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

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:                     .)

 

 

MINUTES
OF
2007 ANNUAL GENERAL SHAREHOLDERS’ MEETING
OF
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED
(Translation)

Time and Date of Meeting: 9:30 a.m., May 7, 2007

Place of Meeting:		Auditorium in the Activity Center of Hsinchu Science Park (No. 2, Shing-An Road, Hsinchu Science Park, Hsin-Chu, Taiwan, ROC)

Total outstanding shares of TSMC (excluding the shareholders who had no voting right stipulated in Article 179 of the Company Law): 25,799,032,910 shares

Total shares represented by shareholders present: 22,752,951,306 shares

Percentage of shares held by shareholders present: 88.19 %

Chairman: Dr. Morris Chang, the Chairman of the Board of Directors

Recorder: Sylvia Fang

The aggregate shareholding of the shareholders present constituted a quorum. The Chairman called the meeting to order.

A.		Chairman’s Address
B.		Report Items

	I.		Reported the business of 2006 (see Attachment I).
	II.		Audit Committee’s Report (see Attachment II).

	III.		Reported the status of acquisition or disposal of assets with related parties for 2006 (see Attachment III).
	IV.		Reported the status of guarantees provided by TSMC as of the end of 2006:

	1.		The guarantee provided by TSMC for its subsidiary, TSMC North America, was reduced by US$40,000,000. As of the end of 2006, the balance of the guarantee was zero.
	2.		The guarantee provided by TSMC for its subsidiary, TSMC Development, Inc., was reduced by US$60,000,000. As of the end of 2006, the balance of the guarantee was zero.

C.

Proposed Resolutions

I.

The 2006 Business Report and Financial Statements were submitted at the meeting for acceptance. (Proposed by the Board of Directors)

		Explanatory Notes:			1.			TSMC’s 2006 Financial Statements, including Balance Sheet, Income Statement, Statement of Changes in Shareholders’ Equity, and Cash Flow Statement, were audited by independent accountants, Messrs. Jackson Huang and Michael Chang, of Deloitte & Touche.
					2.			The 2006 Business Report, independent auditors’ audit report, and the above-mentioned Financial Statements were attached hereto as Attachments I, IV and V.
					3.			To accept the above-mentioned Business Report and Financial Statements.
		(Shareholders’ comments, questions and the management’s responses were omitted)
		Upon decision by the Chairman, the proposal was put through to vote. The number of shares represented by the shareholders present at the time of

		voting was 22,752,948,093, and 17,680,167,721 votes were cast for the proposal, which was 77.70% of the votes represented by the shareholders present.
		RESOLVED, that the 2006 Business Report and Financial Statements be and hereby were accepted as submitted.

II.

A proposal to approve the distribution of 2006 profits was submitted at the meeting for discussion and approval. (Proposed by the Board of Directors)

		Explanatory Notes:			1.			The proposed profits distribution was allocated from 2006 Earnings Available for Distribution. Each common share holder would be entitled to receive a cash dividend of NT$3 per share, and a stock dividend of 2 shares for each 1,000 shares held by such shareholders. In addition, each common share holder would be entitled to receive, for each 1,000 shares held, 3 shares from the proposed capitalization of capital surplus to be discussed in the next resolution; and, together with the 2 shares of stock dividend as mentioned above, 5 shares in total for each 1,000 shares held by such shareholder. If the above-mentioned distributions included any fractional shares which were less than one full share, the shareholders concerned might arrange for pooling together their fractional shares to form one full share and register the same within 5 days after the record date. For the fractional shares which could not be pooled, the distribution would be made in the form of cash rounded to the nearest dollar amount calculated at par value. Such fractional shares would be purchased by persons arranged by the Chairman as authorized by the Board of Directors of TSMC.
								The total amount of common shares outstanding might change and the ultimate cash and stock to be

								distributed to each common share might need to be adjusted accordingly should TSMC subsequently repurchase its common shares or issue new common shares to its employees as a result of their exercise of stock options. It was proposed that the Chairman of the Board of Directors of TSMC be authorized to adjust the cash and stock to be distributed to each common share based on the total amount of profits resolved to be distributed and capital surplus resolved to be capitalized, and the number of actual common shares outstanding on the record date for distribution.
					2.			The 2006 Profit Allocation Proposal was attached hereto as Attachment VI.
		(Shareholders raised questions with respect to issues such as employee profit sharing; the questions and the management’s responses were omitted)
		Upon decision by the Chairman, the proposal was put through to vote. The number of shares represented by the shareholders present at the time of voting was 22,752,948,093, and 17,674,598,388 votes were cast for the proposal, which was 77.68% of the votes represented by the shareholders present.
		RESOLVED, that the above proposals be and hereby were approved as proposed.

