (in Thousands)   (US$ in Thousands)   Ownership   (US$ in Thousands)   Note
 
  Bear Stearns Cos Inc.         Available-for-sale financial assets         US$ 3,585       N/A     US$ 3,585          
 
  Beneficial Corp. Mtn Bk Entry           ²           US$ 2,289       N/A     US$ 2,289          
 
  Berkshire Hathaway Fin Corp.           ²           US$ 1,470       N/A     US$ 1,470          
 
  Caterpillar Finl Svcs Mtn           ²           US$ 5,752       N/A     US$ 5,752          
 
  Chase Manhattan Corp. New           ²           US$ 1,512       N/A     US$ 1,512          
 
  Chase Manhattan Corp. New           ²           US$ 2,106       N/A     US$ 2,106          
 
  Chubb Corp.           ²           US$ 2,103       N/A     US$ 2,103          
 
  Cit Group Hldgs Inc.           ²           US$ 3,011       N/A     US$ 3,011          
 
  Citicorp           ²           US$ 1,382       N/A     US$ 1,382          
 
  Cogentrix Energy Inc.           ²           US$ 3,777       N/A     US$ 3,777          
 
  Colonial Pipeline Co.           ²           US$ 1,506       N/A     US$ 1,506          
 
  Consolidated Edison Inc.           ²           US$ 2,866       N/A     US$ 2,866          
 
  Corestates Cap Corp.           ²           US$ 1,006       N/A     US$ 1,006          
 
  Countrywide Fdg Corp. Mtn           ²           US$ 2,019       N/A     US$ 2,019          
 
  Credit Suisse Fincl Products           ²           US$ 1,508       N/A     US$ 1,508          
 
  Credit Suisse First Boston           ²           US$ 734       N/A     US$ 734          
 
  Credit Suisse First Boston USA           ²           US$ 2,135       N/A     US$ 2,135          
 
  Daimlerchrysler North Amer           ²           US$ 966       N/A     US$ 966          
 
  Daimlerchrysler North Amer Hld           ²           US$ 753       N/A     US$ 753          
 
  Dayton Hudson Corp.           ²           US$ 2,013       N/A     US$ 2,013          
 
  Deere John Cap Corp.           ²           US$ 4,880       N/A     US$ 4,880          
 
  Dell Computer Corp.           ²           US$ 2,822       N/A     US$ 2,822          
 
  Den Danske Bk Aktieselskab           ²           US$ 2,034       N/A     US$ 2,034          
 
  Diageo Plc           ²           US$ 3,405       N/A     US$ 3,405          
 
  European Invt Bk           ²           US$ 3,918       N/A     US$ 3,918          
 
  European Invt Bk           ²           US$ 5,945       N/A     US$ 5,945          
 
  Federal Home Ln Bks           ²           US$ 7,937       N/A     US$ 7,937          
 
  Fifth Third Bk Cincinnati Oh           ²           US$ 2,393       N/A     US$ 2,393          
 
  First Data Corp.           ²           US$ 2,827       N/A     US$ 2,827          
 
  Fleet Boston Corp.           ²           US$ 2,634       N/A     US$ 2,634          
 
  Fleet Finl Group Inc. New           ²           US$ 905       N/A     US$ 905          
 
  Fpl Group Cap Inc.           ²           US$ 843       N/A     US$ 843          
 
  Gannett Co. Inc.           ²           US$ 2,907       N/A     US$ 2,907          
 
  General Elec Cap Corp. Mtn           ²           US$ 3,363       N/A     US$ 3,363          
 
  General Elec Cap Corp. Mtn           ²           US$ 3,824       N/A     US$ 3,824          
 
  General Elec Cap Corp. Mtn           ²           US$ 8,678       N/A     US$ 8,678          
 
  General Re Corp.           ²           US$ 3,307       N/A     US$ 3,307          
 
  Genworth Finl Inc.           ²           US$ 3,417       N/A     US$ 3,417          
 
  Goldman Sachs Group Inc.           ²           US$ 4,910       N/A     US$ 4,910          
(Continued)

- 52 -


 

                                                             
                        June 30, 2006    
                                                Market Value or    
Held Company       Relationship with the   Financial Statement   Shares/Units   Carrying Value   Percentage of   Net Asset Value    
Name   Marketable Securities Type and Name   Company   Account   (in Thousands)   (US$ in Thousands)   Ownership   (US$ in Thousands)   Note
 
  Goldman Sachs Group Inc.         Available-for-sale financial assets         US$ 3,426       N/A     US$ 3,426          
 
  Goldman Sachs Group LP           ²           US$ 1,509       N/A     US$ 1,509          
 
  Greenpoint Finl Corp.           ²           US$ 954       N/A     US$ 954          
 
  Hancock John Global Fdg II Mtn           ²           US$ 3,481       N/A     US$ 3,481          
 
  Hancock John Global Fdg Mtn           ²           US$ 961       N/A     US$ 961          
 
  Hartford Finl Svcs Group Inc.           ²           US$ 1,342       N/A     US$ 1,342          
 
  Hbos Plc Medium Term Sr Nts           ²           US$ 3,172       N/A     US$ 3,172          
 
  Hbos Plc Medium Term Sr Nts           ²           US$ 2,921       N/A     US$ 2,921          
 
  Heller Finl Inc.           ²           US$ 1,923       N/A     US$ 1,923          
 
  Hershey Foods Corp.           ²           US$ 1,513       N/A     US$ 1,513          
 
  Honeywell Inc.           ²           US$ 3,031       N/A     US$ 3,031          
 
  Household Fin Corp.           ²           US$ 2,848       N/A     US$ 2,848          
 
  Household Fin Corp.           ²           US$ 504       N/A     US$ 504          
 
  Household Intl Inc.           ²           US$ 2,848       N/A     US$ 2,848          
 
  HSBC Fin Corp. Mtn           ²           US$ 5,045       N/A     US$ 5,045          
 
  HSBC USA Inc. New           ²           US$ 1,076       N/A     US$ 1,076          
 
  Huntington Natl Bk Columbus Oh           ²           US$ 2,977       N/A     US$ 2,977          
 
  ING Sec Life Instl Fdg           ²           US$ 2,445       N/A     US$ 2,445          
 
  International Business Machs           ²           US$ 2,194       N/A     US$ 2,194          
 
  Intl Lease Fin Corp. Mtn           ²           US$ 2,889       N/A     US$ 2,889          
 
  Intl Lease Fin Corp. Mtn           ²           US$ 4,100       N/A     US$ 4,100          
 
  Intl Lease Fin Corp. Mtn           ²           US$ 2,968       N/A     US$ 2,968          
 
  JP Morgan Chase + Co.           ²           US$ 3,285       N/A     US$ 3,285          
 
  Jackson Natl Life Global Fdg           ²           US$ 998       N/A     US$ 998          
 
  Key Bk Na Med Term Nts Bk Entr           ²           US$ 4,364       N/A     US$ 4,364          
 
