Form 6-K
 
 
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 March 2009
Taiwan Semiconductor Manufacturing Company Ltd.
(Translation of Registrant’s Name Into English)
No. 8, Li-Hsin Rd. 6,
Hsinchu Science Park,
Taiwan

(Address of Principal Executive Offices)
     (Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)
     
Form 20-F þ   Form 40-F o
     (Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)
     
Yes o   No þ
(If “Yes” is marked, indicated below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82: ______.)
 
 

 


 

Taiwan Semiconductor Manufacturing
Company Limited
Financial Statements for the
Years Ended December 31, 2008 and 2007 and
Independent Auditors’ Report

 


 

INDEPENDENT AUDITORS’ REPORT
The Board of Directors and Shareholders
Taiwan Semiconductor Manufacturing Company Limited
We have audited the accompanying balance sheets of Taiwan Semiconductor Manufacturing Company Limited as of December 31, 2008 and 2007, 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, 2008 and 2007, and the results of its operations and its cash flows for the years then ended in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, requirements of the Business Accounting Law and Guidelines Governing Business Accounting with respect to financial accounting standards, and accounting principles generally accepted in the Republic of China.
As discussed in Note 3 to the financial statements, effective January 1, 2008, Taiwan Semiconductor Manufacturing Company Limited adopted Interpretation 2007-052, “Accounting for Bonuses to Employees, Directors and Supervisors” issued by the Accounting Research and Development Foundation of the Republic of China and relevant requirements promulgated by the Financial Supervisory Commission of the Executive Yuan.

- 1 -


 

We have also audited, in accordance with the Rules Governing the Audit of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China, the consolidated financial statements of Taiwan Semiconductor Manufacturing Company Limited and subsidiaries as of and for the years ended December 31, 2008 and 2007, and expressed an unqualified opinion with an explanatory paragraph relating to the adoption of Interpretation 2007-052 and an unqualified opinion, respectively, on such consolidated financial statements.
January 17, 2009
Notice to Readers
The accompanying financial statements are intended only to present the financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other 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.

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Taiwan Semiconductor Manufacturing Company Limited
BALANCE SHEETS
DECEMBER 31, 2008 AND 2007
(In Thousands of New Taiwan Dollars, Except Par Value)
                                 
    2008     2007  
    Amount     %     Amount     %  
ASSETS
                               
 
                               
CURRENT ASSETS
                               
Cash and cash equivalents (Notes 2 and 4)
  $ 138,208,360       26     $ 72,422,102       13  
Financial assets at fair value through profit or loss (Notes 2, 5 and 23)
    42,460             42,083        
Available-for-sale financial assets (Notes 2, 6 and 23)
                22,267,223       4  
Held-to-maturity financial assets (Notes 2, 7 and 23)
    5,881,999       1       11,526,946       2  
Receivables from related parties (Note 24)
    11,728,204       2       26,701,648       5  
Notes and accounts receivable
    11,441,176       2       17,911,328       3  
Allowance for doubtful receivables (Notes 2 and 8)
    (436,746 )           (688,972 )      
Allowance for sales returns and others (Notes 2 and 8)
    (5,868,582 )     (1 )     (3,856,685 )      
Other receivables from related parties (Note 24)
    489,742             525,308        
Other financial assets
    711,755             331,698        
Inventories, net (Notes 2 and 9)
    12,807,936       2       20,987,142       4  
Deferred income tax assets (Notes 2 and 17)
    3,650,700       1       5,268,000       1  
Prepaid expenses and other current assets
    1,192,475             861,465        
 
                       
 
                               
Total current assets
    179,849,479       33       174,299,286       32  
 
                       
 
                               
LONG-TERM INVESTMENTS (Notes 2, 6, 7, 10, 11 and 23)
                               
Investments accounted for using equity method
    109,871,178       20       113,048,081       21  
Available-for-sale financial assets
    2,032,658       1       1,397,186        
Held-to-maturity financial assets
    11,761,325       2       8,697,726       2  
Financial assets carried at cost
    519,502             748,160        
 
                       
 
                               
Total long-term investments
    124,184,663       23       123,891,153       23  
 
                       
 
                               
PROPERTY, PLANT AND EQUIPMENT (Notes 2, 12 and 24)
                               
Cost
                               
Buildings
    114,014,588       21       101,907,892       18  
Machinery and equipment
    635,008,261       118       589,131,625       107  
Office equipment
    9,748,869       2       9,167,107       2  
 
                       
 
    758,771,718       141       700,206,624       127  
Accumulated depreciation
    (557,247,254 )     (103 )     (486,725,019 )     (88 )
Advance payments and construction in progress
    17,758,038       3       21,082,953       4  
 
                       
 
                               
Net property, plant and equipment
    219,282,502       41       234,564,558       43  
 
                       
 
                               
INTANGIBLE ASSETS
                               
Goodwill (Note 2)
    1,567,756             1,567,756        
Deferred charges, net (Notes 2, 13 and 24)
    6,401,461       1       7,172,413       1  
 
                       
 
                               
Total intangible assets
    7,969,217       1       8,740,169       1  
 
                       
 
                               
OTHER ASSETS
                               
Deferred income tax assets (Notes 2 and 17)
    6,497,972       1       7,241,933       1  
Refundable deposits
    2,719,737       1       2,741,538        
Others (Note 2)
    55,677             293,986        
 
                       
 
                               
Total other assets
    9,273,386       2       10,277,457       1  
 
                               
 
                       
TOTAL
  $ 540,559,247       100     $ 551,772,623       100  
 
                       
 
                               
LIABILITIES AND SHAREHOLDERS’ EQUITY
                               
 
                               
CURRENT LIABILITIES
                               
Financial liabilities at fair value through profit or loss (Notes 2, 5 and 23)
  $ 83,618           $ 247,646        
Accounts payable
    4,314,265       1       9,485,818       2  
Payables to related parties (Note 24)
    1,202,350             2,999,630        
Income tax payable (Notes 2 and 17)
    9,222,811       2       10,977,963       2  
Bonuses payable to employees and directors (Notes 3 and 19)
    15,148,057       3              
Payables to contractors and equipment suppliers
    7,574,891       1       5,389,740       1  
Accrued expenses and other current liabilities (Note 15)
    7,553,475       1       14,700,013       3  
Current portion of bonds payable (Note 14)
    8,000,000       2              
 
                       
 
                               
Total current liabilities
    53,099,467       10       43,800,810       8  
 
                       
 
                               
LONG-TERM LIABILITIES
                               
Bonds payable (Note 14)
    4,500,000       1       12,500,000       3  
Other long-term payables (Note 15)
    931,252             1,501,462        
 
                       
 
                               
Total long-term liabilities
    5,431,252       1       14,001,462       3  
 
                       
 
                               
OTHER LIABILITIES
                               
Accrued pension cost (Notes 2 and 16)
    3,710,009       1       3,657,679       1  
Guarantee deposits (Note 26)
    1,479,152             2,240,677        
Deferred credits (Notes 2 and 24)
    462,256             980,593        
 
                       
 
                               
Total other liabilities
    5,651,417       1       6,878,949       1  
 
                       
 
                               
Total liabilities
    64,182,136       12       64,681,221       12  
 
                       
 
                               
CAPITAL STOCK — NT$10 PAR VALUE (Notes 19 and 21)
                               
Authorized: 28,050,000 thousand shares
                               
Issued: 25,625,437 thousand shares in 2008
26,427,104 thousand shares in 2007
    256,254,373       47       264,271,037       48  
 
                       
 
                               
CAPITAL SURPLUS (Notes 2 and 19)
    49,875,255       9       53,732,682       10  
 
                       
 
                               
RETAINED EARNINGS (Note 19)
                               
Appropriated as legal capital reserve
    67,324,393       13       56,406,684       10  
Appropriated as special capital reserve
    391,857             629,550        
Unappropriated earnings
    102,337,417       19       161,828,337       29  
 
                       
 
                               
 
    170,053,667       32       218,864,571       39  
 
                       
 
                               
OTHERS (Notes 2, 21 and 23)
                               
Cumulative translation adjustments
    481,158             (1,072,853 )      
Unrealized gain (loss) on financial instruments
    (287,342 )           680,997        
Treasury stock: 834,096 thousand shares
                (49,385,032 )     (9 )
 
                       
 
    193,816             (49,776,888 )     (9 )
 
                       
 
                               
Total shareholders’ equity
    476,377,111       88       487,091,402       88  
 
                       
 
                               
TOTAL
  $ 540,559,247       100     $ 551,772,623       100  
 
                       
The accompanying notes are an integral part of the financial statements.
(With Deloitte & Touche audit report dated January 17, 2009)

- 3 -


 

Taiwan Semiconductor Manufacturing Company Limited
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)
                                 
    2008     2007  
    Amount     %     Amount     %  
 
                               
GROSS SALES (Notes 2 and 24)
  $ 330,228,027             $ 319,167,299          
 
                               
SALES RETURNS AND ALLOWANCES (Notes 2 and 8)
    8,460,944               5,519,655          
 
                           
 
                               
NET SALES
    321,767,083       100       313,647,644       100  
 
                               
COST OF SALES (Notes 18 and 24)
    183,589,540       57       176,223,224       56  
 
                       
 
                               
GROSS PROFIT
    138,177,543       43       137,424,420       44  
 
                               
REALIZED (UNREALIZED) GROSS PROFIT FROM AFFILIATES (Note 2)
    72             (265,106 )      
 
                       
 
                               
REALIZED GROSS PROFIT
    138,177,615       43       137,159,314       44  
 
                       
 
                               
OPERATING EXPENSES (Notes 18 and 24)
                               
Research and development
    19,737,038       6       15,913,834       5  
General and administrative
    9,895,617       3       7,660,776       3  
Marketing
    2,254,728       1       1,332,657        
 
                       
 
                               
Total operating expenses
    31,887,383       10       24,907,267       8  
 
                       
 
                               
INCOME FROM OPERATIONS
    106,290,232       33       112,252,047       36  
 
                       
 
                               
NON-OPERATING INCOME AND GAINS
                               
Interest income (Note 2)
    2,728,892       1       2,634,636       1  
Foreign exchange gain, net (Note 2)
    1,113,406       1       71,128        
Settlement income (Note 26)
    951,180             985,114        
Technical service income (Notes 24 and 26)
    619,237             712,162        
Gain on settlement and disposal of financial assets, net (Notes 2 and 23)
    452,159             271,094        
Gain on disposal of property, plant and equipment and other assets (Notes 2 and 24)
    298,772             305,201        
Equity in earnings of equity method investees, net (Notes 2 and 10)
    72,568             5,468,230       2  
Others (Note 24)
    489,411             658,227        
 
                       
 
                               
Total non-operating income and gains
    6,725,625       2       11,105,792       3  
 
                       
(Continued)

- 4 -


 

Taiwan Semiconductor Manufacturing Company Limited
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)
                                 
    2008     2007  
    Amount     %     Amount     %  
 
                               
NON-OPERATING EXPENSES AND LOSSES
                               
Valuation loss on financial instruments, net (Notes 2, 5 and 23)
  $ 1,230,966       1     $ 924,316        
Interest expense
    355,056             584,736        
Loss on impairment of financial assets (Notes 2 and 11)
    247,488                    
Loss on impairment of idle assets (Note 2)
    210,477                    
Provision for litigation loss (Note 26h)
    99,126             1,008,635        
Others (Note 2)
    113,926             88,746        
 
                       
 
                               
Total non-operating expenses and losses
    2,257,039       1       2,606,433        
 
                       
 
                               
INCOME BEFORE INCOME TAX
    110,758,818       34       120,751,406       39  
 
                               
INCOME TAX EXPENSE (Notes 2 and 17)
    (10,825,650 )     (3 )     (11,574,313 )     (4 )
 
                       
 
                               
NET INCOME
  $ 99,933,168       31     $ 109,177,093       35  
 
                       
                                 
    2008     2007  
    Before     After     Before     After  
    Income     Income     Income     Income  
    Tax     Tax     Tax     Tax  
 
                               
EARNINGS PER SHARE (NT$, Note 22)
                               
Basic earnings per share
  $ 4.27     $ 3.86     $ 4.49     $ 4.06  
 
                       
Diluted earnings per share
  $ 4.24     $ 3.83     $ 4.49     $ 4.06  
 
                       
Certain pro forma information (after income tax) is shown as follows, based on the assumption that the Company’s stock held by subsidiaries is treated as available-for-sale financial assets instead of treasury stock (Notes 2 and 21):
                 
    2008     2007  
 
               
NET INCOME
  $ 100,035,447     $ 109,278,855  
 
           
 
               
EARNINGS PER SHARE (NT$)
               
Basic earnings per share
  $ 3.86     $ 4.06  
 
           
Diluted earnings per share
  $ 3.83     $ 4.06  
 
           
The accompanying notes are an integral part of the financial statements.
(With Deloitte & Touche audit report dated January 17, 2009)
  (Concluded)

- 5 -


 

     
Taiwan Semiconductor Manufacturing Company Limited
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(In Thousands of New Taiwan Dollars, Except Dividends Per Share)
                                                                                         
                                                            Others        
                            Retained Earnings             Unrealized                
    Capital Stock — Common Stock             Legal     Special                     Cumulative     Gain (Loss)             Total  
    Shares (in             Capital     Capital     Capital     Unappropriated             Translation     on Financial     Treasury     Shareholders’  
    Thousands)     Amount     Surplus     Reserve     Reserve     Earnings     Total     Adjustments     Instruments     Stock     Equity  
                                                                     
BALANCE, JANUARY 1, 2007
    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     $ (918,075 )   $ 507,981,284  
 
                                                                                       
Appropriations of prior year’s earnings
                                                                                       
Legal capital reserve
                      12,700,973             (12,700,973 )                              
Reversal of special capital reserve
                            (11,192 )     11,192                                
Bonus to employees — in cash
                                  (4,572,798 )     (4,572,798 )                       (4,572,798 )
Bonus to employees — in stock
    457,280       4,572,798                         (4,572,798 )     (4,572,798 )                        
Cash dividends to shareholders — NT$3.00 per share
                                  (77,489,064 )     (77,489,064 )                       (77,489,064 )
Stock dividends to shareholders — NT$0.02 per share
    51,659       516,594                         (516,594 )     (516,594 )                        
Bonus to directors and supervisors
                                  (285,800 )     (285,800 )                       (285,800 )
Capital surplus transferred to capital stock
    77,489       774,891       (774,891 )                                                
Net income in 2007
                                  109,177,093       109,177,093                         109,177,093  
Adjustment arising from changes in percentage of ownership in equity method investees
                (28,639 )                                               (28,639 )
Translation adjustments
                                              118,312                   118,312  
Issuance of stock from exercising stock options
    10,988       109,875       326,952                                                 436,827  
Cash dividends received by subsidiaries from the Company
                101,762                                                 101,762  
Valuation gain on available-for-sale financial assets
                                                    24,325             24,325  
Equity in the valuation gain on available-for-sale financial assets held by equity method investees
                                                    95,057             95,057  
Treasury stock repurchased
                                                          (48,466,957 )     (48,466,957 )
 
                                                                 
 
                                                                                       
BALANCE, DECEMBER 31, 2007
    26,427,104       264,271,037       53,732,682       56,406,684       629,550       161,828,337       218,864,571       (1,072,853 )     680,997       (49,385,032 )     487,091,402  
 
                                                                                       
Appropriations of prior year’s earnings
                                                                                       
Legal capital reserve
                      10,917,709             (10,917,709 )                              
Reversal of special capital reserve
                            (237,693 )     237,693                                
Bonus to employees — in cash
                                  (3,939,883 )     (3,939,883 )                       (3,939,883 )
Bonus to employees — in stock
    393,988       3,939,883                         (3,939,883 )     (3,939,883 )                        
Cash dividends to shareholders — NT$3.00 per share
                                  (76,881,311 )     (76,881,311 )                       (76,881,311 )
Stock dividends to shareholders — NT$0.02 per share
    51,254       512,542                         (512,542 )     (512,542 )                        
Bonus to directors
                                  (176,890 )     (176,890 )                       (176,890 )
Capital surplus transferred to capital stock
    76,881       768,813       (768,813 )                                                
Net income in 2008
                                  99,933,168       99,933,168                         99,933,168  
Adjustment arising from changes in percentage of ownership in equity method investees
                (137,063 )                                               (137,063 )
Translation adjustments
                                              1,554,011                   1,554,011  
Issuance of stock from exercising stock options
    6,027       60,266       166,884                                                 227,150  
Cash dividends received by subsidiaries from the Company
                102,279                                                 102,279  
Valuation loss on available-for-sale financial assets
                                                    (233,915 )           (233,915 )
Equity in the valuation loss on available-for-sale financial assets held by equity method investees
                                                    (734,424 )           (734,424 )
Treasury stock repurchased
                                                          (30,427,413 )     (30,427,413 )
Treasury stock retired
    (1,329,817 )     (13,298,168 )     (3,220,714 )                 (63,293,563 )     (63,293,563 )                 79,812,445        
 
                                                                 
 
                                                                                       
BALANCE, DECEMBER 31, 2008
    25,625,437     $ 256,254,373     $ 49,875,255     $ 67,324,393     $ 391,857     $ 102,337,417     $ 170,053,667     $ 481,158     $ (287,342 )   $     $ 476,377,111  
 
                                                                 
The accompanying notes are an integral part of the financial statements.
(With Deloitte & Touche audit report dated January 17, 2009)

- 6 -


 

Taiwan Semiconductor Manufacturing Company Limited
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(In Thousands of New Taiwan Dollars)
                 
    2008     2007  
 
               
CASH FLOWS FROM OPERATING ACTIVITIES
               
Net income
  $ 99,933,168     $ 109,177,093  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
    74,569,562       72,820,579  
Unrealized (realized) gross profit from affiliates
    (72 )     265,106  
Amortization of premium/discount of financial assets
    (97,381 )     (117,159 )
Loss on impairment of financial assets
    247,488        
Gain on disposal of available-for-sale financial assets, net
    (443,404 )     (271,094 )
Gain on disposal of financial assets carried at cost, net
    (8,755 )      
Equity in earnings of equity method investees, net
    (72,568 )     (5,468,230 )
Dividends received from equity method investees
    1,804,351       677,147  
Gain on disposal of property, plant and equipment and other assets, net
    (298,769 )     (300,387 )
Loss on impairment of idle assets
    210,477        
Deferred income tax
    2,361,261       1,083,194  
Changes in operating assets and liabilities:
               
Decrease (increase) in:
               
Financial assets and liabilities at fair value through profit or loss
    (164,405 )     239,413  
Receivables from related parties
    14,973,444       (9,832,139 )
Notes and accounts receivable
    6,470,152       (1,633,164 )
Allowance for doubtful receivables
    (252,226 )     (1,959 )
Allowance for sales returns and others
    2,011,897       1,105,620  
Other receivables from related parties
    43,835       (76,042 )
Other financial assets
    (380,057 )     321,762  
Inventories
    8,179,206       (1,834,928 )
Prepaid expenses and other current assets
    (330,664 )     359,734  
Increase (decrease) in:
               
Accounts payable
    (5,171,553 )     3,342,139  
Payables to related parties
    (1,797,280 )     (327,286 )
Income tax payable
    (1,766,153 )     3,127,545  
Bonuses payable to employees and directors
    15,148,057        
Accrued expenses and other current liabilities
    (3,142,500 )     1,259,738  
Accrued pension cost
    52,330       127,563  
Deferred credits
    (129,494 )     72,747  
 
           
 
               
Net cash provided by operating activities
    211,949,947       174,116,992  
 
           
 
               
CASH FLOWS FROM INVESTING ACTIVITIES
               
Acquisitions of:
               
Property, plant and equipment
    (56,766,192 )     (81,303,047 )
Available-for-sale financial assets
    (23,697,000 )     (9,547,253 )
Held-to-maturity financial assets
    (12,371,965 )      
Investments accounted for using equity method
    (494,765 )     (7,358,685 )
Financial assets carried at cost
    (20,681 )     (36,333 )
Cash from merger of subsidiaries
    270,650        
(Continued)

- 7 -


 

Taiwan Semiconductor Manufacturing Company Limited
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(In Thousands of New Taiwan Dollars)
                 
    2008     2007  
Proceeds from disposal or redemption of:
               
Available-for-sale financial assets
  $ 45,584,934     $ 18,844,520  
Held-to-maturity financial assets
    15,004,000       17,325,120  
Financial assets carried at cost
    10,606        
Property, plant and equipment and other assets
    2,042,899       54,509  
Proceeds from return of capital by investees
    2,465,293       433,551  
Increase in deferred charges
    (3,199,813 )     (2,685,610 )
Decrease (increase) in refundable deposits
    21,801       (1,435,304 )
Increase in other assets
          (232,575 )
 
           
 
               
Net cash used in investing activities
    (31,150,233 )     (65,941,107 )
 
           
 
               
CASH FLOWS FROM FINANCING ACTIVITIES
               
Repayment of bonds payable
          (7,000,000 )
Decrease in guarantee deposits
    (761,525 )     (1,569,284 )
Proceeds from exercise of employee stock options
    227,150       436,827  
Cash dividends
    (76,881,311 )     (77,489,064 )
Cash bonus paid to employees
    (3,939,883 )     (4,572,798 )
Bonus to directors and supervisors
    (176,890 )     (285,800 )
Repurchase of treasury stock
    (33,480,997 )     (45,413,373 )
 
           
 
               
Net cash used in financing activities
    (115,013,456 )     (135,893,492 )
 
           
 
               
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    65,786,258       (27,717,607 )
 
               
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
    72,422,102       100,139,709  
 
           
 
               
CASH AND CASH EQUIVALENTS, END OF YEAR
  $ 138,208,360     $ 72,422,102  
 
           
 
               
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
               
Interest paid
  $ 355,056     $ 661,200  
 
           
Income tax paid
  $ 10,282,464     $ 7,330,401  
 
           
 
               
INVESTING AND FINANCING ACTIVITIES AFFECTING BOTH CASH AND NON-CASH ITEMS
               
Acquisition of property, plant, and equipment
  $ 58,951,343     $ 76,023,264  
Decrease (increase) in payables to contractors and equipment suppliers
    (2,185,151 )     5,279,783  
 
           
Cash paid
  $ 56,766,192     $ 81,303,047  
 
           
 
               
Disposal of property, plant and equipment and other assets
  $ 2,051,168     $ 54,509  
Increase in other receivables from related parties
    (8,269 )      
 
           
Cash received
  $ 2,042,899     $ 54,509  
 
           
(Continued)

- 8 -


 

Taiwan Semiconductor Manufacturing Company Limited
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(In Thousands of New Taiwan Dollars)
                 
    2008     2007  
 
               
Repurchase of treasury stock
  $ 30,427,413     $ 48,466,957  
Decrease (increase) in accrued expenses and other current liabilities
    3,053,584       (3,053,584 )
 
           
Cash paid
  $ 33,480,997     $ 45,413,373  
 
           
 
               
NON-CASH FINANCING ACTIVITIES
               
Current portion of bonds payable
  $ 8,000,000     $  
 
           
Current portion of other long-term payable (under accrued expenses and other current liabilities)
  $ 1,026,421     $ 3,673,182  
 
           
The accompanying notes are an integral part of the financial statements.
     
(With Deloitte & Touche audit report dated January 17, 2009)   (Concluded)

- 9 -


 

Taiwan Semiconductor Manufacturing Company Limited
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
1.   GENERAL
    Taiwan Semiconductor Manufacturing Company Limited (the “Company” or “TSMC”), a Republic of China (R.O.C.) corporation, was incorporated on February 21, 1987 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 a dedicated foundry in the semiconductor industry which engaged mainly in the manufacturing, selling, packaging, testing and computer-aided designing of integrated circuits and other semiconductor devices and the manufacturing of masks.
 
    As of December 31, 2008 and 2007, the Company had 20,425 and 20,555 employees, respectively.
2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
    The financial statements are presented in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, Business Accounting Law, Guidelines Governing Business Accounting, and accounting principles generally accepted in the R.O.C.
 
    For the convenience of readers, the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the R.O.C. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language financial statements shall prevail.
 
    Significant accounting policies are summarized as follows:
 
    Use of Estimates
 
    The preparation of financial statements in conformity with the aforementioned guidelines, law and principles requires management to make reasonable assumptions and estimates of matters that are inherently uncertain. The actual results may differ from management’s estimates.
 