III.

A proposal to approve the capitalization of 2006 dividends, 2006 employee profit sharing, and capital surplus was submitted at the meeting for discussion and approval. (Proposed by the Board of Directors)

		Explanatory Notes:			1.			For purposes of machine purchase and production capacity expansion, it was proposed that TSMC’s paid-in capital be increased by capitalizing (i) capital surplus generated from the excess of the issue price over the par value of capital stock in the

								amount of NT$774,890,640; and (ii) the stock dividends to common share holders of NT$516,593,760 and employee profit sharing (in stock) of NT$4,572,798,010 allocated from 2006 Earnings Available for Distribution.
					2.			The total amount of paid-in capital increase should be NT$5,864,282,410 and 586,428,241 common shares, at par value of NT$10 each share, should be issued for such capital increase.
					3.			The shareholder’s rights and obligations of the new shares were the same as those of the existing shares. After being approved by the governmental authority in charge, the new shares would be distributed on a record date to be determined by the Board of Directors or its designee(s).
					4.			As of March 9, 2007 (the first day of book-close period for registration of share transfer before the Annual General Shareholders’ Meeting), the number of exercisable shares of employees’ stock options that TSMC granted was approximately 49,346,000 shares. In accordance with TSMC’s Employee Stock Option Plans, TSMC had to adjust upwards the number of outstanding employees’ stock options in proportion to the proposed capital increase. It was estimated that the number of such additional employees’ stock options was approximately 1,120,000 shares. Since the additional employees’ stock options were issued in proportion to the increase of paid-in capital, it should not cause any material impact to shareholders’ interest. There were sufficient common shares reserved in the Articles of Incorporation for granting the aforesaid employees’ stock options.

		(Shareholders raised questions with respect to issues such as employee profit sharing; the questions and the management’s responses were omitted)
		Upon decision by the Chairman, the proposal was put through to vote. The number of shares represented by the shareholders present at the time of voting was 22,752,948,093, and 17,983,754,795 votes were cast for the proposal, which was 79.04% of the votes represented by the shareholders present.
		RESOLVED, that the capitalization of 2006 dividends, 2006 employee profit sharing, and capital surplus be and hereby was approved as proposed.

IV.

A proposal to approve revisions to the Articles of Incorporation was submitted at the meeting for discussion and approval. (Proposed by the Board of Directors)

		Explanatory Notes:			1.			TSMC had revised its Articles of Incorporation at the Shareholders’ Meeting of May 16, 2006 to have the Audit Committee take over the duties of Supervisors starting from January 1, 2007, and the Supervisors were terminated as of December 31, 2006. Therefore, it was proposed to delete and/or revise the reference to Supervisors specified in TSMC’s Articles of Incorporation.
					2.			In addition, the current authorized capital as specified in the Article of Incorporation was NT$270,500,000,000. As of December 31, 2006, the paid-in capital was NT$258,296,878,460. As a result, the current authorized capital as specified in the Article of Incorporation might be insufficient for the Company’s future business operations. Therefore, it was proposed to increase the authorized capital to NT$280,500,000,000.
					3.			The Comparison Table for the Articles of Incorporation Before and After Revision was attached hereto as Attachment VII.

		(Shareholders’ comments, questions and the management’s responses were omitted)
		Upon decision by the Chairman, the proposal was put through to vote. The number of shares represented by the shareholders present at the time of voting was 22,752,948,093, and 17,886,971,543 votes were cast for the proposal, which was 78.61% of the votes represented by the shareholders present.
		RESOLVED, that the revisions to the Articles of Incorporation be and hereby were approved as proposed.

V.

A proposal to approve revisions to the internal rules and policies as follows:

1. Procedures for Acquisitions or Disposal of Assets
2. Policies and Procedures for Financial Derivatives Transactions
3. Procedures for Lending Funds to Other Parties
4. Procedures for Endorsement and Guarantee
5. Rules for Election of Directors and Supervisors
(Proposed by the Board of Directors)

		Explanatory Notes:			1.			Since there would be no supervisors beginning with January 1, 2007 in TSMC, the references to “Supervisors” in TSMC’s internal policies and rules should be deleted or revised. In addition, certain wording changes were to reflect the current status and requirements of relevant regulations.
					2.			The Comparison Tables for the above-mentioned Internal Policies and Rules Before and After Revision was attached hereto as Attachment VIII~XII
		(Shareholders’ comments, questions and the management’s responses were omitted)

		Upon decision by the Chairman, the proposal was put through to vote. The number of shares represented by the shareholders present at the time of voting was 22,752,951,306, and 17,218,349,249 votes were cast for the proposal, which was 75.68% of the votes represented by the shareholders present.
		RESOLVED, that the revisions to the internal rules and policies hereby were approved as proposed.