  Keycorp Mtn Book Entry           ²           US$ 2,975       N/A     US$ 2,975          
 
  Kraft Foods Inc.           ²           US$ 748       N/A     US$ 748          
 
  Kraft Foods Inc.           ²           US$ 997       N/A     US$ 997          
 
  Lehman Brothers Hldgs Inc.           ²           US$ 1,599       N/A     US$ 1,599          
 
  Lehman Brothers Hldgs Inc.           ²           US$ 478       N/A     US$ 478          
 
  Lehman Brothers Hldgs Inc.           ²           US$ 1,075       N/A     US$ 1,075          
 
  Lincoln Natl Corp. In           ²           US$ 498       N/A     US$ 498          
 
  Merita Bk Ltd. Ny Brh           ²           US$ 505       N/A     US$ 505          
 
  Merrill Lynch + Co. Inc.           ²           US$ 3,415       N/A     US$ 3,415          
 
  Merrill Lynch + Co. Inc.           ²           US$ 1,972       N/A     US$ 1,972          
 
  Merrill Lynch + Co. Inc.           ²           US$ 4,822       N/A     US$ 4,822          
 
  Metropolitan Life Global Mtn           ²           US$ 3,306       N/A     US$ 3,306          
 
  Monumental Global Fdg II           ²           US$ 1,446       N/A     US$ 1,446          
 
  Monumental Global Fdg II 2002A           ²           US$ 998       N/A     US$ 998          
 
  Morgan Stanley           ²           US$ 2,087       N/A     US$ 2,087          
(Continued)

- 53 -


 

                                                             
                        June 30, 2006    
                                                Market Value or    
Held Company       Relationship with the   Financial Statement   Shares/Units   Carrying Value   Percentage of   Net Asset Value    
Name   Marketable Securities Type and Name   Company   Account   (in Thousands)   (US$ in Thousands)   Ownership   (US$ in Thousands)   Note
 
  Morgan Stanley Group Inc.         Available-for-sale financial assets         US$ 4,385       N/A     US$ 4,385          
 
  National City Corp.           ²           US$ 3,360       N/A     US$ 3,360          
 
  National Westminster Bk Plc           ²           US$ 1,330       N/A     US$ 1,330          
 
  Nationwide Bldg Soc           ²           US$ 3,484       N/A     US$ 3,484          
 
  Nationwide Bldg Soc Mtn           ²           US$ 3,004       N/A     US$ 3,004          
 
  Nationwide Life Global Mtn           ²           US$ 1,463       N/A     US$ 1,463          
 
  Nucor Corp.           ²           US$ 2,513       N/A     US$ 2,513          
 
  Pepsico Inc. Mtn Book Entry           ²           US$ 3,620       N/A     US$ 3,620          
 
  Pnc Fdg Corp.           ²           US$ 1,012       N/A     US$ 1,012          
 
  Popular North Amer Inc.           ²           US$ 2,880       N/A     US$ 2,880          
 
  Praxair Inc.           ²           US$ 3,141       N/A     US$ 3,141          
 
  Premark Intl Inc.           ²           US$ 2,721       N/A     US$ 2,721          
 
  Pricoa Global Fdg 1 Mtn           ²           US$ 3,504       N/A     US$ 3,504          
 
  Protective Life Secd Trs           ²           US$ 2,869       N/A     US$ 2,869          
 
  Prudential Ins Co. Amer           ²           US$ 2,502       N/A     US$ 2,502          
 
  Prudential Ins Co. Amer           ²           US$ 2,652       N/A     US$ 2,652          
 
  Public Svc Elec Gas Co.           ²           US$ 3,631       N/A     US$ 3,631          
 
  Regions Finl Corp. New           ²           US$ 2,347       N/A     US$ 2,347          
 
  Safeco Corp.           ²           US$ 718       N/A     US$ 718          
 
  Sbc Communications Inc.           ²           US$ 1,020       N/A     US$ 1,020          
 
  Sbc Communications Inc.           ²           US$ 682       N/A     US$ 682          
 
  Scotland Intl Fin B V 144a           ²           US$ 1,416       N/A     US$ 1,416          
 
  Slm Corp.           ²           US$ 498       N/A     US$ 498          
 
  Slm Corp. Medium Term Nts           ²           US$ 8,889       N/A     US$ 8,889          
 
  Sp Powerassests Ltd. Global           ²           US$ 956       N/A     US$ 956          
 
  St Paul Cos Inc. Mtn Bk Ent           ²           US$ 2,536       N/A     US$ 2,536          
 
  Suntrust Bks Inc.           ²           US$ 1,000       N/A     US$ 1,000          
 
  Swedbank Sparbanken Svenge Ab           ²           US$ 1,006       N/A     US$ 1,006          
 
  Tiaa Global Mkts Inc.           ²           US$ 498       N/A     US$ 498          
 
  Unitedhealth Group Inc.           ²           US$ 2,993       N/A     US$ 2,993          
 
  Us Bk Natl Assn Cincinnati Oh           ²           US$ 2,692       N/A     US$ 2,692          
 
  Virginia Elec + Pwr Co.           ²           US$ 2,652       N/A     US$ 2,652          
 
  Vodafone Group Plc New           ²           US$ 2,483       N/A     US$ 2,483          
 
  Washington Mut Inc.           ²           US$ 4,502       N/A     US$ 4,502          
 
  Washington Post Co.           ²           US$ 2,970       N/A     US$ 2,970          
 
  Wells Fargo + Co. New           ²           US$ 6,040       N/A     US$ 6,040          
 
  Westfield Cap Corp. Ltd.           ²           US$ 2,008       N/A     US$ 2,008          
 
  Wps Resources Corp.           ²           US$ 1,042       N/A     US$ 1,042          
(Continued)

- 54 -


 

                                                             
                        June 30, 2006    
                                                Market Value or    
Held Company       Relationship with the   Financial Statement   Shares/Units   Carrying Value   Percentage of   Net Asset Value    
Name   Marketable Securities Type and Name   Company   Account   (in Thousands)   (US$ in Thousands)   Ownership   (US$ in Thousands)   Note
 
  Corporate notes                                                        
 
  Canadian Imperial BK         Available-for-sale financial assets         US$ 3,015       N/A     US$ 3,015          
 
                                                           
 
  Money market funds                                                        
 
  SSGA Cash Mgmt Global Offshore         Available-for-sale financial assets         US$ 11,912       N/A     US$ 11,912          
 
                                                           
 
  Fund                                                        
 
  Horizon Ventures Fund I, L.P.         Financial assets carried at cost         $ 280,179       N/A     $ 280,179          
 
                                                           
 
  Crimson Asia Capital Ltd., L.P.           ²             66,290       N/A       66,290          
 