    Classification of Current and Noncurrent Assets and Liabilities
 
    Current assets are assets held for trading purposes and assets expected to be converted to cash, sold or consumed within one year from the balance sheet date. Current liabilities are obligations incurred for trading purposes and obligations expected to be settled within one year from the balance sheet date. Assets and liabilities that are not classified as current are noncurrent assets and liabilities, respectively.
 
    Cash Equivalents
 
    Repurchase agreements collateralized by government bonds and asset-backed commercial papers acquired with maturities of less than three months from the date of purchase are classified as cash equivalents. The carrying amount approximates fair value.

- 10 -


 

    Financial Assets/Liabilities at Fair Value Through Profit or Loss
 
    Derivatives that do not meet the criteria for hedge accounting are initially recognized at fair value, with transaction costs expensed as incurred. The derivatives are remeasured at fair value subsequently with changes in fair value recognized in earnings. A regular way purchase or sale of financial assets is accounted for using settlement date accounting.
 
    Fair value is estimated using valuation techniques incorporating estimates and assumptions that are consistent with prevailing market conditions. When the fair value is positive, the derivative is recognized as a financial asset; when the fair value is negative, the derivative is recognized as a financial liability.
 
    Available-for-sale Financial Assets
 
    Available-for-sale financial assets are initially recognized at fair value plus transaction costs that are directly attributable to the acquisition. Changes in fair value from subsequent remeasurement are reported as a separate component of shareholders’ equity. The corresponding accumulated gains or losses are recognized in earnings when the financial asset is derecognized from the balance sheet. A regular way purchase or sale of financial assets is accounted for using settlement date accounting.
 
    The fair value of structured time deposits is estimated using valuation techniques. Fair value of open-end mutual funds is determined using the net assets value at the end of the year. For debt securities, fair value is determined using the average of bid and asked prices at the end of the year.
 
    Any difference between the initial carrying amount of a debt security and the amount due at maturity is amortized using the effective interest method, with the amortization recognized in earnings.
 
    If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. If, in a subsequent period, the amount of the impairment loss decreases, for equity securities, the previously recognized impairment loss is reversed to the extent of the decrease and recorded as an adjustment to shareholders’ equity; for debt securities, the amount of the decrease is recognized in earnings, provided that the decrease is clearly attributable to an event which occurred after the impairment loss was recognized.
 
    Held-to-maturity Financial Assets
 
    Debt securities for which the Company has a positive intention and ability to hold to maturity are categorized as held-to-maturity financial assets and are carried at amortized cost under the effective interest method except for structured time deposits which are carried at acquisition cost. Those financial assets are initially recognized at fair value plus transaction costs that are directly attributable to the acquisition. Gains or losses are recognized at the time of derecognition, impairment or amortization. A regular way purchase or sale of financial assets is accounted for using settlement date accounting.
 
    If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. If, in a subsequent period, the amount of the impairment loss decreases and the decrease is clearly attributable to an event which occurred after the impairment loss was recognized, the previously recognized impairment loss is reversed to the extent of the decrease. The reversal may not result in a carrying amount that exceeds the amortized cost that would have been determined as if no impairment loss had been recognized.
 
    Allowance for Doubtful Receivables
 
    An allowance for doubtful receivables is provided based on a review of the collectibility of notes and accounts receivable. The Company determines the amount of the allowance for doubtful receivables by examining the aging analysis of outstanding notes and accounts receivable and current trends in the credit quality of its customers as well as its internal credit policies.

- 11 -


 

    Revenue Recognition and Allowance for Sales Returns and Others
 
    The Company recognizes revenue when evidence of an arrangement exists, the rewards of ownership and significant risk of the goods has been transferred to the buyer, price is fixed or determinable, and collectibility is reasonably assured. Provisions for estimated sales returns and others are recorded in the year the related revenue is recognized, based on historical experience, management’s judgment, and any known factors that would significantly affect the allowance.
 
    Sales prices are determined using fair value taking into account related sales discounts agreed to by the Company and its customers. Sales agreements typically provide that payment is due 30 days from invoice date for a majority of the customers and 30 to 45 days after the end of the month in which sales occur for some customers. Since the receivables from sales are collectible within one year and such transactions are frequent, fair value of the receivables is equivalent to the nominal amount of the cash to be received.
 
    Inventories
 
    Inventories are 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. Year-end inventories are evaluated for estimated excess quantities and obsolescence based on a demand forecast within a specific time horizon, which is generally 180 days or less. Estimated losses on scrap and slow-moving items are recognized and included in the allowance for losses.
 
    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. Effective January 1, 2006, pursuant to the revised Statement of Financial Accounting Standards No. 5, “Long-term Investments Accounted for Using the Equity Method”, the cost of an investment shall be analyzed and the cost of investment in excess of the fair value of identifiable net assets acquired, representing goodwill, shall not be amortized. If the fair value of identifiable net assets acquired exceeds the cost of investment, the excess shall be proportionately allocated as reductions to fair values of non-current assets (except for financial assets other than investments accounted for using the equity method and deferred income tax assets). The accounting treatment for the investment premiums paid before January 1, 2006 is the same as that for goodwill which is 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 recognized in earnings.
 
    When the Company subscribes for additional investee’s shares at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment in the investee differs from the amount of the Company’s share of the investee’s equity. The Company records such a difference as an adjustment to long-term investments with the corresponding amount charged or credited to capital surplus.
 
    Gains or losses on sales from the Company to equity method investees are deferred in proportion to the Company’s ownership percentages in the investees until such gains or losses are realized through transactions with third parties. The entire amount of the gains or losses on sales to investees over which the Company has a controlling interest is deferred until such gains or losses are realized through subsequent sales of the related products to third parties. Gains or losses on sales from equity method investees to the Company are deferred in proportion to the Company’s ownership percentages in the investees until they are realized through transactions with third parties. Gains or losses on sales between equity method investees over each of which the Company has control are deferred in proportion to the Company’s weighted-average ownership percentage in the investee which records gains or losses. In transactions between equity method

- 12 -


 

    investees over either or both of which the Company has no control, gains or losses on sales are deferred in proportion to the multiplication of the Company’s weighted-average ownership percentages in the investees. Such gains or losses are recorded until they are realized through transactions with third parties.
 
    If an investee’s functional currency is a foreign currency, differences will result from the translation of the investee’s financial statements into the reporting currency of the Company. Such differences are charged or credited to cumulative translation adjustments, a separate component of shareholders’ equity.
 
    Financial Assets Carried at Cost
 
    Investments for which the Company does not exercise significant influence and that do not have a quoted market price in an active market and whose fair value cannot be reliably measured, such as non-publicly traded stocks and mutual funds, are carried at their original cost. The costs of non-publicly traded stocks and mutual funds are determined using the weighted-average method. If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. A subsequent reversal of such impairment loss is not allowed.
 
    Cash dividends are recognized as investment income upon resolution of shareholders of an investee but are accounted for as a reduction to the original cost of investment if such dividends are declared on the earnings of the investee attributable to the period prior to the purchase of the investment. Stock dividends are recorded as an increase in the number of shares held and do not affect investment income. The cost per share is recalculated based on the new total number of shares.
 
    Property, Plant and Equipment, Assets Leased to Others and Idle Assets
 
    Property, plant and equipment and assets leased to others are stated at cost less accumulated depreciation. When an indication of impairment is identified, any excess of the carrying amount of an asset over its recoverable amount is recognized as a loss. If the recoverable amount increases in a subsequent period, the amount previously recognized as impairment would be reversed and recognized as a gain. However, the adjusted amount may not exceed the carrying amount that would have been determined, net of depreciation, as if no impairment loss had been recognized. Significant additions, renewals and betterments incurred during the construction period are capitalized. Maintenance and repairs are expensed as incurred.
 
    Depreciation is computed using the straight-line method over the following estimated service lives: buildings — 10 to 20 years; machinery and equipment — 5 years; and office equipment — 3 to 5 years.
 
    Upon sale or disposal of property, plant and equipment and assets leased to others, the related cost and accumulated depreciation are deducted from the corresponding accounts, with any gain or loss recorded as non-operating gains or losses in the year of sale or disposal.
 
    When property, plant and equipment are determined to be idle or useless, they are transferred to idle assets at the lower of the net realizable value or carrying amount. Depreciation on the idle assets is provided continuously, and the idle assets are tested for impairment on a periodical basis.
 
    Intangible Assets
 
    Goodwill represents the excess of the consideration paid for acquisition over the fair value of identifiable net assets acquired. Prior to January 1, 2006, goodwill was amortized using the straight-line method over the estimated life of 10 years. Effective January 1, 2006, pursuant to the newly revised Statement of Financial Accounting Standards No. 25, “Business Combinations — Accounting Treatment under Purchase Method”, goodwill is no longer amortized and instead is tested for impairment annually. If an event occurs or circumstances change which indicated that the fair value of goodwill is more likely than not below its carrying amount, an impairment loss is recognized. A subsequent reversal of such impairment loss is not allowed.

- 13 -


 

    Deferred charges consist of technology license fees, software and system design costs and other charges. The amounts are amortized over the following periods: Technology license fees — the shorter of the estimated life of the technology or the term of the technology transfer contract; software and system design costs and other charges — 3 years. When an indication of impairment is identified, any excess of the carrying amount of an asset over its recoverable amount is recognized as a loss. If the recoverable amount increases in a subsequent period, the previously recognized impairment loss would be reversed and recognized as a gain. However, the adjusted amount may not exceed the carrying amount that would have been determined, net of amortization, as if no impairment loss had been recognized.
 
    Expenditures related to research activities and those related to development activities that do not meet the criteria for capitalization are charged to expenses when incurred.
 
    Pension Costs
 
    For employees who participate in defined contribution pension plans, pension costs are recorded based on the actual contributions made to employees’ individual pension accounts during their service periods. For employees who participate in defined benefit pension plans, pension costs are recorded based on actuarial calculations.
 
    Income Tax
 
    The Company applies an inter-period allocation for its income tax whereby deferred income tax assets and liabilities are recognized for the tax effects of temporary differences and unused tax credits. Valuation allowances are provided to the extent, if any, that it is more likely than not that deferred income tax assets will not be realized. A deferred tax asset or liability is classified as current or noncurrent in accordance with the classification of its related asset or liability. However, if a deferred tax asset or liability does not relate to an asset or liability in the financial statements, then it is classified as either current or noncurrent based on the expected length of time before it is realized or settled.
 
    Any tax credits arising from purchases of machinery, equipment and technology, research and development expenditures, personnel training expenditures, and investments in important technology-based enterprises are recognized using the flow-through method.
 
    Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.
 
    Income tax on unappropriated earnings at a rate of 10% is expensed in the year of shareholder approval which is the year subsequent to the year the earnings are generated.
 
    Stock-based Compensation
 
    Employee stock options that were granted or modified in the period from January 1, 2004 to December 31, 2007 are accounted for by the interpretations issued by the Accounting Research and Development Foundation of the Republic of China. The Company adopted the intrinsic value method and any compensation cost determined using this method is recognized in earnings over the employee vesting period. Employee stock option plans that were granted or modified after December 31, 2007 are accounted for using fair value method in accordance with Statement of Financial Accounting Standards No. 39, “Accounting for Share-based Payment”. The Company did not grant or modify employee stock options since January 1, 2008.
 
    Treasury Stock
 
    Treasury stock is stated at cost and shown as a deduction in shareholders’ equity. When the Company retires treasury stock, the treasury stock account is reduced and the common stock as well as the capital surplus — additional paid-in capital are reversed on a pro rata basis. When the book value of the treasury stock exceeds the sum of the par value and additional paid-in capital, the difference is charged to capital surplus — treasury stock transactions and to retained earnings for any remaining amount.

- 14 -


 

    The Company’s stock held by its subsidiaries is treated as treasury stock and reclassified from investments accounted for using equity method to treasury stock. The gains resulted from disposal of the treasury stock held by subsidiaries and cash dividends received by subsidiaries from the Company are recorded under capital surplus — treasury stock transactions.
    Foreign-currency Transactions
 
    Foreign-currency transactions other than derivative contracts are recorded in New Taiwan dollars at the rates of exchange in effect when the transactions occur. Exchange gains or losses derived from foreign-currency transactions or monetary assets and liabilities denominated in foreign currencies are recognized in earnings.
 
    At the balance sheet date, monetary assets and liabilities denominated in foreign currencies are revalued at prevailing exchange rates with the resulting gains or losses recognized in earnings.
 
    Recent Accounting Pronouncements
 
    The Accounting Research and Development Foundation (ARDF) of the R.O.C. revised Statement of Financial Accounting Standards No. 10, “Accounting for Inventories” (SFAS No. 10) in November 2007, which requires inventories to be stated at the lower of cost or net realizable value item by item. Inventories are recorded by the specific identification method, first-in, first-out method or weighted average method. The last-in, first-out method is no longer permitted. The revised SFAS No. 10 should be applied to financial statements for the fiscal years beginning on or after January 1, 2009.
 
    Reclassification
 
    Certain accounts in the financial statements as of and for the year ended December 31, 2007 have been reclassified to be consistent with the financial statements as of and for the year ended December 31, 2008.
3.   ACCOUNTING CHANGES
    Effective January 1, 2008, the Company adopted Interpretation 2007-052, “Accounting for Bonuses to Employees, Directors and Supervisors” issued in March 2007 by the ARDF, which requires companies to record bonuses paid to employees, directors and supervisors as an expense rather than as an appropriation of earnings. The adoption of this interpretation resulted in a decrease in net income and earnings per share (after income tax) of NT$12,627,332 thousand and NT$0.49, respectively, for the year ended December 31, 2008.
 
    Effective January 1, 2008, the Company adopted Statement of Financial Accounting Standards No. 39, “Accounting for Share-based Payment”, which requires companies to record share-based payment transactions in the financial statements at fair value. Such a change in accounting principle did not have any effect on the Company’s financial statements as of and for the year ended December 31, 2008.
4.   CASH AND CASH EQUIVALENTS
                 
    December 31  
    2008     2007  
 
               
Cash and deposits in banks
  $ 129,538,047     $ 61,832,143  
Repurchase agreements collateralized by government bonds
    8,670,313       10,067,843  
Asset-backed commercial papers
          522,116  
 
           
 
               
 
  $ 138,208,360     $ 72,422,102  
 
           

- 15 -


 

5.   FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
                 
    December 31  
    2008     2007  
Tradings financial assets
               
 
               
Forward exchange contracts
  $ 28,411     $ 6,516  
Cross currency swap contracts
    14,049       35,567  
 
           
 
               
 
  $ 42,460     $ 42,083  
 
           
 
               
Tradings financial liabilities
               
 
               
Forward exchange contracts
  $ 34,243     $ 183,916  
Cross currency swap contracts
    49,375       63,730  
 
           
 
               
 
  $ 83,618     $ 247,646  
 
           
    The Company entered into derivative contracts during the years ended December 31, 2008 and 2007 to manage exposures due to fluctuations of foreign exchange rates. The derivative contracts entered into by the Company did not meet the criteria for hedge accounting. Therefore, the Company did not apply hedge accounting treatment for its derivative contracts.
 
    Outstanding forward exchange contracts consisted of the following:
         
        Contract Amount
    Maturity Date   (in Thousands)
December 31, 2008
       
 
       
Sell US$/buy NT$
  January 2009 to February 2009   US$135,000/NT$4,430,925
Sell EUR/buy NT$
  January 2009   EUR1,500/NT$63,150
 
       
December 31, 2007
       
 
       
Sell US$/buy NT$
  January 2008   US$100,000/NT$3,250,952
Sell EUR/buy NT$
  February 2008 to July 2008   EUR48,000/NT$2,090,589
    Outstanding cross currency swap contracts consisted of the following:
             
        Range of   Range of
    Contract Amount   Interest Rates   Interest Rates
Maturity Date   (in Thousands)   Paid   Received
 
           
December 31, 2008
           
 
           
January 2009
  US$307,000/NT$10,061,232   0.54%-5.00%   0.00%-3.83%
December 31, 2007
           
 
           
January 2008 to February 2008
  US$975,000/NT$31,630,180   3.53%-5.60%   0.02%-3.01%
    For the years ended December 31, 2008 and 2007, valuation loss on financial instruments arising from derivative financial instruments was NT$1,230,966 thousand and NT$924,316 thousand, respectively.

- 16 -


 

6.   AVAILABLE-FOR-SALE FINANCIAL ASSETS
                 
    December 31  
    2008     2007  
 
               
Corporate bonds
  $ 2,032,658     $ 4,052,242  
Open-end mutual funds
          14,966,675  
Government bonds
          4,146,082  
Structured time deposits
          499,410  
 
           
 
    2,032,658       23,664,409  
Current portion
          (22,267,223 )
 
           
 
               
 
  $ 2,032,658     $ 1,397,186  
 
           
    Structured time deposits categorized as available-for-sale financial assets consisted of the following:
                                 
    Principal     Carrying              
    Amount     Amount     Interest Rate     Maturity Date
December 31, 2007
                               
 
                               
Step-up callable deposits
                               
Domestic deposits
  $ 500,000     $ 499,410       1.76%   March 2008
 
                           
    The interest rate of the step-up callable deposits was pre-determined by the Company and the banks.
7.   HELD-TO-MATURITY FINANCIAL ASSETS
                 
    December 31  
    2008     2007  
 
               
Corporate bonds
  $ 16,136,752     $ 10,900,247  
Government bonds
    1,506,572       7,824,425  
Structured time deposits
          1,500,000  
 
           
 
    17,643,324       20,224,672  
Current portion
    (5,881,999 )     (11,526,946 )
 
           
 
               
 
  $ 11,761,325     $ 8,697,726  
 
           
    Structured time deposits categorized as held-to-maturity financial assets consisted of the following:
                                 
    Principal     Interest     Range of        
    Amount     Receivable     Interest Rates     Maturity Date  
December 31, 2007
                               
 
                               
Step-up callable deposits
                               
Domestic deposits
  $ 1,500,000     $ 5,585       1.77%-1.83 %   April 2008 to October 2008
 
                           

- 17 -


 

8.   ALLOWANCES FOR DOUBTFUL RECEIVABLES, SALES RETURNS AND OTHERS
    Movements of the allowance for doubtful receivables were as follows:
                 
    Years Ended December 31  
    2008     2007  
 
               
Balance, beginning of year
  $ 688,972     $ 690,931  
Write-off
    (252,226 )     (1,959 )
 
           
 
               
Balance, end of year
  $ 436,746     $ 688,972  
 
           
    Movements of the allowance for sales returns and others were as follows:
                 
    Years Ended December 31  
    2008     2007  
 
               
Balance, beginning of year
  $ 3,856,685     $ 2,751,065  
Provision
    8,460,944       5,519,655  
Write-off
    (6,449,047 )     (4,414,035 )
 
           
 
               
Balance, end of year
  $ 5,868,582     $ 3,856,685  
 
           
9.   INVENTORIES
                 
    December 31  
    2008     2007  
 
               
Finished goods
  $ 5,196,063     $ 3,811,212  
Work in process
    7,694,458       15,867,005  
Raw materials
    737,494       1,428,592  
Supplies and spare parts
    529,360       612,128  
 
           
 
    14,157,375       21,718,937  
Allowance for losses
    (1,349,439 )     (731,795 )
 
           
 
               
 
  $ 12,807,936     $ 20,987,142  
 
           

- 18 -


 

10.   INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD
                                 
    December 31
    2008   2007
            % of           % of
    Carrying     Owner-   Carrying     Owner-
    Amount     ship   Amount     ship
 
                               
TSMC Global Ltd. (TSMC Global)
  $ 45,756,519       100     $ 44,204,188       100  
TSMC International Investment Ltd. (TSMC International)
    29,637,057       100       27,688,565       100  
Vanguard International Semiconductor Corporation (VIS)
    9,787,275       37       11,024,568       36  
Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)
    6,808,192       39       9,092,741       39  
TSMC (Shanghai) Company Limited (TSMC Shanghai)
    6,267,128       100       8,622,715       100  
TSMC Partners, Ltd. (TSMC Partners)
    3,730,913       100       4,734,180       100  
TSMC North America
    2,435,666       100       2,255,647       100  
XinTec Inc. (XinTec)
    1,506,384       42       1,501,521       43  
VentureTech Alliance Fund III, L.P. (VTAF III)
    1,305,605       98       906,536       98  
VentureTech Alliance Fund II, L.P. (VTAF II)
    975,367       98       1,170,841       98  
Global UniChip Corporation (GUC)
    950,263       36       823,552       37  
Emerging Alliance Fund, L.P. (Emerging Alliance)
    433,481       99       467,873       99  
TSMC Japan Limited (TSMC Japan)
    137,617       100       104,929       100  
Taiwan Semiconductor Manufacturing Company Europe B.V. (TSMC Europe)
    124,594       100       88,702       100  
TSMC Korea Limited (TSMC Korea)
    15,117       100       16,436       100  
Chi Cherng Investment Co., Ltd. (Chi Cherng)
                173,429       36  
Hsin Ruey Investment Co., Ltd. (Hsin Ruey)
                171,658       36  
 
                           
 
                               
 
  $ 109,871,178             $ 113,048,081          
 
                           
    In August 2007, the Company acquired additional 169,600 thousand shares in VIS for NT$4,927,865 thousand; after the acquisition, the Company’s percentage of ownership in VIS increased from 27% to 36%.
 
    Chi Cherng and Hsin Ruey, both 100% owned subsidiaries of the Company, were engaged in investing activities. To simplify the organization structure of investment, the Company merged Chi Cherng and Hsin Ruey in the third quarter of 2008.
 
    For the years ended December 31, 2008 and 2007, net equity in earnings of equity method investees of NT$72,568 thousand and NT$5,468,230 thousand were recognized, respectively. The related equity in earnings of equity method investees were determined based on the audited financial statements of the investees for the same periods as the Company.
 
    As of December 31, 2008 and 2007, fair values of publicly traded stocks in investments accounted for using equity method (VIS and GUC) was NT$9,889,107 thousand and NT$24,319,275 thousand, respectively.