D.		Special Motion
		(Shareholders’ comments and questions, as well as the management’s responses were omitted.)
		A shareholder proposed to adjourn the meeting, upon decision by the Chairman, the proposal was put through to vote. The number of shares represented by the shareholders present at the time of voting was 22,752,951,306, and 13,778,133,951 votes were cast for the proposal, which was 60.55% of the votes represented by the shareholders present.

The meeting was adjourned.

ATTACHMENT I

Business Report

     As TSMC enters its 20^th year as a public company, we take great pride in continuing our focus on growing shareholder value while maintaining market leadership in the dedicated semiconductor foundry segment that we created in 1987. During 2006, TSMC registered double-digit growth in full-year revenues and earnings from a year earlier. Nevertheless, an inventory correction that began in the third quarter in 2006 persisted through the first quarter of 2007. But, we expect demand to improve steadily through the remainder of the year.

Financial Results.

Revenue for 2006 totaled NT$317.41 billion, an increase of 19.1% compared with NT$266.57 billion in 2005. Net income increased 35.7% to NT$127.01 billion in 2006 compared with NT$93.58 billion in 2005. Diluted earnings per share in 2006 increased 35.5% to NT$4.92 compared with NT$3.63 the previous year. In US dollars, TSMC in 2006 generated revenue of US$9.76 billion, an increase of 17.7%, and net income of US$3.91 billion, an increase of 34.2%. Among other highlights in 2006, TSMC achieved:

	•		Total average billing utilization of 102%
	•		Average gross profit margin of 49.1%
	•		Average operating profit margin of 40.1%

During the year, TSMC provided 7.06 million 8-inch equivalent wafer capacities, representing about 7% of worldwide IC wafer supply, and it shipped more than 7.2 million 8-inch equivalent wafers, representing about 8% of global IC wafer shipment.

Major Accomplishments.

During 2006, TSMC achieved several noteworthy accomplishments:

	•		49% of wafer sales were generated from advanced process technologies (i.e., 0.13-micron and below), and 65-nanometer process moved into volume production;
	•		TSMC’s continual emphasis on cost improvement and manufacturing efficiencies generated more than US$3.8 billion free cash flow (for the ninth consecutive year) supporting its strong commitment to cash dividend;
	•		TSMC unveiled the industry’s first 65-nm Design-for-Manufacturing (DFM) Ecosystem. Using TSMC’s DFM platform, our customers can reduce the design complexity and utilize the same manufacturing data independent of the design tools that they select. Therefore, we will be able to assist our customers to improve efficiencies, shorten the design cycle, and accelerate time-to-volume and time-to-market.
	•		Early in 2006, TSMC’s immersion lithography program produced nearly defect-free test wafers with acceptable parameters for volume manufacturing, using our proprietary techniques in 65-nanometer process. Ongoing efforts to further develop this technology to commercialize it are underway.

A Vision for Continued Growth

     The foundry segment, driven by TSMC’s successes, is of vital importance to the ongoing viability and growth of the semiconductor industry. Today, foundry segment revenues are approximately 10% of total semiconductor revenue, while the revenue generated by foundry customers accounts for nearly 25% of overall semiconductor revenues.

     While there is every reason to anticipate that foundries will increase their importance in the semiconductor supply chain, it is equally clear that growth of the overall IC market has slowed since the beginning of the 21^st Century. In order to sustain growth, we intend to expand into new CMOS logic IC product markets by providing an increasingly broad portfolio of CMOS logic and derivative technologies to address memory, analog, high performance logic or image sensor applications. Concurrently, we will continue our efforts in strengthening our ability to create a much deeper and broader relationship with each of our customers. This integrated relationship with customers will require a much greater information flow between the design and foundry teams, and optimization of both design and process technology to meet product requirements. TSMC’s robust DFM platform and efficient manufacturing capabilities will bring

win-win benefit to this collaborative partnership and ensure the continual success of the foundry business model.