                                                           
Chi Cherng
  Stock                                                        
 
  TSMC   Parent company   Available-for-sale financial assets     16,947       989,720             989,720          
 
                                                           
 
  VIS   Equity method investee   Investments accounted for using equity method     341       7,905             7,905          
 
                                                           
Hsin Ruey
  Stock                                                        
 
  TSMC   Parent company   Available-for-sale financial assets     16,979       991,575             991,575          
 
                                                           
 
  VIS   Equity method investee   Investments accounted for using equity method     1,748       40,179             40,179          
 
                                                           
TSMC International
  Stock                                                        
 
  InveStar   Subsidiary   Investments accounted for using equity method     14,476     US$ 43,604       97     US$ 43,604          
 
                                                           
 
  InveStar II   Subsidiary     ²       51,300     US$ 45,910       97     US$ 45,910          
 
  TSMC Development   Subsidiary     ²       1     US$ 627,773       100     US$ 627,773          
 
  TSMC Technology   Subsidiary     ²       1     US$ 5,665       100     US$ 5,665          
 
                                                           
Emerging Alliance
  Common stock                                                        
 
  NetLogic Microsystems, Inc.         Financial assets at fair value through profit or loss     84     US$ 2,718           US$ 2,718          
 
  Ikanos Communication, Inc.         Available-for-sale financial assets     515     US$ 7,819       2     US$ 7,819          
 
  RichWave Technology Corp.         Financial assets carried at cost     4,247     US$ 1,648       13     US$ 1,648          
 
  Quake Technologies, Inc.           ²       46     US$ 35           US$ 35          
 
  Pixim, Inc.           ²       1,924     US$ 512       4     US$ 512          
 
  Global Investment Holding Inc.           ²       10,800     $ 100,000       6     $ 100,000          
(Continued)

- 55 -


 

                                                                 
                            June 30, 2006    
                                                    Market Value or    
Held Company       Relationship with the   Financial Statement   Shares/Units   Carrying Value   Percentage of   Net Asset Value    
Name   Marketable Securities Type and Name   Company   Account   (in Thousands)   (US$ in Thousands)   Ownership   (US$ in Thousands)   Note
       
Preferred stock
                                                       
       
Quake Technologies, Inc.
       
Financial assets carried at cost
    555     US$ 415       1     US$ 415          
       
Quickilver Technology, Inc.
          ²       1,049     US$       4     US$          
       
Mosaic Systems, Inc.
          ²       2,481     US$ 12       6     US$ 12          
       
Zenesis Technologies, Inc.
          ²       2,410     US$ 1,399       5     US$ 1,399          
       
Reflectivity, Inc.
          ²       4,848     US$ 2,479       4     US$ 2,479          
       
Miradia, Inc.
          ²       3,040     US$ 1,000       4     US$ 1,000          
       
Axiom Microdevices, Inc.
          ²       1,000     US$ 1,000       3     US$ 1,000          
       
Optichron, Inc.
          ²       714     US$ 1,000       4     US$ 1,000          
       
NuCORE Technology Inc.
          ²       2,254     US$ 1,455       2     US$ 1,455          
       
Next IO, Inc.
          ²       800     US$ 500       2     US$ 500          
       
Audience, Inc.
          ²       1,654     US$ 250       2     US$ 250          
       
Centrality Comunications
          ²       1,325     US$ 1,800       2     US$ 1,800          
       
Britestream Networks, Inc.
          ²       2,444     US$ 1,172       2     US$ 1,172          
       
Teknovus, Inc.
          ²       6,977     US$ 1,327       3     US$ 1,327          
       
Optimal Corporation
          ²       485     US$ 500       6     US$ 500          
       
Mobilygen
          ²       1,415     US$ 750       1     US$ 750          
       
Pixim, Inc.
          ²       2,193     US$ 583           US$ 583          
 
       
Warrants
                                                       
       
Pixim, Inc.
       
Financial assets carried at cost
    242             N/A                
 
Partners  
Common stock
                                                       
       
VisEra Holding Company
  Equity method investee  
Investments accounted for using equity method
    18,931     US$ 24,113       48     US$ 24,113          
 
VTAF II  
Common stock
                                                       
       
Beceem Communications
       
Financial assets carried at cost
    500     US$ 1,000       1     US$ 1,000          
 
       
Yobon Technologies, Inc.
          ²       1,675     US$ 787       13     US$ 787          
       
Sentelic Corp.
          ²       1,200     US$ 2,040       15     US$ 2,040          
 
       
Preferred stock
                                                       
       
Powerprecise Solutions, Inc.
       
Financial assets carried at cost
    1,445     US$ 1,400       11     US$ 1,400          
 
       
Tzero Technologies, Inc.
          ²       730     US$ 1,500       2     US$ 1,500          
       
Miradia, Inc.
          ²       1,809     US$ 1,600       2     US$ 1,600          
       
Axiom Microdevices, Inc.
          ²       761     US$ 776       2     US$ 776          
       
Next IO, Inc.
          ²       216     US$ 182           US$ 182          
       
Ageia Technologies, Inc.
          ²       2,030     US$ 2,074       2     US$ 2,074          
(Continued)

- 56 -


 

                                                                 
                            June 30, 2006    
                                                    Market Value or    
Held Company       Relationship with the   Financial   Shares/Units   Carrying Value   Percentage of   Net Asset Value    
Name   Marketable Securities Type and Name   Company   Statement Account   (in Thousands)   (US$ in Thousands)   Ownership   (US$ in Thousands)   Note
       
Audience, Inc.
       
Financial assets carried at cost
    2,208     US$ 474       1     US$ 474          
       
GemFire Corporation
          ²       600     US$ 600       1     US$ 600          
       
Optichron, Inc.
          ²       353     US$ 869       2     US$ 869          
       
Xceive
          ²       714     US$ 1,000       2     US$ 1,000          
       
5V Technologies, Inc.
          ²       2,357     US$ 1,768       11     US$ 1,768          
       
Power Analog Microelectronics
          ²       2,000     US$ 1,500       13     US$ 1,500          
       
Impinj, Inc.
          ²       257     US$ 500           US$ 500          
       
RichWave Technology Corp.
          ²       500     US$ 231       2     US$ 231          
       
Aquantia
          ²       1,264     US$ 1,150       5     US$ 1,150          
       
Leadtrend Technology, Inc.
          ²       900     US$ 431       5     US$ 431          
       
Teknorus, Inc.
          ²       518     US$ 119           US$ 119          
       
 
                                                       
       
 
                                                       
VTAF III  
Common stock
                                                       
       
Quellan, Inc.
       
Financial assets carried at cost
    2,231     US$ 2,500       7     US$ 2,500          
       
 
                                                       
TSMC Development  
WaferTech stock
  Subsidiary  
Investments accounted for using equity method
        US$ 391,196       100     US$ 391,196          
       
 
                                                       
Investar  
Common stock
                                                       
       
Rich Tek Technology Corp.
       