- 19 -


 

    Movements of the difference between the cost of investments and the Company’s share in investees’ net assets allocated to depreciable assets were as follows:
                 
    Years Ended December 31  
    2008     2007  
 
               
Balance, beginning of year
  $ 2,677,388     $ 943,277  
Addition
          2,081,282  
Amortization
    (624,135 )     (347,171 )
 
           
 
               
Balance, end of year
  $ 2,053,253     $ 2,677,388  
 
           
    Movements of the aforementioned difference allocated to goodwill were as follows:
                 
    Years Ended December 31  
    2008     2007  
 
               
Balance, beginning of year
  $ 987,349     $ 213,984  
Addition
    74,536       773,365  
 
           
 
               
Balance, end of year
  $ 1,061,885     $ 987,349  
 
           
11.   FINANCIAL ASSETS CARRIED AT COST
                 
    December 31  
    2008     2007  
 
               
Non-publicly traded stocks
  $ 357,509     $ 364,913  
Mutual funds
    161,993       383,247  
 
           
 
               
 
  $ 519,502     $ 748,160  
 
           
    For the years ended December 31, 2008 and 2007, the loss on impairment of financial assets carried at cost was recognized NT$ 247,488 thousand and nil, respectively.
12.   PROPERTY, PLANT AND EQUIPMENT
                                         
    Year Ended December 31, 2008  
    Balance,                              
    Beginning of     Addition                     Balance,  
    Year     (Deductions)     Disposals     Reclassification     End of Year  
Cost
                                       
Buildings
  $ 101,907,892     $ 12,115,531     $ (8,524 )   $ (311 )   $ 114,014,588  
Machinery and equipment
    589,131,625       49,396,313       (3,385,502 )     (134,175 )     635,008,261  
Office equipment
    9,167,107       764,414       (182,709 )     57       9,748,869  
 
                             
 
    700,206,624     $ 62,276,258     $ (3,576,735 )   $ (134,429 )     758,771,718  
 
                             
Accumulated depreciation
                                       
Buildings
    57,349,828     $ 8,010,214     $ (8,524 )   $ (4 )     65,351,514  
Machinery and equipment
    422,278,071       63,145,978       (1,258,542 )     (119,347 )     484,046,160  
Office equipment
    7,097,120       935,140       (182,706 )     26       7,849,580  
 
                             
 
    486,725,019     $ 72,091,332     $ (1,449,772 )   $ (119,325 )     557,247,254  
 
                             
Advance payments and construction in progress
    21,082,953     $ (3,324,915 )   $     $       17,758,038  
 
                             
 
                                       
Net
  $ 234,564,558                             $ 219,282,502  
 
                                   

- 20 -


 

                                         
    Year Ended December 31, 2007  
    Balance,                              
    Beginning of                           Balance,  
    Year     Addition     Disposals     Reclassification     End of Year  
Cost
                                       
Buildings
  $ 96,961,851     $ 5,025,296     $ (31,835 )   $ (47,420 )   $ 101,907,892  
Machinery and equipment
    527,850,728       61,793,498       (487,386 )     (25,215 )     589,131,625  
Office equipment
    8,659,225       936,003       (328,555 )     (99,566 )     9,167,107  
 
                             
 
    633,471,804     $ 67,754,797     $ (847,776 )   $ (172,201 )     700,206,624  
 
                             
Accumulated depreciation
                                       
Buildings
    49,595,917     $ 7,783,832     $ (30,957 )   $ 1,036       57,349,828  
Machinery and equipment
    361,401,800       61,492,223       (459,113 )     (156,839 )     422,278,071  
Office equipment
    6,469,533       958,315       (328,363 )     (2,365 )     7,097,120  
 
                             
 
    417,467,250     $ 70,234,370     $ (818,433 )   $ (158,168 )     486,725,019  
 
                             
Advance payments and construction in progress
    12,230,805     $ 8,268,467     $     $ 583,681       21,082,953  
 
                             
 
                                       
Net
  $ 228,235,359                             $ 234,564,558  
 
                                   
    No interest was capitalized during the years ended December 31, 2008 and 2007.
13.   DEFERRED CHARGES, NET
                                                 
    Year Ended December 31, 2008  
    Balance,                                      
    Beginning of                             Reclassifi-     Balance,  
    Year     Addition     Amortization     Disposals     cation     End of Year  
 
                                               
Technology license fees
  $ 5,349,937     $     $ (1,563,686 )   $     $     $ 3,786,251  
Software and system design costs
    1,309,272       945,279       (680,474 )     (14,279 )     59       1,559,857  
Patent and others
    513,204       733,342       (191,193 )                 1,055,353  
 
                                   
 
                                               
 
  $ 7,172,413     $ 1,678,621     $ (2,435,353 )   $ (14,279 )   $ 59     $ 6,401,461  
 
                                   
                                                 
    Year Ended December 31, 2007  
    Balance,                                      
    Beginning of                             Reclassifi-     Balance,  
    Year     Addition     Amortization     Disposals     cation     End of Year  
 
                                               
Technology license fees
  $ 4,038,551     $ 3,263,950     $ (1,656,113 )   $     $ (296,451 )   $ 5,349,937  
Software and system design costs
    1,517,575       1,181,579       (820,183 )     (51 )     (569,648 )     1,309,272  
Patent and others
    36,942       283,990       (104,179 )           296,451       513,204  
 
                                   
 
                                               
 
  $ 5,593,068     $ 4,729,519     $ (2,580,475 )   $ (51 )   $ (569,648 )   $ 7,172,413  
 
                                   
14.   BONDS PAYABLE
                 
    December 31  
    2008     2007  
Domestic unsecured bonds:
               
Issued in January 2002 and repayable in January 2009 and 2012 in two installments, 2.75% and 3.00% interest payable annually, respectively
  $ 12,500,000     $ 12,500,000  
 
               
Current portion
    (8,000,000 )      
 
           
 
               
 
  $ 4,500,000     $ 12,500,000  
 
           

- 21 -


 

    As of December 31, 2008, future principal repayments for the bonds payable were as follows:
         
Year of Repayment   Amount  
 
       
2009
  $ 8,000,000  
2012
    4,500,000  
 
     
 
       
 
  $ 12,500,000  
 
     
15.   OTHER LONG-TERM PAYABLES
    Most of the payables resulted from license agreements for certain semiconductor-related patents. As of December 31, 2008, future payments for other long-term payables were as follows:
         
Year of Payment   Amount  
 
       
2009
  $ 1,026,421  
2010
    504,072  
2011
    427,180  
 
     
 
    1,957,673  
Current portion (classified under accrued expenses and other current liabilities)
    (1,026,421 )
 
     
 
       
 
  $ 931,252  
 
     
16.   PENSION PLANS
    The pension mechanism under the Labor Pension Act is deemed a defined contribution plan. Pursuant to the Act, the Company has made monthly contributions equal to 6% of each employee’s monthly salary to employees’ pension accounts and recognized pension costs of NT$657,870 thousand and NT$616,548 thousand for the years ended December 31, 2008 and 2007, respectively.
 
    The Company has a defined benefit plan under the Labor Standards Law that provides benefits based on an employee’s service years and average monthly salary for the six-month period prior to retirement. The Company contributes an amount equal to 2% of salaries paid each month to a pension fund (the Fund), which is administered by the Labor Pension Fund Supervisory Committee (the Committee) and deposited in the Committee’s name in the Bank of Taiwan (originally the Central Trust of China, which was dissolved after merger with the Bank of Taiwan on July 1, 2007).
 
    Pension information on the defined benefit plan is summarized as follows:
  a.   Components of net periodic pension cost for the year
                 
    2008     2007  
 
               
Service cost
  $ 151,603     $ 184,232  
Interest cost
    170,025       155,297  
Projected return on plan assets
    (67,315 )     (50,326 )
Amortization
    3,776       35,596  
 
           
 
               
Net periodic pension cost
  $ 258,089     $ 324,799  
 
           

- 22 -


 

  b.   Reconciliation of funded status of the plans and accrued pension cost at December 31, 2008 and 2007
                 
    2008     2007  
 
               
Benefit obligation
               
Vested benefit obligation
  $ 114,930     $ 120,146  
Nonvested benefit obligation
    4,146,366       3,450,818  
 
           
Accumulated benefit obligation
    4,261,296       3,570,964  
Additional benefits based on future salaries
    3,245,483       2,428,786  
 
           
Projected benefit obligation
    7,506,779       5,999,750  
Fair value of plan assets
    (2,441,687 )     (2,199,189 )
 
           
Funded status
    5,065,092       3,800,561  
Unrecognized net transition obligation
    (99,591 )     (107,891 )
Prior service cost
    169,216        
Unrecognized net loss
    (1,424,708 )     (34,991 )
 
           
 
               
Accrued pension cost
  $ 3,710,009     $ 3,657,679  
 
           
 
               
Vested benefit
  $ 126,259     $ 125,443  
 
           
 
               
c.     Actuarial assumptions at December 31, 2008 and 2007
               
 
Discount rate used in determining present values
    2.00 %     2.75 %
Future salary increase rate
    3.00 %     3.00 %
Expected rate of return on plan assets
    2.25 %     3.00 %
 
               
d.     Contributions to the Funds for the year
  $ 202,263     $ 200,732  
 
           
 
               
e.     Payments from the Funds for the year
  $ 28,990     $ 15,003  
 
           
17.   INCOME TAX
  a.   A reconciliation of income tax expense based on “income before income tax” at statutory rate and income tax currently payable was as follows:
                 
    Years Ended December 31  
    2008     2007  
 
               
Income tax expense based on “income before income tax” at statutory rate (25%)
  $ 27,689,695     $ 30,187,852  
Tax effect of the following:
               
Tax-exempt income
    (9,610,935 )     (7,602,675 )
Temporary and permanent differences
    1,815,594       (789,073 )
Others
    41,235        
Additional tax at 10% on unappropriated earnings
          2,686,561  
Income tax credits used
    (10,967,795 )     (13,740,683 )
 
           
 
               
Income tax currently payable
  $ 8,967,794     $ 10,741,982  
 
           
(Continued)

- 23 -


 

                 
    Years Ended December 31  
    2008     2007  
 
               
b.      Income tax expense consisted of the following:
               
 
               
Income tax currently payable
  $ 8,967,794     $ 10,741,982  
Other income tax adjustments
    (503,405 )     (250,863 )
Net change in deferred income tax assets
               
Investment tax credits
    1,224,537       5,120,137  
Temporary differences
    (1,792,789 )     (302,847 )
Valuation allowance
    2,929,513       (3,734,096 )
 
           
 
               
Income tax expense
  $ 10,825,650     $ 11,574,313  
 
           
(Concluded)
  c.   Net deferred income tax assets consisted of the following:
                 
    December 31  
    2008     2007  
 
               
Current deferred income tax assets
               
Investment tax credits
  $ 2,791,000     $ 5,268,000  
Temporary differences
    859,700        
 
           
 
               
 
  $ 3,650,700     $ 5,268,000  
 
           
Noncurrent deferred income tax assets
               
Investment tax credits
  $ 10,821,218     $ 9,568,755  
Temporary differences
    2,076,400       1,143,311  
Valuation allowance
    (6,399,646 )     (3,470,133 )
 
           
 
               
 
  $ 6,497,972     $ 7,241,933  
 
           
  d.   Integrated income tax information:
 
      The balance of the imputation credit account as of December 31, 2008 and 2007 was NT$521,634 thousand and NT$3,012,848 thousand, respectively.
 
      The estimated creditable ratio for distribution of earnings of 2008 and 2007 was 0.51% and 9.83%, respectively.
 
      The imputation credit allocated to shareholders is based on its balance as of the date of dividend distribution. The estimated creditable ratio may change when the actual distribution of imputation credit is made.
 
  e.   All earnings generated prior to December 31, 1997 have been appropriated.

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  f.   As of December 31, 2008, investment tax credits consisted of the following:
                                 
            Total     Remaining        
            Creditable     Creditable     Expiry
Law/Statute   Item     Amount     Amount     Year
 
                               
Statute for Upgrading Industries
  Purchase of machinery and equipment   $ 219,587     $       2009  
 
            6,063,320             2010  
 
            4,597,477       4,597,477       2011  
 
            2,661,596       2,661,596       2012  
 
                           
 
                               
 
          $ 13,541,980     $ 7,259,073          
 
                           
 
                               
Statute for Upgrading Industries
  Research and development expenditures   $ 1,000,000     $       2008  
 
            1,127,051             2009  
 
            3,163,784       627,742       2010  
 
            2,687,841       2,687,841       2011  
 
            2,977,848       2,977,848       2012  
 
                           
 
                               
 
          $ 10,956,524     $ 6,293,431          
 
                           
 
                               
Statute for Upgrading Industries
  Personnel training expenditures   $ 21,795     $       2009  
 
            23,146       23,146       2010  
 
            36,568       36,568       2011  
 
                           
 
                               
 
          $ 81,509     $ 59,714          
 
                           
  g.   The profits generated from the following projects are exempt from income tax for a five-year period:
         
    Tax-exemption Period
 
       
Construction of Fab 14 — Module A
    2006 to 2010  
Construction of Fab 12 — Module B and expansion of Fab 14 — Module A
    2007 to 2011  
Construction of Fab 14 — Module B and expansion of Fab 12 and others
    2008 to 2012  
  h.   The tax authorities have examined income tax returns of the Company through 2006.
18.   LABOR COST, DEPRECIATION AND AMORTIZATION
                         
    Year Ended December 31, 2008  
            Classified as        
    Classified as     Operating        
    Cost of Sales     Expenses     Total  
 
                       
Labor cost
                       
Salary and bonus
  $ 17,088,512     $ 11,989,661     $ 29,078,173  
Labor and health insurance
    677,817       379,196       1,057,013  
Pension
    587,281       328,669       915,950  
Meal
    437,910       174,906       612,816  
Welfare
    174,641       100,989       275,630  
Others
    190,323       15,979       206,302  
 
                 
 
                       
 
  $ 19,156,484     $ 12,989,400     $ 32,145,884  
 
                 
 
                       
Depreciation
  $ 68,373,886     $ 3,701,241     $ 72,075,127  
 
                 
Amortization
  $ 1,771,919     $ 663,434     $ 2,435,353  
 
                 

- 25 -


 

                         
    Year Ended December 31, 2007  
            Classified as        
    Classified as     Operating        
    Cost of Sales     Expenses     Total  
Labor cost
                       
Salary
  $ 9,201,605     $ 4,392,243     $ 13,593,848  
Labor and health insurance
    608,748       337,124       945,872  
Pension
    605,879       335,596       941,475  
Meal
    434,106       167,962       602,068  
Welfare
    183,463       110,894       294,357  
Others
    175,781       12,011       187,792  
 
                 
 
                       
 
  $ 11,209,582     $ 5,355,830     $ 16,565,412  
 
                 
 
                       
Depreciation
  $ 66,375,152     $ 3,816,399     $ 70,191,551  
 
                 
Amortization
  $ 1,801,193     $ 778,185     $ 2,579,378  
 
                 
19.   SHAREHOLDERS’ EQUITY
    As of December 31, 2008, 1,092,053 thousand ADSs of the Company were traded on the NYSE. The number of common shares represented by the ADSs is 5,460,265 thousand (one ADS represents five common shares).
 
    Capital surplus can only be used to offset a deficit under the Company Law. However, the capital surplus generated from donations and the excess of the issuance price over the par value of capital stock (including the stock issued for new capital, mergers, convertible bonds and the surplus from treasury stock transactions) may be appropriated as stock dividends, which are limited to a certain percentage of the Company’s paid-in capital. Also the capital surplus from long-term investments may not be used for any purpose.
 
    Capital surplus consisted of the following:
                 
    December 31  
    2008     2007  
 
               
From merger
  $ 22,805,390     $ 24,003,546  
Additional paid-in capital
    17,962,468       19,526,492  
From convertible bonds
    8,893,190       9,360,424  
From long-term investments
    214,152       351,215  
Donations
    55       55  
From treasury stock transactions
          490,950  
 
           
 
               
 
  $ 49,875,255     $ 53,732,682  
 
           
    The Company’s Articles of Incorporation provide that, when allocating the net profits for each fiscal year, the Company shall first offset its losses in previous years and then set aside the following items accordingly:
  a.   Legal capital reserve at 10% of the profits left over, until the accumulated legal capital reserve equals the Company’s paid-in capital;
 
  b.   Special capital reserve in accordance with relevant laws or regulations or as requested by the authorities in charge;

- 26 -


 

  c.   Bonus to directors and bonus to employees of the Company of not more than 0.3% and not less than 1% of the remainder, respectively. Directors who also serve as executive officers of the Company are not entitled to receive the bonus to directors. The Company may issue stock bonuses to employees of an affiliated company meeting the conditions set by the Board of Directors or, by the person duly authorized by the Board of Directors;
 
  d.   Any balance left over shall be allocated according to the resolution of the shareholders’ meeting.
    The Company’s Articles of Incorporation also provide that profits of the Company may be distributed by way of cash dividend and/or stock dividend. However, distribution of profits shall be made preferably by way of cash dividend. Distribution of profits may also be made by way of stock dividend; provided that the ratio for stock dividend shall not exceed 50% of the total distribution.
 
    Any appropriations of the profits are subject to shareholder’s approval in the following year.
 
    For the year ended December 31, 2008, the Company has recorded bonuses to employees and directors with a charge to earnings of approximately 15% of net income. If the actual amounts subsequently resolved by the shareholders differ from the proposed amounts by the Board of Directors, the differences are recorded in the year of shareholders’ resolution as a change in accounting estimate. If stock bonuses are resolved to be distributed to employees, the number of shares is determined by dividing the amount of bonuses by the closing price (after considering the effect of cash and stock dividends) of the shares on the day preceding the shareholders’ meeting.
 
    The Company no longer has supervisors since January 1, 2007. The required duties of supervisors are being fulfilled by the Audit Committee.
 
    The appropriation for legal capital reserve shall be made until the reserve equals the Company’s paid-in capital. The reserve may be used to offset a deficit, or be distributed as dividends and bonuses for the portion in excess of 50% of the paid-in capital if the Company has no unappropriated earnings and the reserve balance has exceeded 50% of the Company’s paid-in capital. The Company Law also prescribes that, when the reserve has reached 50% of the Company’s paid-in capital, up to 50% of the reserve may be transferred to capital.
 
    A special capital reserve equivalent to the net debit balance of the other components of shareholders’ equity (for example, cumulative translation adjustments and unrealized loss on financial instruments, but excluding treasury stock) shall be made from unappropriated earnings pursuant to existing regulations promulgated by the Securities and Futures Bureau (SFB). Any special reserve appropriated may be reversed to the extent that the net debit balance reverses.
 
    The appropriations of earnings for 2007 and 2006 had been approved in the shareholders’ meetings held on June 13, 2008 and May 7, 2007, 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 2007     Year 2006     Year 2007     Year 2006  
 
                               
Legal capital reserve
  $ 10,917,709     $ 12,700,973                  
Special capital reserve
    (237,693 )     (11,192 )                
Bonus to employees — in cash
    3,939,883       4,572,798                  
Bonus to employees — in stock
    3,939,883       4,572,798                  
Cash dividends to shareholders
    76,881,311       77,489,064     $ 3.00     $ 3.00  
Stock dividends to shareholders
    512,542       516,594       0.02       0.02  
Bonus to directors and supervisors
    176,890       285,800                  
 
                           
 
                               
 
  $ 96,130,525     $ 100,126,835                  
 
                           

- 27 -


 

    The shareholders’ meeting held on June 13, 2008 and May 7, 2007 also resolved to distribute stock dividends out of capital surplus in the amount of NT$768,813 thousand and NT$774,891 thousand, respectively.
 
    The amounts of the appropriations of earnings for 2007 and 2006 were consistent with the resolutions of the meetings of the Board of Directors held on February 19, 2008 and February 6, 2007, respectively. If the above bonus to employees, directors and supervisors had been paid entirely in cash and charged to earnings of 2007 and 2006, the basic earnings per share (after income tax) for the years ended December 31, 2007 and 2006 shown in the respective financial statements would have decreased from NT$4.14 to NT$3.84 and NT$4.93 to NT$4.56, respectively. The shares distributed as a bonus to employees represented 1.49 % and 1.77% of the Company’s total outstanding common shares as of December 31, 2007 and 2006, respectively.
 
    As of January 17, 2009, the Board of Directors has not resolved the appropriation for earnings of 2008.
 
    The information about the appropriations of bonus to employees, directors and supervisors is available at the Market Observation Post System website.
 
    Under the Integrated Income Tax System that became effective on January 1, 1998, R.O.C. resident shareholders are allowed a tax credit for their proportionate share of the income tax paid by the Company on earnings generated since January 1, 1998.
20.   STOCK-BASED COMPENSATION PLANS
    The Company’s Employee Stock Option Plans, consisting the 2004 Plan, 2003 Plan and 2002 Plan were approved by the SFB on January 6, 2005, October 29, 2003 and June 25, 2002, respectively. The maximum number of options authorized to be granted under the 2004 Plan, 2003 Plan and 2002 Plan was 11,000 thousand, 120,000 thousand and 100,000 thousand, respectively, with each option eligible to subscribe for one common share when exercisable. The options may be granted to qualified employees of the Company or any of its domestic or foreign subsidiaries, in which the Company’s shareholding with voting rights, directly or indirectly, is more than fifty percent (50%). The options of all the plans are valid for ten years and exercisable at certain percentages subsequent to the second anniversary of the grant date. Under the terms of the plans, the options are granted at an exercise price equal to the closing price of the Company’s common shares listed on the TSE on the grant date.
 
    Options of the plans that had never been granted or had been granted but subsequently canceled had expired as of December 31, 2008.
 
    Information about outstanding options for the years ended December 31, 2008 and 2007 was as follows:
                 
            Weighted-
            average
    Number of   Exercise
    Options   Price
    (in Thousands)   (NT$)
Year ended December 31, 2008
               
 
               
Balance, beginning of year
    41,875     $ 35.6  
Options granted
    767       35.2  
Options exercised
    (6,027 )     37.7  
Options canceled
    (381 )     46.5  
 
               
 
               
Balance, end of year
    36,234       35.3  
 
               
(Continued)

- 28 -


 

                 
            Weighted-
            average
    Number of   Exercise
    Options   Price
    (in Thousands)   (NT$)
Year ended December 31, 2007
               
 
               
Balance, beginning of year
    52,814     $ 37.9  
Options granted
    1,094       37.9  
Options exercised
    (10,988 )     39.8  
Options canceled
    (1,045 )     45.9  
 
               
 
               
Balance, end of year
    41,875       37.4  
 
               
(Concluded)
    The numbers of outstanding options and exercise prices have been adjusted to reflect the appropriations of earnings in accordance with the plans. The options granted were the result of the aforementioned adjustment.
 
    As of December 31, 2008, 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$)
 
                                       
$24.2-$33.9
    25,633       4.15     $ 31.0       25,633     $ 31.0  
38.2- 50.4
    10,601       5.89       45.8       8,669       45.5  
 
                                       
 
                                       
 
    36,234               35.3       34,302       34.6  
 
                                       
    No compensation cost was recognized under the intrinsic value method for the years ended December 31, 2008 and 2007. Had the Company used the fair value based method to evaluate the options, using the Black-Scholes model, the assumptions and pro forma results of the Company for the years ended December 31, 2008 and 2007 would have been as follows:
         
    Years Ended December 31
    2008   2007
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
  $   99,933,168      $   109,177,093     
Pro forma net income
  100,037,622   109,054,923
 
       
Earnings per share (EPS) — after income tax (NT$):
       
Basic EPS as reported
  $3.86     $4.06  
Pro forma basic EPS
  3.86   4.06
Diluted EPS as reported
  3.83   4.06
Pro forma diluted EPS
  3.83   4.06

- 29 -


 

21.   TREASURY STOCK
                                         
                            (Shares in Thousands)
    Beginning           Stock           Ending
    Shares   Addition   Dividends   Retirement   Shares
Year ended December 31, 2008
                                       
 
                                       
Parent company stock held by subsidiaries
    34,096             171       34,267        
Repurchase under share buyback plan
    800,000       495,549             1,295,549        
 
                                       
 
                                       
 
    834,096       495,549       171       1,329,816        
 
                                       
Year ended December 31, 2007
                                       
 
                                       
Parent company stock held by subsidiaries
    33,926             170             34,096  
Repurchase under share buyback plan
          800,000                   800,000  
 
                                       
 
                                       
 
    33,926       800,000       170             834,096  
 
                                       
    As of December 31, 2007, the book value of the treasury stock was NT$49,385,032 thousand; the market value was NT$51,713,947 thousand. The Company’s common shares held by subsidiaries were treated as treasury stock and the holders are entitled to the rights of shareholders, with the exception of voting rights.
 
    The Company held a meeting of the Board of Directors on November 13, 2007 and approved a share buyback plan to repurchase the Company’s common shares up to 800,000 thousand shares listed on the TSE during the period from November 14, 2007 to January 13, 2008 for the buyback price in the range from NT$43.2 to NT$94.2. The Company had repurchased 800,000 thousand common shares. All the treasury stock repurchased under this share buyback plan was retired in February 2008.
 
    The Company held a meeting of the Board of Directors on May 13, 2008 and approved a share buyback plan to repurchase the Company’s common shares up to 500,000 thousand shares listed on the TSE during the period from May 14, 2008 to July 13, 2008 for the buyback price in the range from NT$48.25 to NT$100.50. The Company had repurchased 216,674 thousand common shares. All the treasury stock repurchased under this share buyback plan was retired in August 2008.
 
    The Company held a meeting of the Board of Directors on August 12, 2008 and approved a share buyback plan to repurchase the Company’s common shares up to 283,000 thousand shares listed on the TSE during the period from August 13, 2008 to October 12, 2008 for the buyback price in the range from NT$42.85 to NT$86.20. The Company had repurchased 278,875 thousand common shares. All the treasury stock repurchased under this share buyback plan was retired in November 2008.
 
    As discussed in Note 10, the Company merged Chi Cherng and Hsin Ruey in the third quarter of 2008. The Company’s common shares held by Chi Cherng and Hsin Ruey in the number of 34,267 thousand shares were retired in August 2008.