Major Events

Corporate Governance, Social Responsibility and Innovation: TSMC is a model for corporate governance in Taiwan. For example, in 2002, we were the first Taiwan company to establish an audit committee. Again, in 2006 we were the first Taiwan publicly traded company to see its shareholders eliminate the Supervisor position (effective January 1, 2007) thereby consolidating the Supervisor responsibilities into the audit committee. Today, we have four independent directors.

Also, as you can see in our Annual Report, TSMC proudly received a number of awards in 2006 for its excellence in corporate governance and social responsibility. For example, TSMC won the Globalviews Magazine’s 2006 Corporate Social Responsibility Award in the Large Cap category for the second consecutive year. And, during 2006, TSMC was also recognized for our efforts in innovation when TSMC received the Outstanding Corporate Innovation Award from the Ministry of Economic Affairs (MOEA) of the Republic of China.

Change in Employee Profit Sharing: In light of new government regulations effective in 2008, TSMC, with the support from its Board of Directors, decided to take an early leadership position on profit sharing. In November 2006 TSMC was the first Taiwan company to announce a change in its profit sharing mechanism in order to better balance the interests of TSMC’s employees and its shareholders.

Outlook

While the semiconductor industry grew between 8% and 9% in 2006 the outlook for 2007 is for the industry to grow more moderately. Although TSMC outpaced the industry in 2006, we anticipate a slower growth environment in the short term. Nevertheless, with our continued leadership in the foundry segment we are confident that we will experience over the mid-to-long term strong growth and return on investment to shareholders.

ATTACHMENT II

Audit Committee’s Report

The Board of Directors has prepared the Company’s 2006 Business Report, Financial Statements, and proposal for allocation of profits. The CPA firm of Deloitte & Touche was retained to audit TSMC’s Financial Statements and has issued an audit report relating to the Financial Statements. The Business Report, Financial Statements, and profit allocation proposal have been reviewed and determined to be correct and accurate by the undersigned, the Audit Committee members of Taiwan Semiconductor Manufacturing Company Limited. According to Article 14-4 of the Securities and Exchange Act and Article 219 of the Company Law, we hereby submit this report.

Taiwan Semiconductor Manufacturing Company Limited

Independent Director		Sir Peter Leahy Bonfield
Independent Director		Lester Carl Thurow
Independent Director		Stan Shih
Independent Director		Carleton (Carly) S. Fiorina

February 26, 2007

ATTACHMENT III

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED

DETAILS OF ACQUISITION OR DISPOSAL OF ASSETS WITH RELATED PARTIES IN 2006

Unit: in Thousand

		Number of Shares				Transaction				Relationship
Assets Acquired (Disposed)		Acquired (Disposed)				Amount		Counterparty		with TSMC
Disposal of Machinery Equipment			N/A			US$12,317		TSMC (Shanghai) Company Limited		Subsidiary
Shares of TSMC Global Ltd			1,284			US$1,284,000		TSMC Global Ltd		Subsidiary
Shares of Systems On Silicon Manufacturing Company Pte Ltd.			81,086			SGD$115,457		Systems On Silicon Manufacturing Company Pte Ltd.		Investee accounted for using equity method

ATTACHMENT IV

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders
Taiwan Semiconductor Manufacturing Company Limited

We have audited the accompanying balance sheets of Taiwan Semiconductor Manufacturing Company Limited as of December 31, 2006 and 2005, and the related statements of income, changes in shareholders’ equity and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the Rules Governing the Audit of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Those rules and standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Taiwan Semiconductor Manufacturing Company Limited as of December 31, 2006 and 2005, and the results of its operations and its cash flows for the years then ended in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, requirements of the Business Accounting Law and Guidelines Governing Business Accounting with respect to financial accounting standards, and accounting principles generally accepted in the Republic of China.

We have also audited, in accordance with the Rules Governing the Audit of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China, the consolidated financial statements of Taiwan Semiconductor Manufacturing Company Limited and subsidiaries as of and for the years ended December 31, 2006 and 2005, and have expressed an unqualified opinion on the consolidated financial statements.

January 11, 2007

Notice to Readers

The accompanying financial statements are intended only to present the financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdiction. The standards, procedures and practices to audit such financial statements are those generally accepted and applied in the Republic of China.

For the convenience of readers, the auditors’ report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language auditors’ report and financial statements shall prevail.