Financial assets at fair value through profit or loss
    477     US$ 3,198           US$ 3,198          
       
 
                                                       
       
Advanced Power Electronics Corp.
          ²       236     US$ 202       2     US$ 202          
       
Broadtek Electronics Corp.
          ²       29     US$ 9           US$ 9          
       
Monolithic Power Systems, Inc.
          ²       1,975     US$ 23,361       7     US$ 23,361          
       
Global Testing Corp.
          ²       51,010     US$ 9,006       8     US$ 9,006          
       
Advanced Power Electronics Corp.
       
Available-for-sale financial assets
    674     US$ 576       2     US$ 576          
       
Broadtek Electronics Corp.
          ²       116     US$ 35           US$ 35          
       
Rich Tek Technology Corp.
          ²       421     US$ 2,823           US$ 2,823          
       
Capella Microsystems (Taiwan), Inc
       
Financial assets carried at cost
    530     US$ 154       3     US$ 154          
       
 
                                                       
       
Preferred stock
                                                       
       
Integrated Memory Logic, Inc.
       
Financial assets carried at cost
    1,831     US$ 1,221       9     US$ 1,221          
       
 
                                                       
       
IP Unity, Inc.
          ²       1,008     US$ 494       1     US$ 494          
       
Sonics, Inc.
          ²       1,843     US$ 3,530       3     US$ 3,530          
       
NanoAmp Solutions, Inc.
          ²       541     US$ 853       2     US$ 853          
       
Memsic, Inc.
          ²       2,724     US$ 1,500       10     US$ 1,500          
(Continued)

- 57 -


 

                                                                 
                            June 30, 2006    
                                                    Market Value or    
Held Company       Relationship with the   Financial Statement   Shares/Units   Carrying Value   Percentage of   Net Asset Value    
Name   Marketable Securities Type and Name   Company   Account   (in Thousands)   (US$ in Thousands)   Ownership   (US$ in Thousands)   Note
Investar II  
Common stock
                                                       
       
Monolithic Power Systems, Inc.
       
Financial assets at fair value through profit or loss
    864     US$ 10,227       3     US$ 10,227          
       
 
                                                       
       
Geo Vision, Inc.
          ²       46     US$ 165       1     US$ 165          
       
RichTek Technology Corp.
          ²       296     US$ 1,988           US$ 1,988          
       
Ralink Technology (Taiwan), Inc.
       
Financial assets carried at cost
    1,833     US$ 791       3     US$ 791          
       
Capella Microsystems (Taiwan), Inc
          ²       419     US$ 122       2     US$ 122          
       
Auden Technology MFG. Co., Ltd.
          ²       953     US$ 410       4     US$ 410          
       
EoNEX Technologies, Inc.
          ²       55     US$ 3,048       5     US$ 3,048          
       
Conwise Technology Corporation, Ltd.
          ²       700     US$ 204       9     US$ 204          
       
Goyatek Technology, Corp.
          ²       2,088     US$ 545       7     US$ 545          
       
Trendchip Technologies Corp.
          ²       2,000     US$ 574       5     US$ 574          
       
EON Technology, Corp.
          ²       4,247     US$ 1,175       7     US$ 1,175          
       
eChannel Open Holding, Inc.
          ²       358     US$ 251       4     US$ 251          
       
Epic Communications, Inc.
          ²       191     US$ 37       1     US$ 37          
       
 
                                                       
       
Preferred stock
                                                       
       
Memsic, Inc.
       
Financial assets carried at cost
    2,289     US$ 1,560       8     US$ 1,560          
       
 
                                                       
       
NanoAmp Solutions, Inc.
          ²       375     US$ 1,500       1     US$ 1,500          
       
Sonics, Inc.
          ²       4,335     US$ 3,082       4     US$ 3,082          
       
Kilopass Technology, Inc.
          ²       3,887     US$ 2,000       9     US$ 2,000          
       
FangTek, Inc.
          ²       6,931     US$ 3,250       21     US$ 3,250          
       
eLCOS Microdisplay Technology, Ltd.
          ²       2,937     US$ 3,527       9     US$ 3,527          
       
Alchip Technologies Limited
          ²       3,531     US$ 2,950       14     US$ 2,950          
       
 
                                                       
GUC  
Stock
                                                       
       
Global Unichip Corporation — North America
  Subsidiary  
Investments accounted for using equity method
    100       5,427       100       5,427          
       
Global Unichip Japan
  Subsidiary     ²             2,523       100       2,523          

- 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 SIX MONTHS ENDED JUNE 30, 2006
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
                                                                                                                 
                                                                    Disposal (Note 1)   Ending Balance
                                    Beginning Balance   Acquisition                   Carrying Value   Gain (Loss) on           Amount (US$
        Marketable Securities   Financial Statement           Nature of   Shares/Units (in   Amount (US$   Shares/Units (in   Amount (US$   Shares/Units (in   Amount (US$   (US$ in   Disposal (US$   Shares/Units (in   in Thousands)
Company Name   Type and Name   Account   Counter-party   Relationship   Thousands)   in Thousands)   Thousands)   in Thousands)   Thousands)   in Thousands)   Thousands)   in Thousands)   Thousands)   (Note 2)
The Company  
Government bond
                                                                                                       
       
2004 Government Bond Series B
 
Available-for-sale financial assets
 
KGI Securities Co., Ltd. and several financial institutions
              $           $ 1,005,115           $     $     $           $ 997,583  
       
2005 Government Bond Series A
 
Held-to-maturity financial assets
 
KGI Securities Co., Ltd. and several financial institutions
                2,548,977             199,579                                     2,749,071  
       
2006 Government Bond Series D
    ²    
KGI Securities Co., Ltd. and several financial institutions
                            999,553                                     999,583  
       
European Investment Bank Bonds
    ²    
KGI Securities Co., Ltd. and several financial institutions
                            367,600                                     368,482  
       
United States Treas NTS
 
Available-for-sale financial assets
                US$ 46,173           US$ 250,828           US$ 173,695     US$ 174,336     US$ (641 )         US$ 118,345  
       
Kreditanatalt Fur Wiederaufbau
    ²                     US$ 6,881                       US$ 6,866     US$ 6,881     US$ (15 )            
       
Beneficiary certificates of
                                                                                                       
       
open-end funds
                                                                                                       
       
NITC Bond Fund
 
Available-for-sale financial assets
 
National Investment Trust Co., Ltd.
          3,764     $ 610,864       18,455     $ 3,000,000                               22,219     $ 3,630,743  
       
ABN AMRO Bond Fund
    ²    
ABN-AMRO Securities Investment Trust (Taiwan)Ltd.
          134,906       2,004,862       40,250       600,000                               175,156       2,620,910  
       
Prudential Financial Bond Fund
    ²    
Reliance Securities Investment Trust Co., Ltd.
                      103,751       1,500,000                               103,751       1,505,992  
       