- 30 -


 

22.   EARNINGS PER SHARE
    EPS is computed as follows:
                                         
                    Number of     EPS (NT$)  
    Amounts (Numerator)     Shares     Before     After  
    Before     After     (Denominator)     Income     Income  
    Income Tax     Income Tax     (in Thousands)     Tax     Tax  
Year ended December 31, 2008
                                       
 
                                       
Basic EPS
                                       
Earnings available to common shareholders
  $ 110,758,818     $ 99,933,168       25,909,643     $ 4.27     $ 3.86  
 
                                   
Effect of dilutive potential common shares
                                       
Bonus to employees
                181,943                  
Stock options
                15,090                  
 
                                 
 
                                       
Diluted EPS
                                       
Earnings available to common shareholders (including effect of dilutive potential common shares)
  $ 110,758,818     $ 99,933,168       26,106,676     $ 4.24     $ 3.83  
 
                             
 
                                       
Year ended December 31, 2007
                                       
 
                                       
Basic EPS
                                       
Earnings available to common shareholders
  $ 120,751,406     $ 109,177,093       26,870,684     $ 4.49     $ 4.06  
 
                                   
Effect of dilutive potential common shares
                                       
Stock options
                21,652                  
 
                                 
 
                                       
Diluted EPS
                                       
Earnings available to common shareholders (including effect of dilutive potential common shares)
  $ 120,751,406     $ 109,177,093       26,892,336     $ 4.49     $ 4.06  
 
                             
    As discussed in Note 3, effective January 1, 2008, the Company adopted Interpretation 2007-052 that requires companies to record bonuses paid to employees as an expense rather than as an appropriation of earnings. If the Company may settle the obligation by cash, by issuing share, or in combination of both cash and shares, potential shares from bonus to employees which will be settled in shares should be included in the weighted average number of shares outstanding in calculation of diluted EPS, if the shares have a dilutive effect. The number of shares is estimated by dividing the amount of bonus to employees by the closing price (after consideration of the dilutive effect of dividends) of the common shares on the balance sheet date. Such dilutive effect of the potential shares needs to be included in the calculation of diluted EPS until the shares of employee bonus are resolved in the shareholders’ meeting in the following year.
 
    The average number of shares outstanding for EPS calculation has been retroactively adjusted for the issuance of stock dividends and employee stock bonuses. This adjustment caused both of the basic and diluted after income tax EPS for the year ended December 31, 2007 to decrease from NT$4.14 to NT$4.06.

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23.   DISCLOSURES FOR FINANCIAL INSTRUMENTS
  a.   Fair values of financial instruments were as follows:
                                 
    December 31
    2008   2007
    Carrying           Carrying    
    Amount   Fair Value   Amount   Fair Value
Assets
                               
 
                               
Financial assets at fair value through profit or loss
  $ 42,460     $ 42,460     $ 42,083     $ 42,083  
Available-for-sale financial assets
    2,032,658       2,032,658       23,664,409       23,664,409  
Held-to-maturity financial assets
    17,643,324       17,674,733       20,224,672       20,192,188  
 
                               
Liabilities
                               
 
                               
Financial liabilities at fair value through profit or loss
    83,618       83,618       247,646       247,646  
Bonds payable (including current portion)
    12,500,000       12,612,423       12,500,000       12,669,987  
Other long-term payables (including current portion)
    1,957,673       1,957,673       5,174,644       5,174,644  
  b.   Methods and assumptions used in the estimation of fair values of financial instruments
  1)   The aforementioned financial instruments do not include cash and cash equivalents, receivables, other financial assets, refundable deposits, payables, payables to contractors and equipment suppliers and guarantee deposits. The carrying amounts of these financial instruments approximate their fair values due to their short maturities.
 
  2)   For those financial assets/liabilities at fair value through profit or loss with no quoted market prices, their fair values are determined using valuation techniques incorporating estimates and assumptions that were consistent with prevailing market conditions.
 
  3)   Fair values of available-for-sale and held-to-maturity financial assets were based on their quoted market prices, except for structured time deposits of which the fair values were estimated using valuation techniques.
 
  4)   Fair value of bonds payable was based on their quoted market price.
 
  5)   Fair value of other long-term payables was based on the present value of expected cash flows, which approximates their carrying amount.
  c.   The changes in fair value of derivatives contracts which were outstanding as of December 31, 2008 and 2007 estimated using valuation techniques were recognized as valuation losses of NT$41,158 thousand and NT$205,563 thousand, respectively.
 
  d.   As of December 31, 2008 and 2007, financial assets exposed to fair value interest rate risk were NT$19,718,442 thousand and NT$43,931,164 thousand, respectively; financial liabilities exposed to fair value interest rate risk were NT$12,583,618 thousand and NT$12,747,646 thousand; and financial assets exposed to cash flow interest rate risk were both nil.

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  e.   Movements of the unrealized gain/loss on financial instruments for the years ended December 31, 2008 and 2007 were as follows:
                         
    Year Ended December 31, 2008  
    From     From        
    Available-     Available-for-        
    for-sale     sale Financial        
    Financial     Assets Held by        
    Assets     Investees     Total  
 
                       
Balance, beginning of year
  $ 266,573     $ 414,424     $ 680,997  
Recognized directly in shareholders’ equity
    209,489       (734,424 )     (524,935 )
Removed from shareholders’ equity and recognized in earnings
    (443,404 )           (443,404 )
 
                 
 
                       
Balance, end of year
  $ 32,658     $ (320,000 )   $ (287,342 )
 
                 
                         
    Year Ended December 31, 2007  
    From     From        
    Available-     Available-for-        
    for-sale     sale Financial        
    Financial     Assets Held by        
    Assets     Investees     Total  
 
                       
Balance, beginning of year
  $ 242,248     $ 319,367     $ 561,615  
Recognized directly in shareholders’ equity
    295,419       95,057       390,476  
Removed from shareholders’ equity and recognized in earnings
    (271,094 )           (271,094 )
 
                 
 
                       
Balance, end of year
  $ 266,573     $ 414,424     $ 680,997  
 
                 
  f.   Information about financial risks
  1)   Market risk. The derivative financial instruments categorized as financial assets/liabilities at fair value through profit or loss are mainly used to hedge the exchange rate fluctuations of foreign-currency assets and liabilities; therefore, the market risk of derivatives will be offset by the foreign exchange risk of these hedged items. Available-for-sale financial assets held by the Company are mainly fixed-interest-rate debt securities; therefore, the fluctuations in market interest rates will result in changes in fair values of these debt securities. Subject to recent turmoil in the global financial market, the Company had evaluated its financial instruments and the Company believed the exposure to market risk as of December 31, 2008 was not significant.
 
  2)   Credit risk. Credit risk represents the potential loss that would be incurred by the Company if the counter-parties or third-parties breached contracts. Financial instruments with positive fair values at the balance sheet date are evaluated for credit risk. Subject to recent turmoil in the global financial market, the Company evaluated whether the financial instruments for any possible counter-party or third-parties are reputable financial institutions, business enterprises, and government agencies and accordingly, the Company believed that the Company’s exposure to credit risk as of December 31, 2008 was not significant.
 
  3)   Liquidity risk. The Company has sufficient operating capital to meet cash needs upon settlement of derivative financial instruments and bonds payable. Therefore, the liquidity risk is low.
 
  4)   Cash flow interest rate risk. The Company mainly invests in fixed-interest-rate debt securities. Therefore, cash flows are not expected to fluctuate significantly due to changes in market interest rates.

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24.   RELATED PARTY TRANSACTIONS
    The Company engages in business transactions with the following related parties:
  a.   Subsidiaries
 
      TSMC North America
TSMC Shanghai
TSMC Europe
TSMC Japan
TSMC Korea
  b.   Investees
 
      GUC (with a controlling financial interest)
VIS (accounted for using equity method)
SSMC (accounted for using equity method)
 
  c.   Indirect subsidiaries
 
      WaferTech, LLC (WaferTech)
TSMC Technology, Inc. (TSMC Technology)
TSMC Design Technology Canada, Inc. (TSMC Canada)
 
  d.   Indirect investee
 
      VisEra Technology Company, Ltd. (VisEra), an indirect investee accounted for using equity method.
 
  e.   Others
 
      Related parties over which the Company has control or exercises significant influence but with which the Company had no material transactions.
    Transactions with the aforementioned parties, other than those disclosed in other notes, are summarized as follows:
                                 
    2008     2007  
    Amount     %     Amount     %  
For the year
                               
 
                               
Sales
                               
TSMC North America
  $ 192,986,719       58     $ 192,846,641       61  
Others
    1,814,440       1       1,072,708        
 
                       
 
                               
 
  $ 194,801,159       59     $ 193,919,349       61  
 
                       
 
                               
Purchases
                               
WaferTech
  $ 8,207,876       22     $ 8,774,750       18  
TSMC Shanghai
    4,717,676       12       5,828,541       12  
SSMC
    4,441,795       12       5,468,410       11  
VIS
    3,209,028       8       4,188,107       9  
Others
                1,028        
 
                       
 
                               
 
  $ 20,576,375       54     $ 24,260,836       50  
 
                       

- 34 -


 

                                 
    2008     2007  
    Amount     %     Amount     %  
Manufacturing expenses — outsourcing
                               
VisEra
  $ 72,174           $ 39,078        
 
                       
 
                               
Marketing expenses — commission
                               
TSMC Europe
  $ 367,846       16     $ 316,748       24  
TSMC Japan
    251,367       11       220,858       16  
TSMC Korea
    16,408       1       26,818       2  
 
                       
 
                               
 
  $ 635,621       28     $ 564,424       42  
 
                       
 
                               
General and administrative expenses — rental
                               
GUC
  $ 1,050           $ 6,139        
 
                       
 
                               
Research and development expenses
                               
TSMC Technology (primarily consulting fee)
  $ 352,900       2     $ 354,423       2  
TSMC Canada (primarily consulting fee)
    172,291       1       129,665       1  
GUC
    18,940             56,887       1  
Others
    994             44,168        
 
                       
 
                               
 
  $ 545,125       3     $ 585,143       4  
 
                       
 
                               
Sales of property, plant and equipment
                               
TSMC Shanghai
  $ 1,849,317       91     $ 3,295       6  
Other
    10,843             546       1  
 
                       
 
                               
 
  $ 1,860,160       91     $ 3,841       7  
 
                       
 
                               
Non-operating income and gains
                               
TSMC Shanghai
  $ 297,418       5     $ 338,038       3  
VIS (primarily technical service income, see Note 26f)
    296,250       4       346,260       3  
SSMC (primarily technical service income, see Note 26e)
    244,865       4       290,586       3  
VisEra
    100,821       1       321,799       3  
Others
    178             1,731        
 
                       
 
  $ 939,532       14     $ 1,298,414       12  
 
                       
 
                               
As of December 31
                               
 
                               
Receivables
                               
TSMC North America
  $ 11,512,777       98     $ 26,626,880       100  
Others
    215,427       2       74,768        
 
                       
 
                               
 
  $ 11,728,204       100     $ 26,701,648       100  
 
                       

- 35 -


 

                                 
    2008     2007  
    Amount     %     Amount     %  
 
                               
Other receivables
                               
TSMC North America
  $ 256,624       52     $ 98,885       19  
TSMC Shanghai
    112,933       23       151,037       29  
SSMC
    56,949       12       84,778       16  
VIS
    42,969       9       118,749       22  
VisEra
                40,101       8  
Others
    20,267       4       31,758       6  
 
                       
 
                               
 
  $ 489,742       100     $ 525,308       100  
 
                       
 
                               
Payables
                               
TSMC North America
  $ 327,250       28     $ 13,392        
VIS
    317,491       26       838,584       28  
WaferTech
    171,089       14       784,280       26  
SSMC
    162,807       14       655,029       22  
TSMC Shanghai
    117,417       10       596,581       20  
Others
    106,296       8       111,764       4  
 
                       
 
                               
 
  $ 1,202,350       100     $ 2,999,630       100  
 
                       
 
                               
Deferred credits
                               
TSMC Shanghai
  $ 183,896       40     $ 510,564       52  
VisEra
                62,175       6  
 
                       
 
                               
 
  $ 183,896       40     $ 572,739       58  
 
                       
    The sales prices and payment terms to related parties were not significantly different from those of sales to third parties. For other related party transactions, prices and terms were determined in accordance with mutual agreements.
 
    The Company deferred the net gains (classified under the deferred credits) derived from sales of property, plant and equipment to TSMC Shanghai and VisEra, and then recognized such gains (classified under non-operating income and gains) over the depreciable lives of the disposed assets.
 
    The Company leased part of its office space from GUC and also leased certain buildings and facilities to VisEra. The rental expense and income were classified under operating expenses and non-operating income, respectively. The lease terms and prices were determined in accordance with mutual agreements. The lease agreement between the Company and VisEra expired in April 2008.
 
    Compensation of directors and management personnel:
                 
    Years Ended December 31  
    2008     2007  
 
               
Salaries, incentives and special compensation
  $ 272,325     $ 275,081  
Bonus
    705,376       1,096,233  
 
           
 
               
 
  $ 977,701     $ 1,371,314  
 
           

- 36 -


 

    The information about the compensation of directors and management personnel is available in the annual report for the shareholders’ meeting. Total compensation expense for the year ended December 31, 2008 includes estimated bonuses to employees and directors of the Company that relate to 2008 but will be paid in the following year. The actual amount will be finalized and approved upon the resolution of the shareholders’ meeting in 2009. The total compensation for the year ended December 31, 2007 included the bonuses appropriated from earnings of 2007 which was approved by the shareholders’ meeting held in 2008.
25.   SIGNIFICANT LONG-TERM LEASES
    The Company leases several parcels of land from the Science Park Administration. These operating leases expire on various dates from December 2009 to December 2028 and can be renewed upon expiration.
 
    As of December 31, 2008, future lease payments were as follows:
         
Year   Amount  
 
       
2009
  $ 340,443  
2010
    291,245  
2011
    289,664  
2012
    289,664  
2013
    268,019  
2014 and thereafter
    2,047,777  
 
     
 
       
 
  $ 3,526,812  
 
     
26.   SIGNIFICANT COMMITMENTS AND CONTINGENCIES
    Significant commitments and contingencies of the Company as of December 31, 2008, excluding those disclosed in other notes, were as follows:
  a.   On June 20, 2004, the Company and Philips (Philips parted with its semiconductor company which was renamed as NXP B.V. in September 2006) 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 (now NXP B.V.) will survive the expiration of the amended Technical Cooperation Agreement. Under this amended Technical Cooperation Agreement, the Company will pay Philips (now NXP B.V.) 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 (now NXP B.V.) agreed to cross license the patents owned by each party. The Company also obtained through Philips (now NXP B.V.) a number of cross patent licenses.
 
  b.   Under a technical cooperation agreement with ITRI, the R.O.C. Government or its designee approved by the Company can use up to 35% of the Company’s capacity if the Company’s outstanding commitments to its customers are not prejudiced. The term of this agreement is for five years beginning from January 1, 1987 and is automatically renewed for successive periods of five years unless otherwise terminated by either party with one year prior notice.
 
  c.   Under several foundry agreements, the Company shall reserve a portion of its production capacity for certain major customers that have guarantee deposits with the Company. As of December 31, 2008, the Company had a total of US$43,421 thousand of guarantee deposits.

- 37 -


 

  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%. Nevertheless, Philips parted with its semiconductor company which was renamed as NXP B.V. in September 2006. The Company and NXP B.V. purchased all the SSMC shares owned by EDB Investments Pte Ltd. pro rata according to the Shareholders Agreement on November 15, 2006. After the purchase, the Company and NXP B.V. currently own approximately 39% and 61% of the SSMC shares respectively. The Company and Philips (now NXP) committed to buy specific percentages of the production capacity of SSMC. The Company and Philips (now NXP B.V.) are required, in the aggregate, to purchase up to 70% of SSMC’s capacity, but the Company alone is not required to purchase more than 28% of the capacity. If any party defaults on the commitment and the capacity utilization of SSMC fall below a specific percentage of its capacity, the defaulting party is required to compensate SSMC for all related unavoidable costs.
 
  e.   The Company provides technical services to SSMC under a Technical Cooperation Agreement (the Agreement) effective March 30, 1999. The Company receives compensation for such services computed at a specific percentage of net selling price of all products sold by SSMC. The Agreement shall remain in force for ten years and may be automatically renewed for successive periods of five years each unless pre-terminated by either party under certain conditions.
 
  f.   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.
 
  g.   TSMC, TSMC North America and WaferTech filed a series of lawsuits in late 2003 and 2004 against Semiconductor Manufacturing International Corporation, SMIC (Shanghai) and SMIC Americas (aggregately referring to as “SMIC”). The lawsuits alleged that SMIC infringed multiple TSMC, TSMC North America and WaferTech patents and misappropriated TSMC, TSMC North America and WaferTech’s trade secrets. These suits were settled out of court on January 30, 2005. As part of the settlement, Semiconductor Manufacturing International Corporation shall pay US$175 million over six years to resolve TSMC, TSMC North America and WaferTech’s claims. As of December 31, 2008, SMIC had paid US$120 million in accordance with the terms of this settlement agreement. In August 2006, TSMC, TSMC North America and WaferTech filed a lawsuit against SMIC in Alameda County Superior Court in California for breach of aforementioned settlement agreement, breach of promissory notes and trade secret misappropriation, seeking injunctive relief and monetary damages. In September 2006, SMIC filed a cross-complaint against TSMC, TSMC North America and WaferTech in the same court, alleging TSMC, TSMC North America and WaferTech of breach of the settlement agreement and implied covenant of good faith and fair dealing, in response to TSMC, TSMC North America and WaferTech’s August complaint. In November 2006, SMIC filed a complaint with Beijing People’s High Court against TSMC, TSMC North America and WaferTech alleging defamation and breach of good faith. The California State Superior Court of Alameda County issued an Order on TSMC, TSMC North America and WaferTech’s pre-trial motion for a preliminary injunction against SMIC on September 7, 2007. In the Order, the Court found “TSMC has demonstrated a significant likelihood that it will ultimately prevail on the merits of its claim for breach of certain paragraphs of the (2005) Settlement Agreement” with SMIC. The Court also found “TSMC has demonstrated a significant probability of establishing that SMIC retains and is using TSMC Information in SMIC’s 0.13um and smaller technologies, and there is significant threat of serious irreparable harm to TSMC if SMIC were to disclose or transfer that information before final resolution of the case.” Therefore, the Court ordered that, effective immediately, SMIC must provide advance notice and an opportunity for TSMC, TSMC North America and WaferTech to object before disclosing items enumerated in the Court Order to SMIC’s third party partners. The Court, however, did not grant a preliminary injunction as requested by TSMC, TSMC North America and WaferTech. The result of the above-mentioned litigation cannot be determined at this time.

- 38 -


 

  h.   In April 2004, UniRAM Technology, Inc. (“UniRAM”) filed an action against MoSys Inc., TSMC and TSMC North America in the U.S. District Court for the Northern District of California, alleging patent infringement and trade secret misappropriation and seeking injunctive relief and damages. TSMC appealed after the United States District Court for the Northern District of California rendered judgment in favor of UniRAM in May 2008. In the third quarter of 2008, TSMC and TSMC North America had reached agreement with UniRAM to settle the dispute. In accordance with the settlement, the judgment has been vacated and the claims asserted by UniRAM are fully and finally settled. As of December 31, 2008, the Company had accounted for the result of the settlement in accordance with the aforementioned settlement agreement.
27.   ADDITIONAL DISCLOSURES
    Following are the additional disclosures required by the SFB for the Company and its investees:
  a.   Financing provided: None;
 
  b.   Endorsement/guarantee provided: None;
 
  c.   Marketable securities held: Please see Table 1 attached;
 
  d.   Marketable securities acquired or disposed of at costs or prices of at least NT$100 million or 20% of the paid-in capital: Please see Table 2 attached;
 
  e.   Acquisition of individual real estate properties at costs of at least NT$100 million or 20% of the paid-in capital: Please see Table 3 attached;
 
  f.   Disposal of individual real estate properties at prices of at least NT$100 million or 20% of the paid-in capital: None;
 
  g.   Total purchases from or sales to related parties of at least NT$100 million or 20% of the paid-in capital: Please see Table 4 attached;
 
  h.   Receivable from related parties amounting to at least NT$100 million or 20% of the paid-in capital: Please see Table 5 attached;
 
  i.   Names, locations, and related information of investees on which the Company exercises significant influence: Please see Table 6 attached;
 
  j.   Information about derivatives of investees over which the Company has a controlling interest:
 
      TSMC Shanghai entered into forward exchange contracts during the year ended December 31, 2008 to manage exposures due to foreign exchange rate fluctuations. Outstanding forward exchange contracts as of December 31, 2008:
         
        Contract Amount
    Maturity Date   (in Thousands)
 
       
Sell RMB/buy US$
  January 2009 to April 2009   RMB55,010/US$8,000
Sell US$/buy JPY
  January 2009 to February 2009   US$131/JPY11,800
      For the year ended December 31, 2008, net losses arising from forward exchange contracts of TSMC Shanghai were NT$8,208 thousand.

- 39 -


 

      XinTec entered into forward exchange contracts during the year ended December 31, 2008 to manage exposures due to foreign exchange rate fluctuations. Outstanding forward exchange contracts as of December 31, 2008:
         
        Contract Amount
    Maturity Date   (in Thousands)
 
       
Sell US$/buy NT$
  February 2009   US$3,900/NT$127,747
      For the year ended December 31, 2008, net losses arising from forward exchange contracts of XinTec were NT$9,957 thousand.
 
  k.   Information on investment in Mainland China
  1)   The name of the investee in mainland China, the main businesses and products, its issued capital, method of investment, information on inflow or outflow of capital, percentage of ownership, equity in the net gain or net loss, ending balance, amount received as dividends from the investee, and the limitation on investee: Please see Table 7 attached.
 