 

Taiwan Semiconductor Manufacturing Company Limited

STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

		2006								2005
		Amount				%				Amount				%
GROSS SALES (Notes 2 and 23)		$	319,210,148							$	270,315,064
SALES RETURNS AND ALLOWANCES (Note 2)			5,328,513								5,726,700
NET SALES			313,881,635				100				264,588,364				100
COST OF SALES (Notes 17 and 23)			164,163,235				52				149,344,315				56
GROSS PROFIT			149,718,400				48				115,244,049				44
OPERATING EXPENSES (Notes 17 and 23)
Research and development			14,601,385				5				13,395,801				5
General and administrative			7,190,422				2				7,485,011				3
Marketing			1,626,734				1				1,349,413				1
Total operating expenses			23,418,541				8				22,230,225				9
INCOME FROM OPERATIONS			126,299,859				40				93,013,824				35
NON-OPERATING INCOME AND GAINS
Equity in earnings of equity method investees, net (Notes 2 and 9)			5,526,727				2				—				—
Interest income (Notes 2 and 3)			3,382,868				1				2,506,769				1
Settlement income (Note 25)			967,506				1				950,046				—
Technical service income (Notes 23 and 25)			670,297				—				491,267				—
Gain on disposal of property, plant and equipment and other assets (Notes 2 and 23)			596,459				—				494,374				—
Valuation gain on financial instruments, net (Notes 2, 3, 5 and 22)			33,850				—				—				—
Foreign exchange gain, net (Notes 2 and 3)			—				—				2,572,560				1
Others (Note 23)			419,020				—				366,344				—
Total non-operating income and gains			11,596,727				4				7,381,360				2
NON-OPERATING EXPENSES AND LOSSES
Loss on settlement and disposal of financial instruments, net (Notes 2, 3 and 5)			1,623,882				1				3,742,312				2
Interest expense (Note 3)			661,200				—				1,180,484				—
Foreign exchange loss, net (Note 2)			412,726				—				—				—
Loss on disposal of property, plant and equipment (Note 2)			240,985				—				59,992				—
Equity in losses of equity method investees, net (Notes 2 and 9)			—				—				1,052,045				—

(Continued)

Taiwan Semiconductor Manufacturing Company Limited

STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

		2006								2005
		Amount				%				Amount				%
Valuation loss on financial instruments, net (Notes 2, 3, 5 and 22)		$	—				—			$	337,160				—
Others			151,294				—				203,768				—
Total non-operating expenses and losses			3,090,087				1				6,575,761				2
INCOME BEFORE INCOME TAX			134,806,499				43				93,819,423				35
INCOME TAX EXPENSE (Notes 2 and 16)			(7,550,582	)			(2	)			(244,388	)			—
NET INCOME BEFORE CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES			127,255,917				41				93,575,035				35
CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES, NET OF TAX BENEFIT OF NT$82,062 THOUSAND (Note 3)			(246,186	)			—				—				—
NET INCOME		$	127,009,731				41			$	93,575,035				35

		2006								2005
		Before				After				Before				After
		Income				Income				Income				Income
		Tax				Tax				Tax				Tax
EARNINGS PER SHARE (NT$, Note 21)
Basic earnings per share		$	5.21			$	4.93			$	3.64			$	3.63
Diluted earnings per share		$	5.21			$	4.92			$	3.64			$	3.63

Certain pro forma information (after income tax) is shown as follows, based on the assumption that the Company’s stock held by subsidiaries is treated as an investment instead of treasury stock (Notes 2 and 20):

		2006				2005
NET INCOME BEFORE CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES		$	127,338,237			$	93,881,698
NET INCOME		$	127,092,051			$	93,881,698
EARNINGS PER SHARE (NT$)
Basic earnings per share		$	4.92			$	3.64
Diluted earnings per share		$	4.92			$	3.64

The accompanying notes are an integral part of the financial statements.		(Concluded)

Taiwan Semiconductor Manufacturing Company Limited

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
(In Thousands of New Taiwan Dollars, Except Dividends Per Share)