Cathay Bond
    ²    
Cathay Securities Investment Trust Co., Ltd.
                      122,762       1,400,000                               122,762       1,406,342  
       
NITC Taiwan Bond
    ²    
National Investment Trust Co., Ltd.
                      93,312       1,300,000                               93,312       1,305,711  
       
Dresdner Bond DAM Fund
    ²    
Allianz Dresdner Securities Investment Consulting Co., Ltd.
          69,303       792,068       34,914       400,000                               104,217       1,199,200  
       
JF Taiwan Bond Fund
    ²    
JF Asset Management (Taiwan) Ltd.
          62,009       933,430       13,277       200,000                               75,286       1,140,778  
       
JF Taiwan First Bond Fund
    ²    
JF Asset Management (Taiwan) Ltd.
          63,131       875,416       14,399       200,000                               77,530       1,082,117  
       
ABN AMRO Select Bond Fund
    ²    
ABN-AMRO Securities Investment Trust (Taiwan)Ltd.
          18,235       203,860       93,739       1,050,000                               111,974       1,260,332  
       
ABN AMRO Income
    ²    
ABN-AMRO Securities Investment Trust (Taiwan)Ltd.
                      63,947       1,000,000                               63,947       1,004,697  
       
Fuhwa Albatross Fund
    ²    
Fuh Hwa Investment Trust Co.
                      89,510       1,000,000                               89,510       1,003,570  
       
Fuh Hwa Bond
    ²    
Fuh Hwa Investment Trust Co.
                      60,642       800,000                               60,642       802,844  
       
HSBC Taiwan Money Management
    ²    
HSBC Investment (Taiwan) Ltd.
                      47,667       700,000       6,803     $ 100,004     $ 99,905     $ 99       40,864       602,784  
       
President James Bond
    ²    
Uni-President Assets Management Corp.
                      72,002       1,100,000                               72,002       1,103,437  
       
TIIM High Yield
    ²    
Taiwan International Securities Corp.
                      40,639       500,000                               40,639       500,864  
       
Shinkong Chi Shin Bond Fund
    ²    
Shinkong Investment Trust Co., Ltd.
          55,063       778,482       17,617       250,000                               72,680       1,034,238  
       
Taishin Lucky Fund
    ²    
Taishin Investment Trust Co., Ltd.
                      54,132       550,000                               54,132       551,429  
       
INVESCO Income Fund
    ²    
INVESCO Taiwan Ltd.
                      44,180       500,000       8,821       100,000       99,833       167       35,359       401,136  
(Continued)

- 59 -


 

                                                                                                                 
                                    Beginning Balance   Acquisition   Disposal (Note 1)   Ending Balance
                                                            Carrying Value   Gain (Loss) on           Amount (US$
        Marketable Securities   Financial Statement           Nature of   Shares/Units (in   Amount (US$   Shares/Units (in   Amount (US$   Shares/Units (in   Amount (US$   (US$ in   Disposal (US$   Shares/Units (in   in Thousands)
Company Name   Type and Name   Account   Counter-party   Relationship   Thousands)   in Thousands)   Thousands)   in Thousands)   Thousands)   in Thousands)   Thousands)   in Thousands)   Thousands)   (Note 2)
       
Corporate bond
                                                                                                       
       
Taiwan Power Company
 
Held-to-maturity financial assets
  KGI Securities Co., Ltd.               $ 3,263,349           $ 1,092,832           $     $     $           $ 4,217,617  
       
Formosa Petrochemical Corporation
    ²     KGI Securities Co., Ltd.                 1,093,283             1,695,273                                     2,488,834  
       
Nan Ya Plastics Corporation
    ²     KGI Securities Co., Ltd.                 2,150,842             499,073                                     2,379,459  
       
Chinese Petroleum Corporation
    ²    
KGI Securities Co., Ltd. and several financial institutions
                705,436             1,000,441                                     1,703,676  
       
China Steel Corporation
    ²     KGI Securities Co., Ltd.                 1,010,532             1,000,000                                     1,602,604  
       
Formosa Plastic Corporation
    ²    
KGI Securities Co., Ltd. and several financial institutions
                268,855                                                 135,306  
       
Formosa Chemicals &Fiber Corporation
    ²     KGI Securities Co., Ltd.                 134,369                                                 67,624  
       
Hua Nan Bank
 
Available-for-sale financial assets
  HSBC                             1,526,049                                     1,532,448  
       
Cathay United Bank
    ²     HSBC and other financial institutions                             1,144,877                                     1,149,382  
       
Formosa Petrochemical Corporation
    ²     KGI Securities Co., Ltd.                             397,076                                     397,332  
       
Taiwan Power Company
    ²     KGI Securities Co., Ltd.                             298,918                                     299,034  
       
American Honda Fin Corp. Mtn
    ²                                   US$ 3,087                                   US$ 3,046  
       
American Honda Fin Corp. Mtn
    ²                       US$ 3,800                       US$ 3,004     US$ 3,000     US$ 4           US$ 802  
       
Bank One Corp.
    ²                                   US$ 3,326                                   US$ 3,303  
       
Countrywide Home Lns Inc.
    ²                       US$ 5,210                       US$ 5,001     US$ 5,210     US$ (209 )            
       
Credit Suisse Fb USA Inc.
    ²                       US$ 4,141                       US$ 4,003     US$ 4,141     US$ (138 )            
       
Deere John Cap Corp.
    ²                                   US$ 4,911                                   US$ 4,880  
       
Deere John Cap Corp.
    ²                       US$ 5,079                       US$ 5,013     US$ 5,079     US$ (66 )            
       
European Invt Bk
    ²                                   US$ 5,995           US$                       US$ 5,945  
       
European Invt Bk
    ²                       US$ 8,315                       US$ 8,002     US$ 8,315     US$ (313 )            
       
Federal Home Ln Bks
    ²                                   US$ 7,937                                   US$ 7,937  
       
General Elec Cap Corp. Mtn
    ²                                   US$ 3,351                                   US$ 3,363  
       
Hewlett Packard Co.
    ²                       US$ 3,373                       US$ 3,177     US$ 3,373     US$ (196 )            
       
Intl Lease Fin Corp. Mtn
    ²                       US$ 2,471           US$ 4,100           US$ 2,461     US$ 2,471     US$ (10 )         US$ 4,100  
       
Jp Morgan Chase + Co.
    ²                       US$ 3,663                       US$ 3,519     US$ 3,663     US$ (144 )            
       
Keycorp Mtn Book Entry
    ²                       US$ 3,500                       US$ 3,508     US$ 3,500     US$ 8              
       
Keycorp Mtn Book Entry
    ²                                   US$ 3,006                                   US$ 2,975  
       
Praxair Inc.
    ²                                   US$ 3,180                                   US$ 3,141  
       