  2)   Significant direct or indirect transactions with the investee, its prices and terms of payment, unrealized gain or loss, and other related information which is helpful to understand the impact of investment in mainland China on financial reports: Please see Note 24.
28.   SEGMENT FINANCIAL INFORMATION
  a.   Industry financial information
 
      The Company operates in one industry. Therefore, the disclosure of industry financial information is not applicable to the Company.
 
  b.   Geographic information
 
      The Company has no significant foreign operations. Therefore, the disclosure of geographic information is not applicable to the Company.
 
  c.   Export sales
                 
    Years Ended December 31  
Area   2008     2007  
 
               
Americas
  $ 199,512,258     $ 208,590,323  
Asia
    49,386,819       43,149,191  
Europe and others
    37,622,148       27,944,270  
 
           
 
               
 
  $ 286,521,225     $ 279,683,784  
 
           
      The export sales information is based on the amounts billed to customers within the areas.
 
  d.   Major customers representing at least 10% of gross sales
                                 
    Years Ended December 31  
    2008     2007  
    Amount     %     Amount     %  
 
                               
Customer A
  $ 192,986,719       58     $ 192,846,641       61  
 
                           

- 40 -


 

     
TABLE 1
Taiwan Semiconductor Manufacturing Company Limited and Investees
MARKETABLE SECURITIES HELD
DECEMBER 31, 2008
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
                                                 
                December 31, 2008    
                                        Market Value or Net    
                Shares/Units   Carrying Value   Percentage of   Asset Value    
Held Company Name   Marketable Securities Type and Name   Relationship with the Company   Financial Statement Account   (in Thousands)   (US$ in Thousands)   Ownership (%)   (US$ in Thousands)   Note
 
                                               
The Company
  Corporate bond                                            
 
  Taiwan Mobile Co., Ltd.     Available-for-sale financial assets         $ 2,032,658       N/A     $ 2,032,658      
 
  Taiwan Power Company     Held-to-maturity financial assets           4,209,629       N/A       4,215,260      
 
  Formosa Petrochemical Corporation     ²           3,554,908       N/A       3,540,418      
 
  Nan Ya Plastics Corporation     ²           3,487,804       N/A       3,512,202      
 
  Formosa Plastic Corporation     ²           2,385,285       N/A       2,391,955      
 
  CPC Corporation, Taiwan     ²           1,000,124       N/A       999,740      
 
  China Steel Corporation     ²           1,000,000       N/A       990,897      
 
  Shanghai Commercial & Saving Bank     ²           299,092       N/A       298,988      
 
  Formosa Chemicals & Fiber Corporation     ²           199,910       N/A       199,890      
 
                                               
 
  Government bond                                            
 
  2003 Asian Development Bank Govt. Bond     Held-to-maturity financial assets           873,237       N/A       875,103      
 
  European Investment Bank Bonds     ²           383,387       N/A       400,000      
 
  2004 Government Bond Series B     ²           249,948       N/A       250,280      
 
                                               
 
  Stocks                                            
 
  TSMC Global   Subsidiary   Investments accounted for using equity method     1       45,756,519       100       45,756,519      
 
  TSMC International   Subsidiary   ²     987,968       29,637,057       100       29,637,057      
 
  VIS   Investee accounted for using equity method   ²     628,223       9,787,275       37       4,680,265      
 
  SSMC   Investee accounted for using equity method   ²     314       6,808,192       39       6,036,045      
 
  TSMC Partners   Subsidiary   ²     300       3,730,913       100       3,730,913      
 
  TSMC North America   Subsidiary   ²     11,000       2,435,666       100       2,435,666      
 
  XinTec   Investee with a controlling financial interest   ²     92,620       1,506,384       42       1,443,752      
 
  GUC   Investee with a controlling financial interest   ²     44,904       950,263       36       5,208,842      
 
  TSMC Japan   Subsidiary   ²     6       137,617       100       137,617      
 
  TSMC Europe   Subsidiary   ²           124,594       100       124,594      
 
  TSMC Korea   Subsidiary   ²     80       15,117       100       15,117      
 
  United Industrial Gases Co., Ltd.     Financial assets carried at cost     16,783       193,584       10       292,902      
 
  Shin-Etsu Handotai Taiwan Co., Ltd.     ²     10,500       105,000       7       384,157      
 
  W.K. Technology Fund IV     ²     4,000       40,000       2       38,479      
 
  Hontung Venture Capital Co., Ltd.     ²     2,633       18,925       10       18,816      
 
                                               
 
  Fund                                            
 
  Horizon Ventures Fund     Financial assets carried at cost           103,992       12       103,992      
 
  Crimson Asia Capital     ²           58,001       1       58,001      
 
                                               
 
  Capital                                            
 
  TSMC Shanghai   Subsidiary   Investments accounted for using equity method           6,267,128       100       6,269,794      
 
  VTAF III   Subsidiary   ²           1,305,605       98       1,291,057      
 
  VTAF II   Subsidiary   ²           975,367       98       970,912      
 
  Emerging Alliance   Subsidiary   ²           433,481       99       433,481      
(Continued)

- 41 -


 

                                                 
                December 31, 2008    
                                        Market Value or Net    
                Shares/Units   Carrying Value   Percentage of   Asset Value    
Held Company Name   Marketable Securities Type and Name   Relationship with the Company   Financial Statement Account   (in Thousands)   (US$ in Thousands)   Ownership (%)   (US$ in Thousands)   Note
 
                                               
TSMC North America
  Preferred stock                                            
 
  NeXen, Inc.     Financial assets carried at cost     328     US$ 656       1     US$ 1,912      
 
                                               
TSMC International
  Corporate bond                                            
 
  General Elec Cap Corp. Mtn     Held-to-maturity financial assets         US$ 20,791       N/A     US$ 20,671      
 
  General Elec Cap Corp. Mtn     ²         US$ 20,294       N/A     US$ 20,050      
 
                                               
 
  Stocks                                            
 
  TSMC Development, Inc. (TSMC Development)   Subsidiary   Investments accounted for using equity method     1     US$ 690,095       100     US$ 690,095      
 
  InveStar Semiconductor Development Fund, Inc. (II)   Subsidiary   ²     32,289     US$ 25,586       97     US$ 25,586      
 
  LDC. (ISDF II)                                            
 
  TSMC Technology   Subsidiary   ²     1     US$ 8,408       100     US$ 8,408      
 
  InveStar Semiconductor Development Fund, Inc. (ISDF)   Subsidiary   ²     7,680     US$ 6,529       97     US$ 6,529      
 
                                               
TSMC Development
  Corporate bond                                            
 
  GE Capital Corp.     Held-to-maturity financial assets         US$ 20,447       N/A     US$ 20,050      
 
                                               
 
  Stocks                                            
 
  WaferTech   Subsidiary   Investments accounted for using equity method     293,637     US$ 204,558       100     US$ 204,558      
 
                                               
TSMC Partners
  Common stock                                            
 
  VisEra Holding Company   Investee accounted for using equity method   Investments accounted for using equity method     43,000     US$ 69,298       49     US$ 69,298      
 
  TSMC Canada   Subsidiary   ²     2,300     US$ 2,570       100     US$ 2,570      
 
                                               
Emerging Alliance
  Common stock                                            
 
  Pixim, Inc.     Financial assets carried at cost     203     US$ 54           US$ 54      
 
  RichWave Technology Corp.     ²     4,247     US$ 1,648       10     US$ 1,648      
 
  Global Investment Holding Inc.     ²     10,800     US$ 3,065       6     US$ 3,065      
 
                                               
 
  Preferred stock                                            
 
  Audience, Inc.     Financial assets carried at cost     1,654     US$ 250       1     US$ 250      
 
  Axiom Microdevices, Inc.     ²     1,000     US$ 1,000       1     US$ 1,000      
 
  GemFire Corporation     ²         US$ 31           US$ 31      
 
  Miradia, Inc.     ²     3,040     US$ 1,000       2     US$ 1,000      
 
  Mosaic Systems, Inc.     ²     2,481     US$ 12       6     US$ 12      
 
  Next IO, Inc.     ²     800     US$ 500       1     US$ 500      
 
  Optichron, Inc.     ²     714     US$ 1,000       2     US$ 1,000      
 
  Optimal Corporation     ²         US$ 229           US$ 229      
 
  Pixim, Inc.     ²     4,439     US$ 1,083       2     US$ 1,083      
 
  QST Holding, LLC     ²         US$ 131       4     US$ 131      
 
  Teknovus, Inc.     ²     6,977     US$ 1,327       2     US$ 1,327      
 
                                               
 
  Capital                                            
 
  VentureTech Alliance Holdings, L.L.C. (VTA Holdings)   Subsidiary   Investments accounted for using equity method                 8        
 
                                               
VTAF II
  Common stock                                            
 
  Sentelic     Financial assets carried at cost     1,200     US$ 2,040       15     US$ 2,040      
 
  Aquantia     ²     2,108     US$ 2,573       5     US$ 2,573      
 
  Leadtrend     ²     1,265     US$ 660       5     US$ 660      
 
                                               
 
  Preferred stock                                            
 
  5V Technologies, Inc.     Financial assets carried at cost     2,890     US$ 2,168       15     US$ 2,168      
 
  Audience, Inc.     ²     5,335     US$ 1,390       2     US$ 1,390      
 
  Axiom Microdevices, Inc.     ²     5,046     US$ 2,481       5     US$ 2,481      
(Continued)

- 42 -


 

                                                 
                December 31, 2008    
                                        Market Value or Net    
                Shares/Units   Carrying Value   Percentage of   Asset Value    
Held Company Name   Marketable Securities Type and Name   Relationship with the Company   Financial Statement Account   (in Thousands)   (US$ in Thousands)   Ownership (%)   (US$ in Thousands)   Note
 
                                               
 
  Beceem Communications     Financial assets carried at cost     650     US$ 1,600       1     US$ 1,600      
 
  GemFire Corporation     ²     600     US$ 68       1     US$ 68      
 
  Impinj, Inc.     ²     475     US$ 1,000           US$ 1,000      
 
  Miradia, Inc.     ²     3,416     US$ 3,106       3     US$ 3,106      
 
  Next IO, Inc.     ²     2,775     US$ 756       2     US$ 756      
 
  Optichron, Inc.     ²     1,050     US$ 1,844       4     US$ 1,844      
 
  Pixim, Inc.     ²     6,348     US$ 1,141       2     US$ 1,141      
 
  Power Analog Microelectronics     ²     5,232     US$ 2,790       18     US$ 2,790      
 
  QST Holding, LLC     ²         US$ 415       13     US$ 415      
 
  RichWave Technology Corp.     ²     1,043     US$ 730       1     US$ 730      
 
  Teknovus, Inc.     ²     1,599     US$ 454           US$ 454      
 
  Tzero Technologies, Inc.     ²     1,167     US$ 569       2     US$ 569      
 
  Xceive     ²     870     US$ 1,177       2     US$ 1,177      
 
                                               
 
  Capital                                            
 
  VTA Holdings   Subsidiary   Investments accounted for using equity method                 24        
 
                                               
VTAF III
  Common stock                                            
 
  Mutual-pak Technology Co., Ltd.   Subsidiary   Investments accounted for using equity method     4,590     US$ 1,705       51     US$ 1,705      
 
  Acionn Technology Corporation   Investee accounted for using equity method   ²     4,500     US$ 1,052       44     US$ 1,052      
 
  Auramicro, Inc.     Financial assets carried at cost     3,816     US$ 1,145       20     US$ 1,145      
 
  InvenSence, Inc.     ²     816     US$ 1,000       1     US$ 1,000      
 
                                               
 
  Preferred stock                                            
 
  Advasense Sensors, Inc.     Financial assets carried at cost     1,929     US$ 1,834       6     US$ 1,834      
 
  BridgeLux, Inc.     ²     3,333     US$ 5,000       3     US$ 5,000      
 
  Exclara, Inc. (Formerly SynDitec, Inc.)     ²     21,708     US$ 4,568       18     US$ 4,568      
 
  GTBF, Inc.     ²     1,154     US$ 1,500       N/A     US$ 1,500      
 
  LiquidLeds Lighting Corp.     ²     1,600     US$ 800       11     US$ 800      
 
  M2000, Inc.     ²     3,000     US$ 3,000       5     US$ 3,000      
 
  Neoconix, Inc.     ²     2,458     US$ 4,000       6     US$ 4,000      
 
  Powervation, Ltd.     ²     191     US$ 2,930       19     US$ 2,930      
 
  Quellan, Inc.     ²     3,106     US$ 3,500       6     US$ 3,500      
 
  Silicon Technical Services, LLC     ²     1,055     US$ 1,208       2     US$ 1,208      
 
  Tilera, Inc.     ²     1,698     US$ 2,360       3     US$ 2,360      
 
  Validity Sensors, Inc.     ²     6,424     US$ 2,545       3     US$ 2,545      
 
                                               
 
  Capital                                            
 
  Growth Fund Limited (Growth Fund)   Subsidiary   Investments accounted for using equity method         US$ 100       100     US$ 100      
 
  VTA Holdings   Subsidiary   ²                 68        
 
                                               
Growth Fund
  Common stock                                            
 
  Staccato     Financial assets carried at cost     10     US$ 25           US$ 25      
 
                                               
ISDF
  Common stock                                            
 
  Capella Microsystems (Taiwan), Inc.     Financial assets carried at cost     530     US$ 154       2     US$ 154      
 
                                               
 
  Preferred stock                                            
 
  Memsic, Inc.     Available-for-sale financial assets     1,364     US$ 2,250       6     US$ 2,250      
 
  Integrated Memory Logic, Inc.     Financial assets carried at cost     2,872     US$ 1,221       9     US$ 1,221      
 
  IP Unity, Inc.     ²     1,008     US$ 290       1     US$ 290      
 
  NanoAmp Solutions, Inc.     ²     541     US$ 541       2     US$ 541      
 
  Sonics, Inc.     ²     230     US$ 1,843       2     US$ 1,843      
(Continued)

- 43 -


 

     
                                                 
                December 31, 2008    
                                        Market Value or Net    
                Shares/Units   Carrying Value   Percentage of   Asset Value    
Held Company Name   Marketable Securities Type and Name   Relationship with the Company   Financial Statement Account   (in Thousands)   (US$ in Thousands)   Ownership (%)   (US$ in Thousands)   Note
 
                                               
ISDF II
  Common stock                                            
 
  Rich Tek Technology Corp.     Financial assets at fair value through profit or loss     101     US$ 403           US$ 403      
 
  Rich Tek Technology Corp.     Available-for-sale financial assets     288     US$ 1,148           US$ 1,148      
 
  Ralink Technology (Taiwan), Inc.     ²     1,512     US$ 3,232       1     US$ 3,232      
 
  eLCOS Microdisplay Technology, Ltd.     Financial assets carried at cost     270     US$ 27       1     US$ 27      
 
  EoNEX Technologies, Inc.     ²     55     US$ 305       5     US$ 305      
 
  Sonics, Inc.     ²     278     US$ 1,597       3     US$ 1,597      
 
  Epic Communication, Inc.     ²     191     US$ 23       1     US$ 23      
 
  EON Technology, Corp.     ²     2,494     US$ 691       3     US$ 691      
 
  Goyatek Technology, Corp.     ²     2,088     US$ 545       12     US$ 545      
 
  Trendchip Technologies Corp.     ²     1,020     US$ 574       3     US$ 574      
 
  Capella Microsystems (Taiwan), Inc.     ²     534     US$ 210       2     US$ 210      
 
  Auden Technology MFG. Co., Ltd.     ²     1,049     US$ 223       3     US$ 223      
 
                                               
 
  Preferred stock                                            
 
  Memsic, Inc.     Available-for-sale financial assets     1,145     US$ 1,888       5     US$ 1,888      
 
  Alchip Technologies Limited     Financial assets carried at cost     6,979     US$ 3,664       19     US$ 3,664      
 
  eLCOS Microdisplay Technology, Ltd.     ²     3,500     US$ 878       8     US$ 878      
 
  FangTek, Inc.     ²     7,064     US$ 3,428       16     US$ 3,428      
 
  Kilopass Technology, Inc.     ²     3,887     US$ 1,746       5     US$ 1,746      
 
  NanoAmp Solutions, Inc.     ²     375     US$ 375       1     US$ 375      
 
  Sonics, Inc.     ²     264     US$ 1,517       3     US$ 1,517      
 
                                               
GUC
  Common stock                                            
 
  GUC-NA   Subsidiary   Investments accounted for using equity method     800     $ 34,019       100     $ 34,019      
 
  GUC-Japan   Subsidiary   ²     1       11,854       100       11,854      
 
  GUC-Europe   Subsidiary   ²           2,563       100       2,563      
 
                                               
XinTec
  Capital                                            
 
  Compositech Ltd.     Financial assets carried at cost     587             3        
 
                                               
TSMC Global
  Agency bonds                                            
 
  Fed Hm Ln Pc Pool 1b1225     Available-for-sale financial assets         US$ 75       N/A     US$ 75      
 
  Fed Hm Ln Pc Pool 1b2566     ²         US$ 118       N/A     US$ 118      
 
  Fed Hm Ln Pc Pool 1b2632     ²         US$ 145       N/A     US$ 145      
 
  Fed Hm Ln Pc Pool 1b2642     ²         US$ 195       N/A     US$ 195      
 
  Fed Hm Ln Pc Pool 1b2776     ²         US$ 282       N/A     US$ 282      
 
  Fed Hm Ln Pc Pool 1b2792     ²         US$ 193       N/A     US$ 193      
 
  Fed Hm Ln Pc Pool 1b2810     ²         US$ 246       N/A     US$ 246      
 
  Fed Hm Ln Pc Pool 1b7453     ²         US$ 2,302       N/A     US$ 2,302      
 
  Fed Hm Ln Pc Pool 1g0038     ²         US$ 243       N/A     US$ 243      
 
  Fed Hm Ln Pc Pool 1g0053     ²         US$ 289       N/A     US$ 289      
 
  Fed Hm Ln Pc Pool 1g0104     ²         US$ 119       N/A     US$ 119      
 
  Fed Hm Ln Pc Pool 1g1282     ²         US$ 3,285       N/A     US$ 3,285      
 
  Fed Hm Ln Pc Pool 1g1411     ²         US$ 2,979       N/A     US$ 2,979      
 
  Fed Hm Ln Pc Pool 1h2520     ²         US$ 2,152       N/A     US$ 2,152      
 
  Fed Hm Ln Pc Pool 1h2524     ²         US$ 1,614       N/A     US$ 1,614      
 
  Fed Hm Ln Pc Pool 780870     ²         US$ 481       N/A     US$ 481      
 
  Fed Hm Ln Pc Pool 781959     ²         US$ 2,841       N/A     US$ 2,841      
 
  Fed Hm Ln Pc Pool 782785     ²         US$ 198       N/A     US$ 198      
 
  Fed Hm Ln Pc Pool 782837     ²         US$ 390       N/A     US$ 390      
 
  Fed Hm Ln Pc Pool 783022     ²         US$ 443       N/A     US$ 443      
(Continued)

- 44 -


 

     
                                                 
                December 31, 2008    
                                        Market Value or Net    
                Shares/Units   Carrying Value   Percentage of   Asset Value    
Held Company Name   Marketable Securities Type and Name   Relationship with the Company   Financial Statement Account   (in Thousands)   (US$ in Thousands)   Ownership (%)   (US$ in Thousands)   Note
 
                                               
 
  Fed Hm Ln Pc Pool 783026     Available-for-sale financial assets         US$ 239       N/A     US$ 239    
 
  Fed Hm Ln Pc Pool B19205     ²         US$ 5,501       N/A     US$ 5,501      
 
  Fed Hm Ln Pc Pool E01492     ²         US$ 1,544       N/A     US$ 1,544      
 
  Fed Hm Ln Pc Pool E89857     ²         US$ 1,152       N/A     US$ 1,152      
 
  Fed Hm Ln Pc Pool G11295     ²         US$ 911       N/A     US$ 911      
 
  Fed Hm Ln Pc Pool M80855     ²         US$ 2,526       N/A     US$ 2,526      
 
  Federal Home Ln Mtg Corp.     ²         US$ 348       N/A     US$ 348      
 
  Federal Home Ln Mtg Corp.     ²         US$ 187       N/A     US$ 187      
 
  Federal Home Ln Mtg Corp.     ²         US$ 3,108       N/A     US$ 3,108      
 
  Federal Home Ln Mtg Corp.     ²         US$ 1,603       N/A     US$ 1,603      
 
  Federal Home Ln Mtg Corp.     ²         US$ 1,727       N/A     US$ 1,727      
 
  Federal Home Ln Mtg Corp.     ²         US$ 1,185       N/A     US$ 1,185      
 
  Federal Home Ln Mtg Corp.     ²         US$ 2,782       N/A     US$ 2,782      
 
  Federal Home Ln Mtg Corp.     ²         US$ 1,383       N/A     US$ 1,383      
 
  Federal Home Ln Mtg Corp.     ²         US$ 2,358       N/A     US$ 2,358      
 
  Federal Home Ln Mtg Corp.     ²         US$ 2,233       N/A     US$ 2,233      
 
  Federal Home Ln Mtg Corp.     ²         US$ 2,880       N/A     US$ 2,880      
 
  Federal National Mort Assoc     ²         US$ 2,049       N/A     US$ 2,049      
 
  Federal National Mortgage Asso     ²         US$ 2,879       N/A     US$ 2,879      
 
  Federal Natl Mtg Assn     ²         US$ 1,328       N/A     US$ 1,328      
 
  Federal Natl Mtg Assn     ²         US$ 1,315       N/A     US$ 1,315      
 
  Federal Natl Mtg Assn     ²         US$ 1,372       N/A     US$ 1,372      
 
  Federal Natl Mtg Assn     ²         US$ 2,868       N/A     US$ 2,868      
 
  Federal Natl Mtg Assn Gtd     ²         US$ 1,298       N/A     US$ 1,298      
 
  Fnma Pool 255883     ²         US$ 2,724       N/A     US$ 2,724      
 
  Fnma Pool 257245     ²         US$ 3,513       N/A     US$ 3,513      
 
  Fnma Pool 555549     ²         US$ 1,184       N/A     US$ 1,184      
 
  Fnma Pool 555715     ²         US$ 142       N/A     US$ 142      
 
  Fnma Pool 632399     ²         US$ 337       N/A     US$ 337      
 
  Fnma Pool 662401     ²         US$ 451       N/A     US$ 451      
 
  Fnma Pool 667766     ²         US$ 1,068       N/A     US$ 1,068      
 
  Fnma Pool 680932     ²         US$ 952       N/A     US$ 952      
 
  Fnma Pool 681393     ²         US$ 2,045       N/A     US$ 2,045      
 
  Fnma Pool 685116     ²         US$ 489       N/A     US$ 489      
 
  Fnma Pool 691283     ²         US$ 3,039       N/A     US$ 3,039      
 
  Fnma Pool 694287     ²         US$ 17       N/A     US$ 17      
 
  Fnma Pool 703711     ²         US$ 402       N/A     US$ 402      
 
  Fnma Pool 725095     ²         US$ 865       N/A     US$ 865      
 
  Fnma Pool 730033     ²         US$ 138       N/A     US$ 138      
 
  Fnma Pool 740934     ²         US$ 889       N/A     US$ 889      
 
  Fnma Pool 742232     ²         US$ 13       N/A     US$ 13      
 
  Fnma Pool 750798     ²         US$ 18       N/A     US$ 18      
 
  Fnma Pool 773246     ²         US$ 183       N/A     US$ 183      
 
  Fnma Pool 793932     ²         US$ 367       N/A     US$ 367      
 
  Fnma Pool 794040     ²         US$ 579       N/A     US$ 579      
 
  Fnma Pool 795548     ²         US$ 133       N/A     US$ 133      
 
  Fnma Pool 799664     ²         US$ 77       N/A     US$ 77      
 
  Fnma Pool 799868     ²         US$ 26       N/A     US$ 26      
 
  Fnma Pool 804764     ²         US$ 303       N/A     US$ 303      
 
  Fnma Pool 804852     ²         US$ 264       N/A     US$ 264      
 
  Fnma Pool 804962     ²         US$ 323       N/A     US$ 323      
 
  Fnma Pool 805163     ²         US$ 347       N/A     US$ 347      
 
  Fnma Pool 806642     ²         US$ 457       N/A     US$ 457      
(Continued)

- 45 -


 

                                             
                December 31, 2008    
                                    Market Value or Net    
                Shares/Units   Carrying Value   Percentage of   Asset Value    
Held Company Name   Marketable Securities Type and Name   Relationship with the Company   Financial Statement Account   (in Thousands)   (US$ in Thousands)   Ownership (%)   (US$ in Thousands)   Note
                     
 
  Fnma Pool 806721     Available-for-sale financial assets         US$ 548     N/A   US$ 548      
 
  Fnma Pool 814418     ²         US$ 297     N/A   US$ 297      
 
  Fnma Pool 815626     ²         US$ 1,833     N/A   US$ 1,833      
 
  Fnma Pool 819423     ²         US$ 453     N/A   US$ 453      
 
  Fnma Pool 821129     ²         US$ 430     N/A   US$ 430      
 
  Fnma Pool 888499     ²         US$ 1,588     N/A   US$ 1,588      
 
  Fnma Pool 888502     ²         US$ 204     N/A   US$ 204      
 
  Fnma Pool 888507     ²         US$ 783     N/A   US$ 783      
 
  Fnma Pool 888515     ²         US$ 847     N/A   US$ 847      
 
  Fnma Pool 888519     ²         US$ 99     N/A   US$ 99      
 
  Fnma Pool 888527     ²         US$ 57     N/A   US$ 57      
 
  Fnma Pool 888738     ²         US$ 3,776     N/A   US$ 3,776      
 
  Fnma Pool 888793     ²         US$ 4,242     N/A   US$ 4,242      
 
  Fnma Pool 900296     ²         US$ 2,415     N/A   US$ 2,415      
 
  Gnma Ii Pool 081150     ²         US$ 331     N/A   US$ 331      
 
  Gnma Ii Pool 081153     ²         US$ 1,030     N/A   US$ 1,030      
 
  Gnma Pool 646061     ²         US$ 2,468     N/A   US$ 2,468      
 
  Government Natl Mtg Assn Gtd     ²         US$ 1,861     N/A   US$ 1,861      
 
  Fed Home Ln Bank     ²         US$ 5,305     N/A   US$ 5,305      
 
  Federal Farm Cr Bks     ²         US$ 3,610     N/A   US$ 3,610      
 
  Federal Farm Credit Bank     ²         US$ 3,433     N/A   US$ 3,433      
 
  Federal Home Ln Bks     ²         US$ 3,854     N/A   US$ 3,854      
 
  Federal Home Ln Bks     ²         US$ 5,320     N/A   US$ 5,320      
 
  Federal Home Ln Bks     ²         US$ 4,148     N/A   US$ 4,148      
 
  Federal Home Ln Mtg     ²         US$ 5,340     N/A   US$ 5,340      
 
  Federal Home Ln Mtg Corp.     ²         US$ 3,428     N/A   US$ 3,428      
 
  Federal Home Ln Mtg Corp.     ²         US$ 3,560     N/A   US$ 3,560      
 
  Federal Home Ln Mtg Corp.     ²         US$ 3,743     N/A   US$ 3,743      
 
  Federal Home Loan Bank     ²         US$ 4,710     N/A   US$ 4,710      
 
  Federal Natl Mtg Assn     ²         US$ 4,134     N/A   US$ 4,134      
 
  Federal Natl Mtg Assn     ²         US$ 3,713     N/A   US$ 3,713      
 
  Federal Natl Mtg Assn     ²         US$ 4,169     N/A   US$ 4,169      
 
  Federal Natl Mtg Assn     ²         US$ 3,809     N/A   US$ 3,809      
 
  Federal Natl Mtg Assn Mtn     ²         US$ 3,108     N/A   US$ 3,108      
 
                                           
 