																														Others
														Retained Earnings																				Unrealized
		Capital Stock												Legal				Special												Cumulative				Gain on												Total
		Shares (in								Capital				Capital				Capital				Unappropriated								Translation				Financial								Treasury				Shareholders’
		Thousands)				Amount				Surplus				Reserve				Reserve				Earnings				Total				Adjustments				Instruments				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	)
Net income in 2005			—				—				—				—				—				93,575,035				93,575,035				—				—				—				—				93,575,035
Adjustment arising from changes in percentage of ownership in investees			—				—				71,405				—				—				—				—				—				—				—				—				71,405
Translation adjustments			—				—				—				—				—				—				—				1,585,685				—				1,585,685				—				1,585,685
Issuance of stock from exercising stock options			6,837				68,370				202,559				—				—				—				—				—				—				—				—				270,929
Cash dividends received by subsidiaries from the Company			—				—				84,285				—				—				—				—				—				—				—				—				84,285
Treasury stock transactions — sales of the Company’s stock held by subsidiaries			—				—				222,378				—				—				—				—				—				—				—				677,111				899,489
BALANCE, DECEMBER 31, 2005			24,730,025				247,300,246				57,117,886				34,348,208				2,226,427				106,196,399				142,771,034				(640,742	)			—				(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	)			—				—				—				—				—				—				—				—				—
Net income in 2006			—				—				—				—				—				127,009,731				127,009,731				—				—				—				—				127,009,731
Adjustment arising from changes in percentage of ownership in investees			—				—				187,095				—				—				—				—				—				—				—				—				187,095
Translation adjustments			—				—				—				—				—				—				—				(550,423	)			—				(550,423	)			—				(550,423	)
Issuance of stock from exercising stock options			14,550				145,496				429,701				—				—				—				—				—				—				—				—				575,197
Cash dividends received by subsidiaries from the Company			—				—				82,320				—				—				—				—				—				—				—				—				82,320
Valuation gain on available-for-sale financial assets			—				—				—				—				—				—				—				—				242,248				242,248				—				242,248
Equity in the valuation gain on available-for-sale financial assets of equity method investees			—				—				—				—				—				—				—				—				319,367				319,367				—				319,367
BALANCE, DECEMBER 31, 2006			25,829,688			$	258,296,879			$	54,107,498			$	43,705,711			$	640,742			$	152,778,079			$	197,124,532			$	(1,191,165	)		$	561,615			$	(629,550	)		$	(918,075	)		$	507,981,284

The accompanying notes are an integral part of the financial statements.

Taiwan Semiconductor Manufacturing Company Limited

STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
(In Thousands of New Taiwan Dollars)

		2006				2005
CASH FLOWS FROM OPERATING ACTIVITIES
Net income		$	127,009,731			$	93,575,035
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			66,699,455				67,991,423
Amortization of premium/discount of financial assets			2,399				120,872
Loss on disposal of available-for-sale financial assets, net			485				150,081
Equity in losses (earnings) of equity method investees, net			(5,526,727	)			1,052,045
Dividends received from equity method investees			626,367				668,464
Gain on disposal of investments accounted for using equity method investees, net			(26,031	)			(583	)
Gain on disposal of financial assets carried at cost, net			(212	)			(2,919	)
Loss on impairment of financial assets carried at cost			36,608				—
Gain on disposal of property, plant and equipment and other assets, net			(355,474	)			(434,382	)
Deferred income taxes			179,828				(3,278,952	)
Loss on idle assets			44,072				131,849
Donation of idle assets			—				7,207
Changes in operating assets and liabilities:
Decrease (increase) in:
Financial assets and liabilities at fair value through profit or loss			1,112,776				10,739
Notes and accounts receivable			4,313,654				(5,264,937	)
Receivables from related parties			4,181,095				(4,914,565	)
Allowance for doubtful receivables			(285,413	)			(4,117	)
Allowance for sales returns and others			(1,518,904	)			942,055
Other receivables from related parties			985,419				(1,243,126	)
Other financial assets			(99,109	)			64,288
Inventories			(2,894,259	)			(2,086,010	)
Prepaid expenses and other current assets			(49,426	)			(84,341	)
Increase (decrease) in:
Accounts payable			(1,908,427	)			1,563,489
Payables to related parties			(612,381	)			(1,224,371	)
Income tax payable			4,034,530				3,435,985
Accrued expenses and other current liabilities			157,262				(1,001,293	)
Accrued pension cost			68,724				360,196
Deferred credits			(95,745	)			95,744
Net cash provided by operating activities			196,080,297				150,629,876
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of:
Available-for-sale financial assets			(98,679,832	)			(99,436,242	)
Held-to-maturity financial assets			(18,554,027	)			(14,199,142	)
Financial assets carried at cost			(12,940	)			(48,536	)
Investments accounted for using equity method			(5,515,466	)			(3,392,619	)
Property, plant and equipment			(77,215,811	)			(73,659,014	)