Santander Us Debt S A Uniperso
    ²                       US$ 4,998                       US$ 4,957     US$ 4,998     US$ (41 )            
       
Slm Corp. Medium Term Nts
    ²                       US$ 2,950           US$ 6,012                                   US$ 8,889  
       
Wells Fargo + Co. New
    ²                                   US$ 6,076                                   US$ 6,040  
       
Wells Fargo + Co. New
    ²                       US$ 3,697                       US$ 3,512     US$ 3,697     US$ (185 )            
       
 
                                                                                                       
       
Agency bonds
                                                                                                       
       
Fed Hm Ln Pc Pool M80855
 
Available-for-sale financial assets
                                US$ 3,882                                   US$ 3,520  
       
Federal Home Ln Mtg Corp.
    ²                                   US$ 4,962                                   US$ 4,897  
       
Federal Home Ln Mtg Corp.
    ²                                   US$ 4,317                                   US$ 4,117  
(Continued)

- 60 -


 

                                                                                                                 
                                    Beginning Balance   Acquisition   Disposal (Note 1)   Ending Balance
                                                            Carrying Value   Gain (Loss) on           Amount (US$
        Marketable Securities   Financial Statement           Nature of   Shares/Units (in   Amount (US$   Shares/Units (in   Amount (US$   Shares/Units (in   Amount (US$   (US$ in   Disposal (US$   Shares/Units (in   in Thousands)
Company Name   Type and Name   Account   Counter-party   Relationship   Thousands)   in Thousands)   Thousands)   in Thousands)   Thousands)   in Thousands)   Thousands)   in Thousands)   Thousands)   (Note 2)
       
Federal Home Ln Mtg Corp.
 
Available-for-sale financial assets
                    US$           US$ 3,349           US$     US$     US$           US$ 3,347  
       
Federal Home Ln Mtg Corp.
    ²                                   US$ 3,857                                   US$ 3,834  
       
Federal Home Ln Mtg Corp.
    ²                                   US$ 5,380                                   US$ 4,956  
       
Federal Home Loan Mtg
    ²                                   US$ 5,009                                   US$ 5,009  
       
Federal Home Ln Bks
    ²                       US$ 3,976                       US$ 3,964     US$ 3,976     US$ (12 )            
       
Federal Home Ln Bks
    ²                                   US$ 8,628                                   US$ 8,650  
       
Federal Home Ln Bks
    ²                       US$ 4,965                       US$ 4,944     US$ 4,965     US$ (21 )            
       
Federal Home Ln Bks
    ²                                   US$ 5,740                                   US$ 5,772  
       
Federal Home Ln Bks
    ²                                   US$ 4,823                                   US$ 4,818  
       
Federal Home Ln Bks
    ²                       US$ 8,594                       US$ 8,519     US$ 8,594     US$ (75 )            
       
Federal Home Ln Bks
    ²                                   US$ 12,227                                   US$ 12,145  
       
Federal Home Ln Bks
    ²                       US$ 7,887                       US$ 7,758     US$ 7,887     US$ (129 )            
       
Federal Home Ln Bks
    ²                       US$ 19,846                       US$ 19,800     US$ 19,846     US$ (46 )            
       
Federal Home Ln Bks
    ²                       US$ 9,134                       US$ 8,968     US$ 9,134     US$ (166 )            
       
Federal Home Ln Bks
    ²                                   US$ 7,490                                   US$ 7,475  
       
Federal Home Ln Mtg Corp.
    ²                       US$ 6,980                       US$ 6,941     US$ 6,980     US$ (39 )            
       
Federal Home Ln Mtg Corp.
    ²                                   US$ 6,415                                   US$ 6,398  
       
Federal Home Ln Mtg Corp.
    ²                                   US$ 14,175                                   US$ 14,166  
       
Federal Home Ln Mtg Corp.
    ²                                   US$ 9,974                                   US$ 9,887  
       
Federal Natl Mtg Assn
    ²                       US$ 4,921                       US$ 4,916     US$ 4,921     US$ (5 )            
       
Federal Natl Mtg Assn
    ²                       US$ 7,892                       US$ 7,908     US$ 7,892     US$ 16              
       
Federal Natl Mtg Assn
    ²                       US$ 4,943                       US$ 4,944     US$ 4,943     US$ 1              
       
Federal Natl Mtg Assn
    ²                       US$ 8,971                       US$ 8,940     US$ 8,971     US$ (31 )            
       
Federal Natl Mtg Assn
    ²                       US$ 17,888                       US$ 17,782     US$ 17,888     US$ (106 )            
       
Federal Natl Mtg Assn
    ²                                   US$ 19,539                                   US$ 19,565  
       
Federal Natl Mtg Assn
    ²                                   US$ 4,123                                   US$ 4,104  
       
Federal Natl Mtg Assn
    ²                                   US$ 10,430                                   US$ 10,413  
       
Federal Natl Mtg Assn
    ²                                   US$ 7,966                                   US$ 7,963  
       
Federal Natl Mtg Assn Mtn
    ²                       US$ 9,758                       US$ 9,781     US$ 9,758     US$ 23              
       
Federal Natl Mtg Assn Mtn
    ²                       US$ 15,787                       US$ 15,851     US$ 15,787     US$ 64              
       
Federal Natl Mtg Assn Mtn
    ²                       US$ 7,000                       US$ 6,925     US$ 7,000     US$ (75 )            
       
Freddie Mac
    ²                                   US$ 9,391                                   US$ 9,273  
       
 
                                                                                                       
       
Corporate issued asset-backed securities
                                                                                                       
       
Bear Stearns Arm Tr
 
Available-for-sale financial assets
                                US$ 3,826                                   US$ 3,635  
       
Capital Auto Receivables Asset
    ²                                   US$ 3,250                                   US$ 3,217  
       
Capital One Auto Fin Tr
    ²                                   US$ 5,000                                   US$ 4,979  
       
Cit Equip Coll Tr
    ²                                   US$ 3,975                                   US$ 3,941  
       
Credit Suisse First Boston Mtg
    ²                                   US$ 4,773                                   US$ 4,752  
(Continued)

- 61 -


 

                                                                                                                 
                                    Beginning Balance   Acquisition   Disposal (Note 1)   Ending Balance
                                                            Carrying Value   Gain (Loss) on           Amount (US$
        Marketable Securities   Financial Statement           Nature of   Shares/Units (in   Amount (US$   Shares/Units (in   Amount (US$   Shares/Units (in   Amount (US$   (US$ in   Disposal (US$   Shares/Units (in   in Thousands)
Company Name   Type and Name   Account   Counter-party   Relationship   Thousands)   in Thousands)   Thousands)   in Thousands)   Thousands)   in Thousands)   Thousands)   in Thousands)   Thousands)   (Note 2)
       