  Corporate issued asset-backed securities                                        
 
  Banc Amer Coml Mtg Inc.     Available-for-sale financial assets         US$ 4,584     N/A   US$ 4,584      
 
  Banc Amer Fdg 2006 I Tr     ²         US$ 2,066     N/A   US$ 2,066      
 
  Bear Stearns Adjustable Rate     ²         US$ 60     N/A   US$ 60      
 
  Bear Stearns Arm Tr     ²         US$ 1,909     N/A   US$ 1,909      
 
  Bear Stearns Arm Tr     ²         US$ 1,160     N/A   US$ 1,160      
 
  Bear Stearns Arm Tr     ²         US$ 129     N/A   US$ 129      
 
  Bear Stearns Coml Mtg Secs Inc.     ²         US$ 96     N/A   US$ 96      
 
  Bear Stearns Coml Mtg Secs Inc.     ²         US$ 2,690     N/A   US$ 2,690      
 
  Cbass Tr     ²         US$ 709     N/A   US$ 709      
 
  Chase Mtg Fin Tr     ²         US$ 576     N/A   US$ 576      
 
  Chase Mtg Fin Tr     ²         US$ 1,171     N/A   US$ 1,171      
 
  Chase Mtg Fin Tr     ²         US$ 1,704     N/A   US$ 1,704      
 
  Chase Mtge Finance Corp.     ²         US$ 865     N/A   US$ 865      
 
  Cit Equip Coll Tr     ²         US$ 3,884     N/A   US$ 3,884      
 
  Credit Suisse First Boston Mtg     ²         US$ 439     N/A   US$ 439      
 
  Credit Suisse First Boston Mtg     ²         US$ 1,513     N/A   US$ 1,513      
 
  Credit Suisse First Boston Mtg     ²         US$ 4,349     N/A   US$ 4,349      
(Continued)

- 46 -


 

                                             
                December 31, 2008    
                                    Market Value or Net    
                Shares/Units   Carrying Value   Percentage of   Asset Value    
Held Company Name   Marketable Securities Type and Name   Relationship with the Company   Financial Statement Account   (in Thousands)   (US$ in Thousands)   Ownership (%)   (US$ in Thousands)   Note
                     
 
  First Franklin Mtg Ln Tr     Available-for-sale financial assets         US$ 413     N/A   US$ 413      
 
  First Horizon     ²         US$ 29     N/A   US$ 29      
 
  First Un Natl Bk Coml Mtg Tr     ²         US$ 1,051     N/A   US$ 1,051      
 
  First Un Natl Bk Coml Mtg Tr     ²         US$ 4,715     N/A   US$ 4,715      
 
  First Un Natl Bk Coml Mtg Tr     ²         US$ 2,019     N/A   US$ 2,019      
 
  Gs Mtg Secs Corp.     ²         US$ 991     N/A   US$ 991      
 
  Home Equity Mortgage Trust     ²         US$ 1,237     N/A   US$ 1,237      
 
  Home Equity Mtg Tr 2006 4     ²         US$ 485     N/A   US$ 485      
 
  JP Morgan Mtg Tr     ²         US$ 588     N/A   US$ 588      
 
  JP Morgan Mtg Tr     ²         US$ 630     N/A   US$ 630      
 
  JP Morgan Mtg Tr     ²         US$ 559     N/A   US$ 559      
 
  Lb Ubs Coml Mtg Tr     ²         US$ 3,495     N/A   US$ 3,495      
 
  Nomura Asset Accep Corp.     ²         US$ 660     N/A   US$ 660      
 
  Residential Asset Mtg Prods     ²         US$ 1,515     N/A   US$ 1,515      
 
  Residential Fdg Mtg Secs I Inc.     ²         US$ 1,074     N/A   US$ 1,074      
 
  Residential Fdg Mtg Secs I Inc.     ²         US$ 2,331     N/A   US$ 2,331      
 
  Sequoia Mtg Tr     ²         US$ 288     N/A   US$ 288      
 
  Sequoia Mtg Tr     ²         US$ 158     N/A   US$ 158      
 
  Sequoia Mtg Tr     ²         US$ 147     N/A   US$ 147      
 
  Terwin Mtg Tr     ²         US$ 1,041     N/A   US$ 1,041      
 
  Tiaa Seasoned Coml Mtg Tr     ²         US$ 3,163     N/A   US$ 3,163      
 
  Wamu Mtg     ²         US$ 2,925     N/A   US$ 2,925      
 
  Wamu Mtg Pass Through Ctfs     ²         US$ 114     N/A   US$ 114      
 
  Wamu Mtg Pass Through Ctfs     ²         US$ 1,521     N/A   US$ 1,521      
 
  Washington Mut Mtg Secs Corp.     ²         US$ 1,641     N/A   US$ 1,641      
 
  Wells Fargo Mtg Backed Secs     ²         US$ 2,405     N/A   US$ 2,405      
 
  Wells Fargo Mtg Backed Secs     ²         US$ 2,632     N/A   US$ 2,632      
 
  Wells Fargo Mtg Backed Secs     ²         US$ 2,391     N/A   US$ 2,391      
 
  Wells Fargo Mtg Bkd Secs     ²         US$ 845     N/A   US$ 845      
 
  Wells Fargo Mtg Bkd Secs     ²         US$ 2,088     N/A   US$ 2,088      
 
                                           
 
  Corporate bonds                                        
 
  American Gen Fin Corp. Mtn     Available-for-sale financial assets         US$ 1,156     N/A   US$ 1,156      
 
  Chase Manhattan Corp. New     ²         US$ 1,505     N/A   US$ 1,505      
 
  Chase Manhattan Corp. New     ²         US$ 2,066     N/A   US$ 2,066      
 
  Chase Manhattan Corp. New     ²         US$ 3,353     N/A   US$ 3,353      
 
  Credit Suisse First Boston USA     ²         US$ 347     N/A   US$ 347      
 
  Deutsche Bank Ag London     ²         US$ 3,013     N/A   US$ 3,013      
 
  Fleet Boston Corp.     ²         US$ 2,589     N/A   US$ 2,589      
 
  General Elec Cap Corp. Mtn     ²         US$ 2,988     N/A   US$ 2,988      
 
  General Elec Cap Corp. Mtn     ²         US$ 673     N/A   US$ 673      
 
  Goldman Sachs Group     ²         US$ 2,029     N/A   US$ 2,029      
 
  JP Morgan Chase     ²         US$ 1,994     N/A   US$ 1,994      
 
  Mellon Fdg Corp.     ²         US$ 2,669     N/A   US$ 2,669      
 
  Morgan Stanley     ²         US$ 4,552     N/A   US$ 4,552      
 
  U S Bancorp Mtn Bk Ent     ²         US$ 1,369     N/A   US$ 1,369      
 
  Wachovia Corp. New     ²         US$ 3,135     N/A   US$ 3,135      
 
  Wells Fargo + Co. New Med Trm     ²         US$ 4,493     N/A   US$ 4,493      
 
                                           
 
  Money market funds                                        
 
  Ssga Cash Mgmt Global Offshore     Available-for-sale financial assets         US$ 30,435     N/A   US$ 30,435      
 
  Government bonds                                        
 
  United States Treas Nts     Available-for-sale financial assets         US$ 10,374     N/A   US$ 10,374      
(Concluded)

- 47 -


 

TABLE 2
Taiwan Semiconductor Manufacturing Company Limited and Investees
MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2008
(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Specified)
                                                                                                 
                    Beginning Balance   Acquisition   Disposal (Note 2)    
        Financial                   Amount   Shares/Units   Amount           Amount   Carrying Value   Gain (Loss) or   Ending Balance (Note 3)
    Marketable Securities Type and   Statement       Nature of   Shares/Units   (US$ in   (in Thousands)   (US$ in   Shares/Units   (US$ in   (US$ in   Disposal (US$   Shares/Units   Amount (US$
Company Name   Name   Account   Counter-party   Relationship   (in Thousands)   Thousands)   (Note 1)   Thousands)   (In Thousands)   Thousands)   Thousands)   in Thousands)   (In Thousands)   in Thousands)
                                 
The Company
  Open-end mutual funds                                                                                            
 
  NITC Bond Fund   Available-for-sale
financial assets
  National Investment Trust Co., Ltd.       12,239     $ 2,045,935       6,257     $ 1,058,000       18,496     $ 3,119,140     $ 3,047,038     $ 72,102           $  
 
  Fuh Hwa Bond Fund   ²   Fuh Hwa Investment Trust Co., Ltd.       132,997       1,801,674       129,864       1,775,000       262,861       3,598,480       3,543,862       54,618              
 
  NITC Taiwan Bond Fund   ²   National Investment Trust Co., Ltd.       103,016       1,474,856       153,113       2,214,000       256,129       3,703,023       3,656,443       46,580              
 
  ING Taiwan Bond Fund   ²   ING Securities Investment Trust Co., Ltd       85,581       1,310,030       140,522       2,170,000       226,103       3,497,877       3,470,000       27,877              
 
  Prudential Financial Bond Fund   ²   Prudential Financial Securities Investment Trust Enterprise       83,306       1,236,728                   83,306       1,245,214       1,204,418       40,796              
 
  Uni-President James Bond Fund   ²   Uni-President Assets Management Corp.       77,128       1,208,799       120,183       1,900,000       197,311       3,125,566       3,100,000       25,566              
 
  JF Taiwan Bond Fund   ²   JF Asset Management (Taiwan) Ltd.       59,049       915,252       45,425       712,000       104,474       1,635,181       1,612,083       23,098              
 
  ING Taiwan Income Bond Fund   ²   ING Securities Investment Trust Co., Ltd.       54,621       878,682       60,839       988,000       115,460       1,877,230       1,842,149       35,081              
 
  Taishin Lucky Investment Trust Fund   ²   Taishin Investment Trust Co., Ltd.       68,945       718,556                   68,945       724,340       701,524       22,816              
 
  AIG Taiwan Bond Fund   ²   AIG Global Asset Management Corporation (Taiwan) Ltd.       54,469       705,033                   54,469       708,863       700,000       8,863              
 
  Cathay Bond Fund   ²   Cathay Securities Investment Trust Co., Ltd.       60,126       703,824                   60,126       709,289       700,000       9,289              
 
  Dresdner Bond DAM Fund   ²   Allianz Global Investors Taiwan Ltd.       54,319       639,542                   54,319       644,310       624,828       19,482              
 
  JF Taiwan First Bond Fund   ²   JF Asset Management (Taiwan) Ltd.       35,324       504,206                   35,324       508,184       500,342       7,842              
 
  HSBC NTD Money Management Fund   ²   HSBC Asset Management (Taiwan) Ltd.       27,416       413,504                   27,416       416,788       402,614       14,174              
 
  INVESCO Bond Fund   ²   INVESCO Taiwan Limited       27,176       410,054                   27,176       412,892       403,727       9,165              
 
  IBT Ta-Chong Bond Fund   ²   IBT Asset Magement Co., Ltd.                   74,771       1,000,000       74,771       1,002,474       1,000,000       2,474              
 
  PCA Well Pool Fund   ²   PCA Securities Investment Trust Co., Ltd.                   187,050       2,400,000       187,050       2,411,016       2,400,000       11,016              
 
  Capital Income Fund   ²   Capital Investment Trust Corporation                   228,072       3,480,000       228,072       3,491,264       3,480,000       11,264              
                                 
    Government bond                            
 
  2004 Government Bond Series B   Available-for-sale
financial assets
  Grand Cathay Securities Corp. and several financial institutions             1,197,121                         1,203,434       1,201,660       1,774              
 
  2004 Government Bond Series G   ²   ²             200,065                         201,301       200,841       460              
 
  2004 Government Bond Series B   Held-to-maturity
financial assets
  Sinopac Securities Corp. and several financial institutions                         249,603                                     249,948  
 
  2003 Government Bond Series H   ²   ²             400,709             299,852                                      
                                 
 
  Corporate bond                                                                                            
 
  Taiwan Mobile Co., Ltd   Available-for-sale
financial assets
  Grand Cathay Securities Corp. and several financial institutions                         2,000,000                                     2,032,658  

(Continued)

- 48 -


 

                                                                                                 
                    Beginning Balance   Acquisition   Disposal (Note 2)    
        Financial                   Amount   Shares/Units   Amount           Amount   Carrying Value   Gain (Loss) or   Ending Balance (Note 3)
    Marketable Securities Type and   Statement       Nature of   Shares/Units   (US$ in   (in Thousands)   (US$ in   Shares/Units   (US$ in   (US$ in   Disposal (US$   Shares/Units   Amount (US$
Company Name   Name   Account   Counter-party   Relationship   (in Thousands)   Thousands)   (Note 1)   Thousands)   (In Thousands)   Thousands)   Thousands)   in Thousands)   (In Thousands)   in Thousands)
                                 
 
  Formosa Chemicals & Fiber Corporation   Held-to-maturity
financial assets
  Grand Cathay Securities Corp. and several financial institutions           $           $ 198,914           $     $     $           $ 199,910  
 
  Formosa Petrochemical Corporation   ²   ²             3,581,667             959,827                                     3,554,908  
 
  Taiwan Power Company   ²   ²             2,630,064             3,192,915                                     4,209,629  
 
  Formosa Plastic Corporation   ²   ²             391,134             1,984,471                                     2,385,285  
 
  Nan Ya Plastics Corporation   ²   ²             1,804,346             2,486,383                                     3,487,804  
                                 
 
  Capital                                                                                            
 
  VTAF III   Investments
accounted for using
equity method
    Subsidiary           906,536             466,783                                     1,305,605  
                                 
TSMC International
  Corporate bond                                                                                            
  General Elec Cap Corp. Mtn   Held-to-maturity
financial assets
  BNP PARIBAS, London                       US$ 20,864                                   US$ 20,791  
 
  General Elec Cap Corp. Mtn   ²   ²                       US$ 20,316                                   US$ 20,294  
                                 
TSMC Development
  Corporate bond                                                                                            
  GE Capital Corp.   Held-to-maturity
financial assets
  BNP PARIBAS, London                       US$ 20,478                                   US$ 20,447  
                                 
GUC
  Open-end mutual funds                                                                                            
 
  PCA Well Pool Fund   Available-for-sale
financial assets
  PCA Securities Investment Trust Co., Ltd.                   19,654       252,000       19,654       252,536       252,000       536              
 
  Prudential Financial Bond Fund   ²   Prudential Financial Securities Investment Trust Enterprise                   18,087       271,000       18,087       271,331       271,000       331              
 
  Uni-President James Bond Fund   ²   Uni-President Assets Management Corp.                   17,430       275,000       17,430       275,390       275,000       390              
 
  Cathay Bond Fund   ²   Cathay Securities Investment Trust Co., Ltd.                   16,096       190,000       16,096       190,077       190,000       77              
 
  NITC Taiwan Bond Fund   ²   National Investment Trust Co., Ltd.                   15,575       225,000       15,575       225,206       225,000       206              
 
  IBT 1699 Bond Fund   ²   IBT Asset Magement Co., Ltd.                   13,383       170,000       13,383       170,333       170,000       333              
 
  ING Taiwan Bond Fund   ²   ING Securities Investment Trust Co., Ltd                   13,262       205,000       13,262       205,393       205,000       393              
 
  IBT Ta-Chong Bond Fund   ²   IBT Asset Magement Co., Ltd.                   11,631       155,000       11,631       155,255       155,000       255              
 
  Fuh Hwa Bond Fund   ²   Fuh Hwa Investment Trust Co., Ltd.                   12,602       172,000       12,602       172,353       172,000       353              
 
  Mega Diamond Bond Fund   ²   Mega International Investment Trust Co., Ltd.                   12,484       147,000       12,484       147,117       147,000       117              
 
  Polaris De-Li Fund   ²   Polaris Securities Investment Trust Co., Ltd.                   10,042       154,000       10,042       154,298       154,000       298              
 
  NITC Bond Fund   ²   National Investment Trust Co., Ltd.                   796       135,000       796       135,133       135,000       133              
                                 
TSMC Global
  Agency bonds                                                                                            
 
  Fnma Pool 257245   Available-for-sale
financial assets
                    3,716     US$ 3,741                               3,716     US$ 3,513  
 
  Federal Home Ln Bks   ²         9,000     US$ 8,977                   9,000     US$ 9,002     US$ 8,716     US$ 286              
 
  Federal Home Ln Bks   ²                     9,000     US$ 8,783       9,000     US$ 9,162     US$ 8,783     US$ 379              
 
  Federal Home Ln Bks   ²         9,000     US$ 8,939                   9,000     US$ 9,003     US$ 8,735     US$ 268              
 
  Federal Home Ln Bks   ²                     3,725     US$ 3,721                               3,725     US$ 3,854  
 
  Federal Home Ln Bks   ²         5,000     US$ 4,965                   5,000     US$ 5,003     US$ 4,850     US$ 153              
 
  Federal Home Ln Bks   ²         5,000     US$ 4,980                   5,000     US$ 4,999     US$ 4,882     US$ 117              
 
  Federal Home Ln Bks   ²                     7,100     US$ 7,204       7,100     US$ 7,420     US$ 7,204     US$ 216              

(Continued)

- 49 -


 

                                                                                                 
                    Beginning Balance   Acquisition   Disposal (Note 2)    
        Financial                   Amount   Shares/Units   Amount           Amount   Carrying Value   Gain (Loss) or   Ending Balance (Note 3)
    Marketable Securities Type and   Statement       Nature of   Shares/Units   (US$ in   (in Thousands)   (US$ in   Shares/Units   (US$ in   (US$ in   Disposal (US$   Shares/Units   Amount (US$
Company Name   Name   Account   Counter-party   Relationship   (in Thousands)   Thousands)   (Note 1)   Thousands)   (In Thousands)   Thousands)   Thousands)   in Thousands)   (In Thousands)   in Thousands)
                                 
 
  Federal Home Ln Bks   Available-for-sale
financial assets
            US$       12,100     US$ 12,464       8,100     US$ 8,399     US$ 8,328     US$ 71       4,000     US$ 4,148  
 
  Federal Home Ln Bks   ²         18,665     US$ 19,023                   18,665     US$ 19,403     US$ 18,951     US$ 452              
 
  Federal Home Ln Bks   ²         21,900     US$ 22,342                   21,900     US$ 22,473     US$ 21,985     US$ 488              
 
  Federal Home Ln Mtg   ²                     5,000     US$ 5,186                               5,000     US$ 5,340  
 
  Federal Farm Credit Bank   ²                     7,200     US$ 7,241       7,200     US$ 7,475     US$ 7,241     US$ 234              
 
  Federal Farm Credit Bank   ²                     3,375     US$ 3,370                               3,375     US$ 3,433  
 
  Federal Home Ln Mtg Corp.   ²                     6,700     US$ 6,690       6,700     US$ 6,841     US$ 6,690     US$ 151              
 
  Federal Home Ln Mtg Corp.   ²                     3,340     US$ 3,336                               3,340     US$ 3,428  
 
  Federal Home Ln Mtg Corp.   ²                     3,500     US$ 3,494                               3,500     US$ 3,560  
 
  Federal Home Ln Mtg Corp.   ²                     7,000     US$ 7,572       3,500     US$ 3,712     US$ 3,786     US$ (74 )     3,500     US$ 3,743  
 
  Federal Home Ln Mtg Corp.   ²                     3,391     US$ 3,389                               3,391     US$ 3,108  
 
  Federal Home Ln Mtg Corp.   ²                     3,083     US$ 3,170                               3,083     US$ 2,880  
 
  Federal Home Loan Banks   ²         21,000     US$ 21,500                   21,000     US$ 21,646     US$ 21,356     US$ 290              
 
  Federal Natl Mtg Assn   ²                     7,200     US$ 7,248       7,200     US$ 7,424     US$ 7,248     US$ 176              
 
  Federal Natl Mtg Assn   ²                     3,700     US$ 3,700                               3,700     US$ 3,713  
 
  Federal Natl Mtg Assn   ²                     10,000     US$ 10,291       6,000     US$ 6,138     US$ 6,174     US$ (36 )     4,000     US$ 4,169  
 
  Federal Natl Mtg Assn   ²         5,000     US$ 5,169                   5,000     US$ 5,196     US$ 5,102     US$ 94              
 
  Federal Natl Mtg Assn   ²                     3,500     US$ 3,645                               3,500     US$ 3,809  
 
  Federal Natl Mtg Assn   ²                     3,750     US$ 4,151                               3,750     US$ 4,134  
 
  Federal Natl Mtg Assoc   ²                     3,450     US$ 3,463       3,450     US$ 3,450     US$ 3,463     US$ (13 )            
 
  Federal Natl Mtg Assn Mtn   ²         3,000     US$ 2,982                   3,000     US$ 3,006     US$ 2,909     US$ 97              
 
  Federal Natl Mtg Assn Mtn   ²         3,200     US$ 3,171                   3,200     US$ 3,201     US$ 3,090     US$ 111              
 
  Gnma Pool 646061   ²                     4,173     US$ 4,352                               4,173     US$ 2,468  
                                 
 
  Corporate issued asset-backed securities                                                                                            
 
  Capital One Multi Asset Exec   Available-for-sale
financial assets
        9,000     US$ 9,118                   9,000     US$ 8,710     US$ 8,998     US$ (288 )            
 
  Capital One Prime Auto Receiva   ²         3,500     US$ 3,498                   3,500     US$ 3,414     US$ 3,500     US$ (86 )            
 
  Daimlerchrysler Auto Tr   ²         4,335     US$ 4,337                   4,335     US$ 3,596     US$ 4,333     US$ (737 )            
 
  Usaa Auto Owner Tr   ²         5,000     US$ 4,998                   5,000     US$ 4,926     US$ 4,999     US$ (73 )            
 
  Wells Fargo Finl Auto Owner Tr   ²         5,000     US$ 4,956                   3,658     US$ 3,466     US$ 3,608     US$ (142 )     1,342        
                                 
 
  Corporate bonds                                                                                            
 
  American Honda Fin Corp. Mtn   Available-for-sale
financial assets
        3,150     US$ 3,107                   3,150     US$ 3,110     US$ 3,095     US$ 15              
 
  Burlington Res Inc.   ²         3,250     US$ 3,653                   3,250     US$ 3,437     US$ 3,647     US$ (210 )            
 
  Depfa Acs Bank   ²         20,000     US$ 20,402                   20,000     US$ 20,409     US$ 19,984     US$ 425              
 
  Deutschs Bank Ag London   ²                     2,995     US$ 3,041                               2,995     US$ 3,013  
 
  European Invt Bk   ²                     10,600     US$ 10,577       10,600     US$ 10,461     US$ 10,577     US$ (116 )            
 
  European Invt Bk   ²                     7,300     US$ 7,277       7,300     US$ 7,492     US$ 7,276     US$ 216              
 
  European Invt Bk   ²                     10,600     US$ 10,576       10,600     US$ 10,676     US$ 10,576     US$ 100              
 
  European Invt Bk   ²                     7,200     US$ 7,182       7,200     US$ 7,596     US$ 7,182     US$ 414              
 