Credit Suisse First Boston Mtg
 
Available-for-sale financial assets
                    US$           US$ 3,750           US$     US$     US$           US$ 3,715  
       
Credit Suisse First Boston Mtg
    ²                                   US$ 3,572                                   US$ 3,554  
       
Ford Cr Auto Owner Tr
    ²                       US$ 10,908                       US$ 4,181     US$ 4,225     US$ (44 )         US$ 2,826  
       
Gs Mtg Secs Corp.
    ²                                   US$ 4,150                                   US$ 4,124  
       
Gsamp Tr
    ²                                   US$ 4,250                                   US$ 4,232  
       
Long Beach Mtg Ln Tr
    ²                                   US$ 3,200                                   US$ 3,188  
       
Merrill Lynch Mtg Invs Inc.
    ²                                   US$ 6,665                                   US$ 6,635  
       
Nissan Auto Receivables
    ²                       US$ 7,000                       US$ 4,944     US$ 5,000     US$ (56 )         US$ 1,437  
       
Nomura Asset Accep Corp.
    ²                                   US$ 4,150                                   US$ 4,131  
       
Terwin Mtg Tr
    ²                                   US$ 4,050                                   US$ 4,014  
       
Wells Fargo Finl Auto Owner Tr
    ²                                   US$ 4,893                                   US$ 4,885  
       
Wells Fargo Mtg Bkd Secs
    ²                                   US$ 3,772                                   US$ 3,128  
       
WFS Finl 2004 4 Owner Tr
    ²                       US$ 5,399                       US$ 3,346     US$ 3,400     US$ (54 )         US$ 1,672  
Note 1: The proceeds of bond investments matured are excluded.
Note 2: The ending balance included the amortization of premium or discount on bond investments and valuation gain or loss.

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TABLE 5
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
ACQUISITION OF INDIVIDUAL REAL ESTATES AT COSTS OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
FOR THE SIX MONTHS ENDED JUNE 30, 2006
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
                                                                                                         
Company   Types of           Transaction                   Nature of   Prior Transaction of Related Counter-party   Price   Purpose of    
Name   Property   Transaction Date   Amount   Payment Term   Counter-party   Relationship   Owner   Relationship   Transfer Date   Amount   Reference   Acquisition   Other Terms
The Company
  Fab. 14   January 6, 2006   $ 854,000     By the construction progress   M+W Zander Facility Engineering Co., Ltd.           N/A       N/A       N/A       N/A     Public bidding   Manufacturing purpose   None
 
  Fab. 12   March 30, 2006   US$ 3,340     By the construction progress   M+W Zander Facility Engineering Co., Ltd.           N/A       N/A       N/A       N/A     Public bidding   Manufacturing purpose   None
 
  Fab. 14   June 2, 2006   $ 197,500     By the construction progress   China Steel Structure Co., Ltd.           N/A       N/A       N/A       N/A     Public bidding   Manufacturing purpose   None
 
  Fab. 14   June 26, 2006   EUR 2,733     By the construction progress   Siemens Limited           N/A       N/A       N/A       N/A     Public bidding   Manufacturing purpose   None
 
  Fab. 14   June 30, 2006   $ 517,500     By the construction progress   United Steel Engineering & Construction Corp.           N/A       N/A       N/A       N/A     Public bidding   Manufacturing purpose   None

- 63 -


 

TABLE 6
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 SIX MONTHS ENDED JUNE 30, 2006
(Amounts in Thousands of New Taiwan Dollars)
                                                             
                                            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   $ 94,075,632       58     Net 30 days after invoice date       $ 22,374,338       52      
    Philips  
Major shareholder
  Sales     2,318,898       2     Net 30 days after monthly closing         382,251       1      
    GUC  
Investee over which the Company had a controlling interest
  Sales     332,080           Net 30 days after monthly closing         148,386        
    WaferTech  
Indirect subsidiary
  Purchases     6,505,148       28     Net 30 days after monthly closing         (1,155,023 )     11      
    SSMC  
Investee accounted
for using equity
method
  Purchases     3,718,466       16     Net 30 days after monthly closing         (662,385 )     7      
    TSMC-Shanghai  
Subsidiary
  Purchases     1,918,584       8     Net 30 days after monthly closing         (401,379 )     4      
    VIS  
Investee accounted
for using equity
method
  Purchases     1,712,082       7     Net 30 days after monthly closing         (943,129 )     9      
GUC   TSMC-North America  
The same Parent
  Purchases     253,238       51     Net 30 days after invoice date         (75,348 )     27      
Note:   The terms of sales to related parties were 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.

- 64 -


 

     
TABLE 7
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
JUNE 30, 2006
(Amounts in Thousands of New Taiwan Dollars)
                                             
                                    Amounts Received    
                        Overdue   in Subsequent   Allowance for Bad
Company Name   Related Party   Nature of Relationship   Ending Balance   Turnover Rate   Amounts   Action Taken   Period   Debts
The Company
  TSMC-North America   Subsidiary   $ 22,579,665     42 days   $ 5,809,994       $ 8,734,125     $—
 
  Philips   Major shareholder     382,251     38 days     21,743     Accelerate demand on account receivables     20,826       —
 
  GUC  
Investee over which the Company had a controlling interest
    148,386     54 days     2,019         60,991       —
 
  VIS  
Investee accounted for using equity method
    688,807     Note     6,668     Accelerate demand on account receivables           —
 
  TSMC Technology   Indirect subsidiaries     485,449     Note     495     Accelerate demand on account receivables           —
 
  TSMC-Shanghai   Subsidiary     167,585     Note     32,343     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.

- 65 -


 

     
TABLE 8
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES ON WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE
JUNE 30, 2006
(Amounts in Thousands of New Taiwan Dollars)
                                                                         
                Original Investment Amount   Balance as of June 30, 2006   Net Income   Equity in the    
                        December 31,   Shares (in   Percentage of   Carrying   (Losses) of the   Earnings    
Investor Company   Investee Company   Location   Main Businesses and Products   June 30, 2006   2005   Thousands)   Ownership   Value (Note)   Investee   (Losses)   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     $ 25,984,419     $ 2,264,286     $ 2,264,286     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       12,180,367             100       9,093,788       (302,853 )     (302,853 )   Subsidiary
 
  SSMC   Singapore  
Fabrication and supply of integrated circuits
    6,408,190       6,408,190       382       32       5,094,733       2,916,458       933,267    
Investee accounted for using equity method
 
  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       5,087,101       1,043,109       231,525    
Investee accounted for using equity method
 
  TSMC Partners   Tortola, British Virgin Islands   Investment activities     10,350       10,350       300       100       4,225,071       137,223       137,223     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       1,790,365       24,647       24,647     Subsidiary
 
  Emerging Alliance   Cayman Islands  
Investing in new start-up technology companies
    1,455,564       1,545,288             99       1,050,087       114,784       114,211     Subsidiary
 