  General Elec Cap Corp. Mtn   ²         4,000     US$ 3,978                   4,000     US$ 4,042     US$ 3,893     US$ 149              
 
  General Elec Cap Corp. Mtn   ²         3,000     US$ 3,047                   3,000     US$ 3,070     US$ 2,994     US$ 76              
 
  General Re Corp.   ²         3,000     US$ 3,263                   3,000     US$ 3,060     US$ 3,319     US$ (259 )            
 
  Hancock John Global Fdg Ii Mtn   ²         4,750     US$ 5,111                   4,750     US$ 4,707     US$ 5,170     US$ (463 )            
 
  International Business Machs   ²         3,500     US$ 3,555                   3,500     US$ 3,582     US$ 3,496     US$ 86              
 
  Keycorp Mtn Book Entry   ²         3,050     US$ 3,053                   3,050     US$ 3,041     US$ 3,016     US$ 25              
 
  Kreditanstalt Fur Wiederaufbau   ²                     8,700     US$ 8,679       8,700     US$ 8,973     US$ 8,679     US$ 294              
 
  Massmutual Global Fdg Ii Mtn   ²         3,800     US$ 3,737                   3,800     US$ 3,668     US$ 3,647     US$ 21              
 
  Metropolitan Life Golbal Mtn   ²         3,400     US$ 3,366                   3,400     US$ 3,409     US$ 3,325     US$ 84              
 
  Nationwide Life Global Fdg I   ²         3,500     US$ 3,631                   3,500     US$ 3,159     US$ 3,520     US$ (361 )            

(Continued)

- 50 -


 

     
                                                                                                 
                    Beginning Balance   Acquisition   Disposal (Note 2)    
        Financial                   Amount   Shares/Units   Amount           Amount   Carrying Value   Gain (Loss) or   Ending Balance (Note 3)
    Marketable Securities Type and   Statement       Nature of   Shares/Units   (US$ in   (in Thousands)   (US$ in   Shares/Units   (US$ in   (US$ in   Disposal (US$   Shares/Units   Amount (US$
Company Name   Name   Account   Counter-party   Relationship   (in Thousands)   Thousands)   (Note 1)   Thousands)   (In Thousands)   Thousands)   Thousands)   in Thousands)   (In Thousands)   in Thousands)
                                 
 
  Protective Life Secd Trs Mtn   Available-for-sale financial assets       US$ 3,500     US$ 3,484           $     US$ 3,500     US$ 3,274     US$ 3,396     US$ (122 )         US$  
 
  Sbc Communications Inc.   ²         3,400     US$ 3,372                   3,400     US$ 3,367     US$ 3,309     US$ 58              
                                 
 
  Money market funds                                                                                          
 
  Ssga Cash Mgmt Global Offshore   Available-for-sale
financial assets
        592,180     US$ 592,180       1,035,077     US$ 1,035,077       1,596,822     US$ 1,596,822     US$ 1,596,822     US$       30,435     US$ 30,435  
                                 
 
  Government bonds                                                                                            
 
  U S Treas Bond Call   Available-for-sale financial assets                     17,825     US$ 17,813       17,825     US$ 17,830     US$ 17,813     US$ 17              
 
  US Treasury N/B   ²                     31,300     US$ 31,414       31,300     US$ 31,514     US$ 31,413     US$ 101              
 
  US Treasury N/B   ²                     4,200     US$ 4,259       4,200     US$ 4,260     US$ 4,259     US$ 1              
 
  United States Treas Nts   ²                     19,400     US$ 19,353       19,400     US$ 19,460     US$ 19,353     US$ 107              
 
  United States Treas Nts   ²                     20,100     US$ 20,057       20,100     US$ 20,314     US$ 20,057     US$ 257              
 
  United States Treas Nts   ²                     19,500     US$ 19,474       19,500     US$ 19,451     US$ 19,474     US$ (23 )            
 
  United States Treas Nts   ²                     60,100     US$ 60,563       60,100     US$ 60,829     US$ 60,564     US$ 265              
 
  United States Treas Nts   ²                     20,800     US$ 20,751       20,800     US$ 21,292     US$ 20,751     US$ 541              
 
  United States Treas Nts   ²                     45,300     US$ 45,549       45,300     US$ 45,992     US$ 45,549     US$ 443              
 
  United States Treas Nts   ²                     17,000     US$ 16,886       17,000     US$ 16,917     US$ 16,885     US$ 32              
 
  United States Treas Nts   ²                     67,600     US$ 67,804       67,600     US$ 68,342     US$ 67,805     US$ 537              
 
  United States Treas Nts   ²                     7,800     US$ 7,787       7,800     US$ 7,757     US$ 7,787     US$ (30 )            
 
  United States Treas Nts   ²                     14,600     US$ 14,605       14,600     US$ 15,114     US$ 14,605     US$ 509              
 
  United States Treas Nts   ²                     26,500     US$ 26,636       26,500     US$ 26,614     US$ 26,636     US$ (22 )            
 
  United States Treas Nts   ²                     6,400     US$ 6,372       6,400     US$ 6,282     US$ 6,372     US$ (90 )            
 
  United States Treas Nts   ²         25,900     US$ 25,924                   25,900     US$ 26,091     US$ 25,941     US$ 150              
 
  United States Treas Nts   ²                     14,700     US$ 14,887       14,700     US$ 14,990     US$ 14,887     US$ 103              
 
  United States Treas Nts   ²                     11,500     US$ 11,615       11,500     US$ 11,652     US$ 11,615     US$ 37              
 
  United States Treas Nts   ²                     53,300     US$ 54,114       53,300     US$ 54,153     US$ 54,114     US$ 39              
 
  United States Treas Nts   ²                     4,000     US$ 4,057       4,000     US$ 3,969     US$ 4,057     US$ (88 )            
 
  United States Treas Nts   ²         5,000     US$ 5,070                   5,000     US$ 5,077     US$ 5,037     US$ 40              
 
  United States Treas Nts   ²                     3,750     US$ 3,958       3,750     US$ 3,861     US$ 3,958     US$ (97 )            
 
  United States Treas Nts   ²         5,500     US$ 5,613                   5,500     US$ 5,623     US$ 5,584     US$ 39              
 
  United States Treas Nts   ²         6,400     US$ 6,500                   6,400     US$ 6,594     US$ 6,407     US$ 187              
 
  United States Treas Nts   ²         41,900     US$ 42,509                   41,900     US$ 42,867     US$ 41,870     US$ 997              
 
  United States Treas Nts   ²                     4,000     US$ 4,200       4,000     US$ 4,210     US$ 4,199     US$ 11              
 
  United States Treas Nts   ²                     10,266     US$ 11,167                               10,266     US$ 10,374  
 
  United States Treas Nts   ²         5,000     US$ 5,160       2,000     US$ 2,062       7,000     US$ 7,308     US$ 7,119     US$ 189              
 
  United States Treas Nts   ²                     10,000     US$ 10,525       10,000     US$ 10,489     US$ 10,525     US$ (36 )            
 
  United States Treas Nts   ²         3,250     US$ 3,359                   3,250     US$ 3,347     US$ 3,298     US$ 49              
 
  United States Treas Nts   ²                     10,000     US$ 10,866       10,000     US$ 11,008     US$ 10,866     US$ 142              
 
  United States Treas Nts   ²         7,500     US$ 7,758                   7,500     US$ 7,855     US$ 7,742     US$ 113              
 
  United States Treas Nts   ²                     15,000     US$ 16,162       15,000     US$ 16,335     US$ 16,162     US$ 173              
 
  United States Treas Nts   ²         9,500     US$ 9,735                   9,500     US$ 9,757     US$ 9,479     US$ 278              
 
  United States Treas Nts   ²                     11,250     US$ 12,259       11,250     US$ 12,038     US$ 12,259     US$ (221 )            
 
  United States Treas Nts   ²                     19,700     US$ 19,900       19,700     US$ 20,045     US$ 19,900     US$ 145              
 
  Wi Treasury Sec   ²                     13,300     US$ 13,383       13,300     US$ 13,430     US$ 13,383     US$ 47              
 
Note 1:    The shares/units and amount of marketable securities acquired do not include stock dividends from investees.  
 
Note 2:    The data for marketable securities disposed exclude bonds maturities and capital return from subsidiaries.  
 
Note 3:    The ending balance includes the amortization of premium/discount on bonds investments, unrealized valuation gains/ losses on financial assets, translation adjustments or equity in earnings of equity method investees. (Concluded)

- 51 -


 

TABLE 3
Taiwan Semiconductor Manufacturing Company Limited
ACQUISITION OF INDIVIDUAL REAL ESTATE PROPERTIES AT COSTS OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2008
(Amounts in Thousands of New Taiwan Dollars)
                                                         
Company   Types of       Transaction           Nature of   Prior Transaction of Related Counter-party   Price   Purpose of   Other
Name   Property   Transaction Date   Amount   Payment Term   Counter-party   Relationships   Owner   Relationships   Transfer Date   Amount   Reference   Acquisition   Terms
 
The Company
  Fab   January 16, 2008 to January 19, 2008   $ 4,045,220     By the construction
progress
  Tasa Construction Corporation, Fu Tsu Construction, and China Steel Structure Co., Ltd.     N/A   N/A   N/A   N/A   Public bidding   Manufacturing
purpose
  None

- 52 -


 

TABLE 4
Taiwan Semiconductor Manufacturing Company Limited and Investees
TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2008
(Amounts in Thousands of New Taiwan Dollars)
                                                             
                                            Notes/Accounts Payable or    
            Transaction Details   Abnormal Transaction   Receivable    
            Purchases/           % to       Unit Price   Payment Terms           % to    
Company Name   Related Party   Nature of Relationships   Sales   Amount   Total   Payment Terms   (Note)   (Note)   Ending Balance   Total   Note
 
                                                           
The Company
  TSMC North America   Subsidiary   Sales   $ 192,986,719       58     Net 30 days after invoice date       $ 11,512,777       50      
 
  GUC   Investee with a controlling financial interest   Sales     1,611,058       1     Net 30 days after monthly closing         215,190       1      
 
  TSMC Shanghai   Subsidiary   Sales     101,245           Net 30 days after monthly closing                    
 
  WaferTech   Indirect subsidiary   Purchases     8,207,876       22     Net 30 days after monthly closing         (171,089 )     3      
 
  TSMC Shanghai   Subsidiary   Purchases     4,717,676       12     Net 30 days after monthly closing         (117,417 )     2      
 
  SSMC   Investee accounted for using equity method   Purchases     4,441,795       12     Net 30 days after monthly closing         (162,807 )     3      
 
  VIS   Investee accounted for using equity method   Purchases     3,209,028       8     Net 30 days after monthly closing         (317,491 )     6      
 
                                                           
GUC
  TSMC North America   Same parent company   Purchases     1,747,488       41     Net 30 days after invoice date/net 45 days after monthly closing         (148,680 )     20      
 
                                                           
XinTec
  OmniVision   Parent company of director (represented for XinTec)   Sales     2,522,749       81     Net 30 days after monthly closing         309,133       89      
 
  VisEra   Same president   Sales     23,650       1     Net 45 days after monthly closing         283            
 
Note:   The sales prices and payment terms to related parties were not significantly different from those of sales to third parties. For other related party transactions, prices and terms were determined in accordance with mutual agreements.

- 53 -


 

TABLE 5
Taiwan Semiconductor Manufacturing Company Limited and Investees
RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
DECEMBER 31, 2008
(Amounts in Thousands of New Taiwan Dollars)
                                                 
                                        Amounts Received    
                    Turnover Days   Overdue   in Subsequent   Allowance for Bad
Company Name   Related Party   Nature of Relationships   Ending Balance   (Note 1)   Amounts   Action Taken   Period   Debts
 
The Company
  TSMC North America   Subsidiary   $ 11,769,401       36     $ 4,130,119       $ 4,177,615     $—
 
  GUC   Investee with a controlling financial interest     215,190       33       1,869         103,680    
 
  TSMC Shanghai   Subsidiary     112,933     (Note 2)                
 
                                               
XinTec
  OmniVision   Parent company of director (represented for XinTec)     309,133       54                  
 
Note 1:   The calculation of turnover days excludes other receivables from related parties.
 
Note 2:   The ending balance primarily consisted of other receivables, which is not applicable for the calculation of turnover days.

- 54 -


 

TABLE 6
Taiwan Semiconductor Manufacturing Company Limited and Investee
NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES OVER WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE
DECEMBER 31, 2008
(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Specified)
                                                                         
                Original Investment Amount   Balance as of December 31, 2008   Net Income   Equity in the
Earnings
   
Investor Company   Investee Company   Location   Main Businesses and Products   December 31,
2008
(Foreign
Currencies in
Thousands)
  December 31,
2007
(Foreign
Currencies in
Thousands)
  Shares (in
Thousands)
  Percentage of
Ownership
  Carrying
Value
(Foreign
Currencies in
Thousands)
  (Losses) of the
Investee
(Foreign
Currencies in
Thousands)
  (Losses)
(Note 1)
(Foreign
Currencies in
Thousands)
  Note
 
                                                                       
The Company
  TSMC Global   Tortola, British Virgin Islands   Investment activities   $ 42,327,245     $ 42,327,245       1       100     $ 45,756,519     $ 963,052     $ 963,052     Subsidiary
 
  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       29,637,057       2,082,332       2,082,332     Subsidiary
 
  VIS   Hsin-Chu, Taiwan   Research, design, development, manufacture, packaging, testing and sale of memory integrated circuits, LSI, VLSI and related parts     13,232,288       13,047,681       628,223       37       9,787,275       1,041,953       (114,707 )   Investee accounted for
using equity method
 
  SSMC   Singapore   Fabrication and supply of integrated circuits     5,120,028       8,840,895       314       39       6,808,192       2,460,149       757,241     Investee accounted for
using equity method
 
  TSMC Shanghai   Shanghai, China   Manufacturing and selling of integrated circuits at the order of and pursuant to product design specifications provided by customers     12,180,367       12,180,367             100       6,267,128       (2,904,565 )     (2,907,231 )   Subsidiary
 
  TSMC Partners   Tortola, British Virgin Islands   Investment activities     10,350       10,350       300       100       3,730,913       (973,153 )     (973,153 )   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       2,435,666       144,918       144,918     Subsidiary
 
  XinTec   Taoyuan, Taiwan   Wafer level chip size packaging service     1,357,890       1,357,890       92,620       42       1,506,384       198,178       30,811     Investee with a
controlling financial
interest
 
  VTAF III   Cayman Islands   Investing in new start-up technology companies     1,440,241       973,459             98       1,305,605       (92,095 )     (90,253 )   Subsidiary
 
  VTAF II   Cayman Islands   Investing in new start-up technology companies     1,036,422       1,095,622             98       975,367       (132,150 )     (129,507 )   Subsidiary
 
  GUC   Hsin-Chu, Taiwan   Researching, developing, manufacturing, testing and marketing of integrated circuits     386,568       386,568       44,904       36       950,263       747,049       269,544     Investee with a
controlling financial
interest
 
  Emerging Alliance   Cayman Islands   Investing in new start-up technology companies     986,797       1,019,042             99       433,481       (6,643 )     (6,610 )   Subsidiary
 
  TSMC Japan   Yokohama, Japan   Marketing activities     83,760       83,760       6       100       137,617       4,943       4,943     Subsidiary
 
  TSMC Europe   Amsterdam, the Netherlands   Marketing activities     15,749       15,749             100       124,594       38,454       38,454     Subsidiary
 
  TSMC Korea   Seoul, Korea   Customer service and technical support activities     13,656       13,656       80       100       15,117       3,232       3,232     Subsidiary
 
                                                                       
TSMC International
  TSMC Development   Delaware, U.S.A.   Investment activities   US$ 0.001     US$ 0.001       1       100     US$ 690,095     US$ 16,011     Note 2   Subsidiary
 
  ISDF II   Cayman Islands   Investing in new start-up technology companies   US$ 32,289     US$ 43,048       42,320       97     US$ 25,586     US$ 240     Note 2   Subsidiary
 
  TSMC Technology   Delaware, U.S.A.   Engineering support activities   US$ 0.001     US$ 0.001       1       100     US$ 8,408     US$ 1,816     Note 2   Subsidiary
 
  ISDF   Cayman Islands   Investing in new start-up technology companies   US$ 7,680     US$ 8,721       7,598       97     US$ 6,529     US$ (2,156 )   Note 2   Subsidiary
 
                                                                       
TSMC Development
  WaferTech   Washington, U.S.A.   Manufacturing, selling, testing and computer-aided designing of integrated circuits and other semiconductor devices   US$ 380,000     US$ 430,000       293,637       100     US$ 204,558     US$ 27,089     Note 2   Subsidiary
 
                                                                       
TSMC Partners
  VisEra Holding Company   Cayman Islands   Investment in companies involved in the design, manufacturing, and other related businesses in the semiconductor industry   US$ 43,000     US$ 43,000       43,000       49     US$ 69,298     US$ 4,633     Note 2   Investee accounted for
using equity method
 
  TSMC Canada   Ontario, Canada   Engineering support activities   US$ 2,300     US$ 2,300       2,300       100     US$ 2,570     US$ 286     Note 2   Subsidiary
 
                                                                       
VisEra Holding Company
  VisEra   Hsin-Chu, Taiwan   Manufacturing and selling of electronic parts and providing turn-key services in back-end color filter fabrication, package, test, and optical solutions   US$ 91,041     US$ 91,041       253,120       89     US$ 122,700     US$ 4,429     Note 2   Subsidiary
 
                                                                       
 
                                                                      (Continued)

- 55 -


 

                                                                         
                Original Investment Amount   Balance as of December 31, 2008   Net Income   Equity in the
Earnings
   
Investor Company   Investee Company   Location   Main Businesses and Products   December 31,
2008
(Foreign
Currencies in
Thousands)
  December 31,
2007
(Foreign
Currencies in
Thousands)
  Shares (in
Thousands)
  Percentage of
Ownership
  Carrying
Value
(Foreign
Currencies in
Thousands)
  (Losses) of the
Investee
(Foreign
Currencies in
Thousands)
  (Losses)
(Note 1)
(Foreign
Currencies in
Thousands)
  Note
 
                                                                       
VTAF III
  Mutual-Pak Technology Co., Ltd.   Taipei, Taiwan   Manufacturing and selling of electronic parts and researching, developing, and testing of RFID   US$ 1,705     US$ 1,705       4,590       51     US$ 1,398     US$ (544 )   Note 2   Subsidiary
 
  Aiconn Technology Corp.   Taipei, Taiwan   Wholesaling telecommunication equipments, and manufacturing wired and wireless communication equipments                 4,500       44     US$ 1,052     US$ (1,339 )   Note 2   Investee accounted for
using equity method
 
  Growth Fund   Cayman Islands   Investing in new start-up technology companies   US$ 700                   100     US$ 100     US$ (600 )   Note 2   Subsidiary
 
  VTA Holdings   Delaware, U.S.A.   Investing in new start-up technology companies                       68                 Note 2   Subsidiary
 
                                                                       
VTAF II
  VTA Holdings   Delaware, U.S.A.   Investing in new start-up technology companies                       24                 Note 2   Subsidiary
 
                                                                       
GUC
  GUC-NA   U.S.A.   Consulting services in main products   US$ 800     US$ 100       800       100     $ 34,019     $ 2,774     Note 2   Subsidiary
 
  GUC-Japan   Japan   Consulting services in main products   JPY 30,000     JPY 10,000       1       100       11,854       459     Note 2   Subsidiary
 
  GUC-Europe   The Netherlands   Consulting services in main products   EUR 50                   100       2,563       254     Note 2   Subsidiary
 
                                                                       
Emerging Alliance
  VTA Holdings   Delaware, U.S.A.   Investing in new start-up technology companies                       8                 Note 2   Subsidiary
 
Note 1:   Equity in earnings/losses of investees exclude the effect of unrealized gross profit from affiliates.  
 
Note 2:   The equity in the earnings (losses) of the investee company is not reflected herein as such amount is already included in the equity in the earnings (losses) of the investor company. (Concluded)

- 56 -


 

TABLE 7
Taiwan Semiconductor Manufacturing Company Limited
INFORMATION OF INVESTMENT IN MAINLAND CHINA
FOR THE YEAR ENDED DECEMBER 31, 2008
(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Specified)
                                                                     
        Total Amount of       Accumulated
Outflow of
Investment
from Taiwan as
of
  Investment Flows   Accumulated
Outflow of
Investment
from Taiwan as
of
      Equity in the   Carrying Value   Accumulated
Inward
Remittance of
Investee Company   Main Businesses and
Products
  Paid-in Capital
RMB in
Thousand)
  Method of
Investment
  January 1, 2008
(US$ in
Thousand)
  Outflow
(US$ in
Thousand)
  Inflow
(US$ in
Thousand)
  December 31, 2008
(US$ in
Thousand)
  Percentage of
Ownership
  Earnings
(Losses)
(Note 2)
  as of
December 31,
2008
  Earnings as of
December 31,
2008
 
                                                                   
TSMC Shanghai
  Manufacturing and sales of integrated circuits at the order of and pursuant to product design specifications provided by customers   $12,180,367
(RMB3,070,623)
  (Note 1)   $12,180,367
(US$371,000)
  $—   $—   $12,180,367
(US$371,000)
    100 %   $(2,907,231)   $6,267,128   $—
         
       
Accumulated Investment in Mainland   Investment Amounts Authorized by    
China as of December 31, 2008   Investment Commission, MOEA   Upper Limit on Investment
(US$ in Thousand)   (US$ in Thousand)   (US$ in Thousand)
 
       
$12,180,367
(US$371,000)
  $12,180,367
(US$371,000)
  $12,180,367
(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.

- 57 -


 

Taiwan Semiconductor Manufacturing
Company Limited and Subsidiaries
Consolidated Financial Statements for the
Years Ended December 31, 2008 and 2007 and
Independent Auditors’ Report

 


 

REPRESENTATION LETTER
The entities that are required to be included in the combined financial statements of Taiwan Semiconductor Manufacturing Company Limited as of and for the year ended December 31, 2008, under the Criteria Governing the Preparation of Affiliation Reports, Consolidated Business Reports and Consolidated Financial Statements of Affiliated Enterprises are the same as those included in the consolidated financial statements prepared in conformity with the revised Statement of Financial Accounting Standards No. 7, “Consolidated Financial Statements”. In addition, the information required to be disclosed in the combined financial statements is included in the consolidated financial statements. Consequently, Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries do not prepare a separate set of combined financial statements.
Very truly yours,
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED
By
/s/ MORRIS CHANG     
MORRIS CHANG
Chairman
January 17, 2009

- 1 -


 

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 December 31, 2008 and 2007, and the related consolidated statements of income, changes in shareholders’ equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the Rules Governing the Audit of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Those rules and standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Taiwan Semiconductor Manufacturing Company Limited and subsidiaries as of December 31, 2008 and 2007, and the results of their consolidated operations and their consolidated cash flows for the years then ended in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers and accounting principles generally accepted in the Republic of China.

- 2 -


 

As discussed in Note 3 to the consolidated financial statements, effective January 1, 2008, Taiwan Semiconductor Manufacturing Company Limited and subsidiaries adopted Interpretation 2007-052, “Accounting for Bonuses to Employees, Directors and Supervisors” issued by the Accounting Research and Development Foundation of the Republic of China and relevant requirements promulgated by the Financial Supervisory Commission of the Executive Yuan.
January 17, 2009
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 financial statements shall prevail.