  VTAF II   Cayman Islands  
Investing in new start-up technology companies
    736,934       654,509             98       707,835       (9,355 )     (9,169 )   Subsidiary
 
  GUC   Hsin-Chu, Taiwan  
Researching, developing, manufacturing, testing and marketing of integrated circuits
    409,920       409,920       40,147       45       447,762       31,320       14,971    
Investee over which the Company had a controlling interest
 
  VTAF III   Cayman Islands  
Investing in new start-up technology companies
    146,454                   98       145,055       (5,744 )     (5,630 )   Subsidiary
 
  Chi Cherng   Taipei, Taiwan   Investment activities     300,000       300,000             36       113,574       99,216       (5,687 )   Subsidiary
 
  Hsin Ruey   Taipei, Taiwan   Investment activities     300,000       300,000             36       113,246       100,327       (5,367 )   Subsidiary
 
  TSMC-Japan   Yokohama, Japan   Marketing activities     83,760       83,760       6       100       96,536       798       798     Subsidiary
 
  TSMC-Europe   Amsterdam, the Netherlands   Marketing activities     15,749       15,749             100       36,909       12,048       12,048     Subsidiary
 
  TSMC-Korea   Seoul, Korea   Marketing activities     13,656             80       100       13,752       112       112     Subsidiary
 
Note: The treasury stock is deducted from the carrying value.

- 66 -


 

TABLE 9
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
INFORMATION OF INVESTMENT IN MAINLAND CHINA
FOR THE SIX MONTHS ENDED JUNE 30, 2006
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
                                                                                         
                            Accumulated                     Accumulated                                
                            Outflow of                     Outflow of                                
                            Investment                     Investment                                
            Total Amount           from Taiwan as                     from Taiwan as                             Accumulated  
            of Paid-in           of     Investment Flows     of             Equity in the             Inward  
            Capital           January 1, 2006     Outflow             June 30, 2006             Earnings     Carrying Value     Remittance of  
        Main Businesses and   (RMB in   Method of     (US$ in     (US$ in             (US$ in     Percentage of     (Losses)     as of     Earnings as of  
Investee Company   Products   Thousand)   Investment     Thousand)     Thousand)     Inflow     Thousand)     Ownership     (Note 2)     June 30, 2006     June 30, 2006  
TSMC (Shanghai)  
Manufacturing and
  $12,180,367
    (Note 1)   $12,180,367
    $—     $—     $12,180,367
    100%     $(302,853 )   $9,093,788     $—  
Company Limited
 
sales of integrated
  (RMB3,070,623)           (US$371,000)                   (US$371,000)                                
       
circuits at the order of and pursuant to product design specifications provided by customers
                                                                               
         
Accumulated Investment in Mainland   Investment Amounts Authorized by    
China as of June 30, 2006   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.

- 67 -


 

TABLE 10
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS
(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Specified)
A. FOR THE SIX MONTHS ENDED JUNE 30, 2006
                                         
                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   $ 94,075,632             59  
 
              Receivables from related parties     22,374,338             4  
 
              Other receivables from related parties     205,327              
 
              Payables to related parties     44,352              
 
      TSMC-Shanghai   1   Sales     19,926              
 
              Purchases     1,918,584             1  
 
              Gain on disposal of property, plant and equipment     82,010              
 
              Technical service income     41,881              
 
              Proceeds from disposal of property, plant and equipment     173,299              
 
              Other receivables from related parties     167,585              
 
              Payables to related parties     401,379              
 
              Deferred credits     635,124              
 
      TSMC-Japan   1   Marketing expenses - commission     125,553              
 
              Payables to related parties     45,176              
 
      TSMC-Europe   1   Marketing expenses - commission     116,934              
 
              Payables to related parties     9,604              
 
      GUC   1   Sales     332,080              
 
              Research and development expenses     19,582              
 
              General and administrative expenses - rental expense     7,659              
 
              Receivables from related parties     148,386              
 
              Payables to related parties     12,804              
 
      TSMC Technology   1   Other receivables from related parties     485,449              
 
              Payables to related parties     6,453                
 
      WaferTech   1   Purchases     6,505,148             4  
 
              Payables to related parties     1,155,023              
1
  TSMC International   TSMC Development   3   Interest income     7,963              
 
      TSMC Technology   3   Deferred royalty income     639,789              
2
  TSMC Partners   TSMC International   3   Other receivables     9,943,193             2  
 
              Deferred revenue     8,761,555             1  
3
  TSMC Technology   WaferTech   3   Management service income     6,719              
4
  GUC   TSMC-NA   3   Purchases     253,238              
 
              Manufacturing overhead     186,954              
 
              Payables to related parties     75,348              
 
      GUC-NA   3   Operating expenses     19,534              
 
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 mutual agreements.

- 68 -


 

B. FOR THE SIX MONTHS ENDED JUNE 30, 2005
                                         
                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   $ 64,760,945             55  
 
              Receivables from related parties     14,513,699             3  
 
              Other receivables from related parties     415,650              
 
              Payables to related parties     51,082              
 
      TSMC Shanghai   1   Sales     5,251              
 
              Purchases     234,333              
 
              Non-operating income and gains     75,743              
 
              Proceeds from disposal of property, plant and equipment     106,412              
 
              Other receivables from related parties     271,905              
 
              Payables to related parties     70,080              
 
              Deferred gain on intercompany transactions     708,941              
 
      TSMC-Japan   1   Marketing expenses - commission     133,765              
 
              Payables to related parties     43,693              
 
      TSMC-Europe   1   Marketing expenses - commission     116,034              
 
              Payables to related parties     9,722              
 
      GUC   1   Sales     135,805              
 
              General and administrative expenses - rental expense     8,162              
 
              Receivables from related parties     11,917              
 
      VisEra   1   Non-operating income and gains     10,752              
 
              Other receivables from related parties     1,064              
 
      TSMC Technology   1   Other receivables from related parties     715,306              
 
      WaferTech   1   Purchases     5,117,622             4  
 
              Payables to related parties     793,200              
1
  TSMC International   TSMC Development   3   Interest income     14,264              
 
              Other receivables     1,942,052              
 
      TSMC Technology   3   Deferred royalty income     624,367              
2
  TSMC - NA   VisEra   3   Sales     319,742              
 
              Receivables from related parties     42,714              
3
  TSMC Partners   TSMC International   3   Other receivables     9,703,506             2  
 
              Deferred revenue     8,550,352             2  
 
      TSMC Development   3   Interest income     18,822              
 
              Other receivables     948,540              
4
  GUC   TSMC-NA   3   Purchases     79,117              
 
              Manufacturing overhead     144,428              
 
      GUC-NA   3   Operating expenses     11,779              
 
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 mutual agreements.

- 69 -


 

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: August 31, 2006
  By   /s/ Lora Ho
 
       
 
         Lora Ho
 
         Vice President & Chief Financial Officer