- 3 -


 

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2008 AND 2007
(In Thousands of New Taiwan Dollars, Except Par Value)
                                 
    2008     2007  
    Amount     %     Amount     %  
ASSETS
                               
 
                               
CURRENT ASSETS
                               
Cash and cash equivalents (Notes 2 and 4)
  $ 194,613,752       35     $ 94,986,488       16  
Financial assets at fair value through profit or loss (Notes 2, 5 and 24)
    55,730             1,632,387        
Available-for-sale financial assets (Notes 2, 6 and 24)
    10,898,715       2       66,688,368       12  
Held-to-maturity financial assets (Notes 2, 7 and 24)
    5,881,999       1       11,526,946       2  
Receivables from related parties (Note 25)
    407             10,885        
Notes and accounts receivable
    25,023,321       4       47,204,126       8  
Allowance for doubtful receivables (Notes 2 and 8)
    (455,751 )           (701,807 )      
Allowance for sales returns and others (Notes 2 and 8)
    (6,071,026 )     (1 )     (4,089,035 )     (1 )
Other receivables from related parties (Note 25)
    99,918             243,620        
Other financial assets (Note 26)
    1,911,699             1,515,527        
Inventories, net (Notes 2 and 9)
    14,876,645       3       23,862,260       4  
Deferred income tax assets, net (Notes 2 and 18)
    3,969,330       1       5,572,334       1  
Prepaid expenses and other current assets
    1,813,692             1,370,230        
 
                       
 
                               
Total current assets
    252,618,431       45       249,822,329       42  
 
                       
 
                               
LONG-TERM INVESTMENTS (Notes 2, 6, 7, 10, 11 and 24)
                               
Investments accounted for using equity method
    18,907,158       3       22,517,289       4  
Available-for-sale financial assets
    2,032,658             1,400,691        
Held-to-maturity financial assets
    15,426,252       3       8,697,726       2  
Financial assets carried at cost
    3,615,447       1       3,845,619       1  
 
                       
 
                               
Total long-term investments
    39,981,515       7       36,461,325       7  
 
                       
 
                               
PROPERTY, PLANT AND EQUIPMENT (Notes 2, 12 and 26)
                               
Cost
                               
Land and land improvements
    953,857             942,197        
Buildings
    132,249,996       24       118,640,027       21  
Machinery and equipment
    697,498,743       125       646,419,427       113  
Office equipment
    12,430,800       2       11,829,640       2  
Leased assets
    722,339             652,296        
 
                       
 
    843,855,735       151       778,483,587       136  
Accumulated depreciation
    (618,816,267 )     (110 )     (540,099,567 )     (94 )
Advance payments and construction in progress
    18,605,882       3       21,868,167       4  
 
                       
 
                               
Net property, plant and equipment
    243,645,350       44       260,252,187       46  
 
                       
 
                               
INTANGIBLE ASSETS
                               
Goodwill (Note 2)
    6,044,392       1       5,987,582       1  
Deferred charges, net (Notes 2 and 13)
    7,125,828       1       7,923,601       2  
 
                       
 
                               
Total intangible assets
    13,170,220       2       13,911,183       3  
 
                       
 
                               
OTHER ASSETS
                               
Deferred income tax assets, net (Notes 2 and 18)
    6,636,873       1       7,313,283       1  
Refundable deposits
    2,767,199       1       2,777,769       1  
Others (Note 2)
    97,001             327,150        
 
                       
 
                               
Total other assets
    9,501,073       2       10,418,202       2  
 
                       
 
                               
TOTAL
  $ 558,916,589       100     $ 570,865,226       100  
 
                       
 
                               
LIABILITIES AND SHAREHOLDERS’ EQUITY
                               
 
                               
CURRENT LIABILITIES
                               
Financial liabilities at fair value through profit or loss (Notes 2, 5 and 24)
  $ 85,187           $ 249,313        
Accounts payable
    5,553,151       1       11,574,882       2  
Payables to related parties (Note 25)
    489,857             1,503,376       1  
Income tax payable (Notes 2 and 18)
    9,331,825       2       11,126,128       2  
Bonuses payable to employees, directors and supervisors (Notes 3 and 20)
    15,369,730       3              
Payables to contractors and equipment suppliers
    7,998,773       1       6,256,732       1  
Accrued expenses and other current liabilities (Notes 16 and 28)
    9,755,835       2       17,714,763       3  
Current portion of bonds payable and bank loans (Notes 14, 15 and 26)
    8,222,398       1       280,813        
 
                       
 
                               
Total current liabilities
    56,806,756       10       48,706,007       9  
 
                       
 
                               
LONG-TERM LIABILITIES
                               
Bonds payable (Note 14)
    4,500,000       1       12,500,000       2  
Long-term bank loans (Notes 15 and 26)
    1,420,476             1,722,196        
Other long-term payables (Notes 16 and 28)
    9,548,226       2       9,409,978       2  
Obligations under capital leases (Note 2)
    722,339             652,296        
 
                       
 
                               
Total long-term liabilities
    16,191,041       3       24,284,470       4  
 
                       
 
                               
OTHER LIABILITIES
                               
Accrued pension cost (Notes 2 and 17)
    3,701,584       1       3,665,522       1  
Guarantee deposits (Note 28)
    1,484,495             2,243,009        
Deferred credits (Notes 2 and 25)
    316,537             1,236,873        
Others
    43,709             43,774        
 
                       
 
                               
Total other liabilities
    5,546,325       1       7,189,178       1  
 
                       
 
                               
Total liabilities
    78,544,122       14       80,179,655       14  
 
                       
 
                               
EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT
                               
Capital stock — $10 par value (Notes 20 and 22)
                               
Authorized: 28,050,000 thousand shares
                               
Issued:25,625,437 thousand shares in 2008
26,427,104 thousand shares in 2007
    256,254,373       46       264,271,037       46  
 
                       
Capital surplus (Notes 2 and 20)
    49,875,255       9       53,732,682       9  
 
                       
 
                               
Retained earnings (Note 20)
                               
Appropriated as legal capital reserve
    67,324,393       12       56,406,684       10  
Appropriated as special capital reserve
    391,857             629,550        
Unappropriated earnings
    102,337,417       18       161,828,337       28  
 
                       
 
    170,053,667       30       218,864,571       38  
 
                       
 
                               
Others (Notes 2, 22 and 24)
                               
Cumulative translation adjustments
    481,158             (1,072,853 )      
Unrealized gain/loss on financial instruments
    (287,342 )           680,997        
Treasury stock: 834,096 thousand shares
                (49,385,032 )     (8 )
 
                       
 
    193,816             (49,776,888 )     (8 )
 
                       
 
                               
Equity attributable to shareholders of the parent
    476,377,111       85       487,091,402       85  
 
                               
MINORITY INTERESTS (Note 2)
    3,995,356       1       3,594,169       1  
 
                       
 
                               
Total shareholders’ equity
    480,372,467       86       490,685,571       86  
 
                       
 
                               
TOTAL
  $ 558,916,589       100     $ 570,865,226       100  
 
                       
The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche audit report dated January 17, 2009)

- 4 -


 

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)
                                 
    2008     2007  
    Amount     %     Amount     %  
 
                               
GROSS SALES (Notes 2 and 25)
  $ 341,983,355             $ 328,336,172          
 
                               
SALES RETURNS AND ALLOWANCES (Notes 2 and 8)
    8,825,695               5,705,576          
 
                           
 
                               
NET SALES
    333,157,660       100       322,630,596       100  
 
                               
COST OF SALES (Notes 19 and 25)
    191,408,099       58       180,280,385       56  
 
                       
 
                               
GROSS PROFIT
    141,749,561       42       142,350,211       44  
 
                       
 
                               
OPERATING EXPENSES (Notes 19 and 25)
                               
Research and development
    21,480,937       7       17,946,322       5  
General and administrative
    11,096,599       3       8,963,836       3  
Marketing
    4,736,657       1       3,718,146       1  
 
                       
 
                               
Total operating expenses
    37,314,193       11       30,628,304       9  
 
                       
 
                               
INCOME FROM OPERATIONS
    104,435,368       31       111,721,907       35  
 
                       
 
                               
NON-OPERATING INCOME AND GAINS
                               
Interest income (Note 2)
    5,373,823       2       5,651,700       2  
Foreign exchange gain, net (Note 2)
    1,227,653       1       80,922        
Technical service income (Notes 25 and 28)
    1,181,966             590,391        
Settlement income (Note 28)
    951,180             985,114       1  
Gain on settlement and disposal of financial assets, net (Notes 2 and 24)
    721,050             874,670        
Equity in earnings of equity method investees, net (Notes 2 and 10)
    701,533             2,507,869       1  
Gain on disposal of property, plant and equipment and other assets (Notes 2 and 25)
    100,874             91,210        
Subsidy income (Note 2)
    8,029             364,321        
Valuation gain on financial instruments, net (Notes 2, 5 and 24)
                63,017        
Others (Note 25)
    555,341             724,589        
 
                       
 
                               
Total non-operating income and gains
    10,821,449       3       11,933,803       4  
 
                       
(Continued)

- 5 -


 

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)
                                 
    2008     2007  
    Amount     %     Amount     %  
 
                               
NON-OPERATING EXPENSES AND LOSSES
                               
Loss on impairment of financial assets (Notes 2, 6, 11 and 24)
  $ 1,560,055       1     $ 54,208        
Valuation loss on financial instruments, net (Notes 2, 5 and 24)
    1,081,019                    
Interest expense
    614,988             842,242        
Loss on impairment of idle assets (Note 2)
    210,477                    
Provision for litigation loss (Note 28h)
    99,126             1,008,635       1  
Others (Note 2)
    218,906             108,599        
 
                       
 
                               
Total non-operating expenses and losses
    3,784,571       1       2,013,684       1  
 
                       
 
                               
INCOME BEFORE INCOME TAX
    111,472,246       33       121,642,026       38  
 
                               
INCOME TAX EXPENSE (Notes 2 and 18)
    (10,949,009 )     (3 )     (11,709,626 )     (4 )
 
                       
 
                               
NET INCOME
  $ 100,523,237       30     $ 109,932,400       34  
 
                       
 
                               
ATTRIBUTABLE TO:
                               
Shareholders of the parent
  $ 99,933,168       30     $ 109,177,093       34  
Minority interests
    590,069             755,307        
 
                       
 
                               
 
  $ 100,523,237       30     $ 109,932,400       34  
 
                       
                                 
    2008     2007  
    Before     After     Before     After  
    Income Tax     Income Tax     Income Tax     Income Tax  
EARNINGS PER SHARE (NT$, Note 23)
                               
Basic earnings per share
  $ 4.28     $ 3.86     $ 4.50     $ 4.06  
 
                       
Diluted earnings per share
  $ 4.25     $ 3.83     $ 4.50     $ 4.06  
 
                       
The accompanying notes are an integral part of the consolidated financial statements.
 
(With Deloitte & Touche audit report dated January 17, 2009)
  (Concluded)

- 6 -


 

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(In Thousands of New Taiwan Dollars, Except Dividends Per Share)
                                                                                                                 
    Equity Attributable to Shareholders of the Parent  
                                                            Others                        
                            Retained Earnings             Unrealized                                        
    Capital Stock — Common Stock             Legal     Special                     Cumulative     Gain (Loss)                                     Total  
    Shares (in             Capital     Capital     Capital     Unappropriated             Translation     on Financial     Treasury     Others             Minority     Shareholders’  
    Thousands)     Amount     Surplus     Reserve     Reserve     Earnings     Total     Adjustments     Instruments     Stock     Total     Total     Interests     Equity  
 
                                                                                                               
BALANCE, JANUARY 1, 2007
    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     $ (918,075 )   $ (1,547,625 )   $ 507,981,284     $ 1,156,832     $ 509,138,116  
 
                                                                                                               
Appropriations of prior year’s earnings
                                                                                                               
Legal capital reserve
                      12,700,973             (12,700,973 )                                                
Reversal of special capital reserve
                            (11,192 )     11,192                                                  
Bonus to employees — in cash
                                  (4,572,798 )     (4,572,798 )                             (4,572,798 )           (4,572,798 )
Bonus to employees — in stock
    457,280       4,572,798                         (4,572,798 )     (4,572,798 )                                          
Cash dividends to shareholders — NT$3.00 per share
                                  (77,489,064 )     (77,489,064 )                             (77,489,064 )           (77,489,064 )
Stock dividends to shareholders — NT$0.02 per share
    51,659       516,594                         (516,594 )     (516,594 )                                          
Bonus to directors and supervisors
                                  (285,800 )     (285,800 )                             (285,800 )           (285,800 )
Capital surplus transferred to capital stock
    77,489       774,891       (774,891 )                                                                  
Net income in 2007
                                  109,177,093       109,177,093                               109,177,093       755,307       109,932,400  
Adjustment arising from changes in percentage of ownership in equity method investees
                (28,639 )                                                     (28,639 )     31,862       3,223  
Translation adjustments
                                              118,312                   118,312       118,312       (99,318 )     18,994  
Issuance of stock from exercising employee stock options
    10,988       109,875       326,952                                                       436,827             436,827  
Cash dividends received by subsidiaries from parent company
                101,762                                                       101,762             101,762  
Valuation gain on available-for-sale financial assets
                                                    241,821             241,821       241,821       19,487       261,308  
Equity in the valuation loss on available-for-sale financial assets held by equity method investees
                                                    (122,439 )           (122,439 )     (122,439 )           (122,439 )
Treasury stock repurchased
                                                          (48,466,957 )     (48,466,957 )     (48,466,957 )           (48,466,957 )
Increase in minority interests
                                                                            1,729,999       1,729,999  
 
                                                                                   
 
                                                                                                               
BALANCE, DECEMBER 31, 2007
    26,427,104       264,271,037       53,732,682       56,406,684       629,550       161,828,337       218,864,571       (1,072,853 )     680,997       (49,385,032 )     (49,776,888 )     487,091,402       3,594,169       490,685,571  
 
                                                                                                               
Appropriations of prior year’s earnings
                                                                                                               
Legal capital reserve
                      10,917,709             (10,917,709 )                                                
Reversal of special capital reserve
                            (237,693 )     237,693                                                  
Bonus to employees — in cash
                                  (3,939,883 )     (3,939,883 )                             (3,939,883 )           (3,939,883 )
Bonus to employees — in stock
    393,988       3,939,883                         (3,939,883 )     (3,939,883 )                                          
Cash dividends to shareholders — NT$3.00 per share
                                  (76,881,311 )     (76,881,311 )                             (76,881,311 )           (76,881,311 )
Stock dividends to shareholders — NT$0.02 per share
    51,254       512,542                         (512,542 )     (512,542 )                                          
Bonus to directors
                                  (176,890 )     (176,890 )                             (176,890 )           (176,890 )
Capital surplus transferred to capital stock
    76,881       768,813       (768,813 )                                                                  
Net income in 2008
                                  99,933,168       99,933,168                               99,933,168       590,069       100,523,237  
Adjustment arising from changes in percentage of ownership in equity method investees
                (137,063 )                                                     (137,063 )     11,700       (125,363 )
Translation adjustments
                                              1,554,011                   1,554,011       1,554,011       (68,792 )     1,485,219  
Issuance of stock from exercising employee stock options
    6,027       60,266       166,884                                                       227,150             227,150  
Cash dividends received by subsidiaries from parent company
                102,279                                                       102,279             102,279  
Valuation loss on available-for-sale financial assets
                                                    (826,251 )           (826,251 )     (826,251 )     (17,048 )     (843,299 )
Equity in the valuation loss on available-for-sale financial assets held by equity method investees
                                                    (142,088 )           (142,088 )     (142,088 )           (142,088 )
Treasury stock repurchased
                                                          (30,427,413 )     (30,427,413 )     (30,427,413 )           (30,427,413 )
Treasury stock retired
    (1,329,817 )     (13,298,168 )     (3,220,714 )                 (63,293,563 )     (63,293,563 )                 79,812,445       79,812,445                    
Decrease in minority interests
                                                                            (114,742 )     (114,742 )
 
                                                                                   
 
                                                                                                               
BALANCE, DECEMBER 31, 2008
    25,625,437     $ 256,254,373     $ 49,875,255     $ 67,324,393     $ 391,857     $ 102,337,417     $ 170,053,667     $ 481,158     $ (287,342 )   $     $ 193,816     $ 476,377,111     $ 3,995,356     $ 480,372,467  
 
                                                                                   
The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche audit report dated January 17, 2009)

- 7 -


 

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(In Thousands of New Taiwan Dollars)
                 
    2008     2007  
 
               
CASH FLOWS FROM OPERATING ACTIVITIES
               
Net income attributable to shareholders of the parent
  $ 99,933,168     $ 109,177,093  
Net income attributable to minority interests
    590,069       755,307  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
    81,512,191       80,005,395  
Amortization of premium/discount of financial assets
    (93,393 )     (117,159 )
Loss on impairment of financial assets
    1,560,055       54,208  
Gain on disposal of available-for-sale financial assets, net
    (637,219 )     (610,167 )
Gain on disposal of financial assets carried at cost, net
    (83,831 )     (264,503 )
Equity in earnings of equity method investees, net
    (701,533 )     (2,507,869 )
Dividends received from equity method investees
    1,661,134       625,130  
Gain on disposal of property, plant and equipment and other assets, net
    (100,285 )     (85,020 )
Loss on impairment of idle assets
    210,477        
Deferred income tax
    2,279,414       943,797  
Net changes in operating assets and liabilities:
               
Decrease (increase) in:
               
Financial assets and liabilities at fair value through profit or loss
    1,412,531       (187,084 )
Receivables from related parties
    10,478       629,467  
Notes and accounts receivable
    22,180,805       (12,134,176 )
Allowance for doubtful receivables
    (246,056 )     (48,126 )
Allowance for sales returns and others
    1,981,991       1,205,277  
Other receivables from related parties
    143,702       13,243  
Other financial assets
    (425,937 )     842,136  
Inventories
    8,985,615       (2,226,106 )
Prepaid expenses and other current assets
    (443,462 )     290,434  
Increase (decrease) in:
               
Accounts payable
    (6,021,731 )     3,218,255  
Payables to related parties
    (1,013,519 )     (375,731 )
Income tax payable
    (1,794,303 )     3,179,655  
Bonuses payable to employees, directors and supervisors
    15,369,730        
Accrued expenses and other current liabilities
    (3,954,427 )     913,872  
Accrued pension cost
    36,062       125,462  
Deferred credits
    (858,161 )     343,878  
 
           
 
               
Net cash provided by operating activities
    221,493,565       183,766,668  
 
           
 
               
CASH FLOWS FROM INVESTING ACTIVITIES
               
Acquisitions of:
               
Property, plant and equipment
    (59,222,654 )     (84,000,985 )
Available-for-sale financial assets
    (85,273,867 )     (87,550,197 )
Held-to-maturity financial assets
    (16,523,275 )      
Investments accounted for using equity method
    (55,871 )     (5,803,826 )
Financial assets carried at cost
    (463,211 )     (911,323 )
(Continued)

- 8 -


 

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(In Thousands of New Taiwan Dollars)
                 
    2008     2007  
 
               
Proceeds from disposal or redemption of:
               
Available-for-sale financial assets
  $ 138,515,023     $ 94,908,666  
Held-to-maturity financial assets
    15,634,620       17,325,120  
Financial assets carried at cost
    199,424       410,465  
Property, plant and equipment and other assets
    194,940       60,535  
Proceeds from return of capital by investees
    2,345,867        
Increase in deferred charges
    (3,395,287 )     (3,059,155 )
Decrease (increase) in refundable deposits
    10,570       (1,434,895 )
Net cash paid for acquisition of subsidiaries
          (404,445 )
Increase in other assets
    (8,163 )     (228,747 )
 
           
 
               
Net cash used in investing activities
    (8,041,884 )     (70,688,787 )
 
           
 
               
CASH FLOWS FROM FINANCING ACTIVITIES
               
Decrease in short-term bank loans
          (89,720 )
Proceeds from long-term bank loans
    98,400       653,000  
Repayments of:
               
Long-term bank loans
    (468,313 )     (196,173 )
Bonds payable
          (7,000,000 )
Decrease in guarantee deposits
    (758,514 )     (1,574,131 )
Cash dividends
    (76,779,032 )     (77,387,302 )
Cash bonus paid to employees
    (3,939,883 )     (4,572,798 )
Bonus to directors and supervisors
    (176,890 )     (285,800 )
Proceeds from exercise of employee stock options
    227,150       436,827  
Repurchase of treasury stock
    (33,480,997 )     (45,413,373 )
Increase (decrease) in minority interests
    (114,742 )     19,004  
 
           
 
               
Net cash used in financing activities
    (115,392,821 )     (135,410,466 )
 
           
 
               
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    98,058,860       (22,332,585 )
 
               
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
    1,568,404       (518,119 )
 
               
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
    94,986,488       117,837,192  
 
           
 
               
CASH AND CASH EQUIVALENTS, END OF YEAR
  $ 194,613,752     $ 94,986,488  
 
           
 
               
SUPPLEMENTAL INFORMATION
               
Interest paid
  $ 676,318     $ 922,079  
 
           
Income tax paid
  $ 10,477,018     $ 7,585,727  
 
           
(Continued)

- 9 -


 

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(In Thousands of New Taiwan Dollars)
                 
    2008     2007  
 
               
INVESTING AND FINANCING ACTIVITIES AFFECTING BOTH CASH AND NON-CASH ITEMS
               
Acquisition of property, plant and equipment
  $ 60,978,527     $ 78,889,954  
Decrease (increase) in payables to contractors and equipment suppliers
    (1,742,041 )     5,111,031  
Increase in obligations under capital leases
    (13,832 )      
 
           
Cash paid
  $ 59,222,654     $ 84,000,985  
 
           
 
               
Repurchase of treasury stock
  $ 30,427,413     $ 48,466,957  
Decrease (increase) in accrued expenses and other current liabilities
    3,053,584       (3,053,584 )
 
           
Cash paid
  $ 33,480,997     $ 45,413,373  
 
           
 
               
NONCASH FINANCING ACTIVITIES
               
Current portion of bonds payable and long-term liabilities
  $ 8,222,398     $ 280,813  
 
           
Current portion of other long-term payables
               
(under accrued expenses and other current liabilities)
  $ 1,126,546     $ 3,735,875  
 
           
The Company acquired controlling interests in XinTec Inc. (XinTec) and Mutual-Pak Technology Co., Ltd. (Mutual-Pak) in March 2007 and July 2007, respectively, and consolidated the revenue/income and expenses/losses of these two subsidiaries from the respective acquisition dates. Fair values of assets acquired and liabilities assumed at acquisition were as follows:
         
Current assets
  $ 3,101,718  
Property, plant and equipment
    2,339,546  
Other assets
    436,692  
Current liabilities
    (1,937,407 )
Long-term liabilities
    (701,855 )
 
     
 
       
Net amount
  $ 3,238,694  
 
     
 
       
Purchase price for XinTec and Mutual-Pak
  $ 1,413,585  
Less: Cash balance of XinTec and Mutual-Pak at acquisition
    (1,009,140 )
 
     
 
       
Net cash paid for acquisition of XinTec and Mutual-Pak
  $ 404,445  
 
     
The accompanying notes are an integral part of the consolidated financial statements.
     
(With Deloitte & Touche audit report dated January 17, 2009)
  (Concluded)

- 10 -


 

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
(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 on February 21, 1987 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 a dedicated foundry in the semiconductor industry which engaged mainly in the manufacturing, selling, packaging, testing and computer-aided designing of integrated circuits and other semiconductor devices and the manufacturing of masks.
 
    As of December 31, 2008 and 2007, TSMC and its subsidiaries had 24,834 and 25,258 employees, respectively.
2.   SUMMARY OF 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.

- 11 -


 

    The consolidated entities were as follows:
                         
        Percentage of Ownership    
        December 31    
Name of Investor   Name of Investee   2008   2007   Remark
 
                       
TSMC
  TSMC North America     100 %     100 %  
 
  TSMC Japan Limited (TSMC Japan)     100 %     100 %  
 
  TSMC Korea Limited (TSMC Korea)     100 %     100 %  
 
  Taiwan Semiconductor Manufacturing Company Europe B.V. (TSMC Europe)     100 %     100 %  
 
  TSMC International Investment Ltd. (TSMC International)     100 %     100 %  
 
  TSMC Global Ltd. (TSMC Global)     100 %     100 %  
 
  TSMC (Shanghai) Company Limited (TSMC Shanghai)     100 %     100 %  
 
  Chi Cherng Investment Co., Ltd. (Chi Cherng)           36 %   TSMC and Hsin Ruey held in aggregate a 100% ownership of Chi Cherng as of December 31, 2007. In July 2008, Chi Cherng was merged by Hsin Ruey.
 
  Hsin Ruey Investment Co., Ltd. (Hsin Ruey)           36 %   TSMC and Chi Cherng held in aggregate a 100% ownership of Hsin Ruey as of December 31, 2007. In August 2008, Hsin Ruey was merged by TSMC.
 
  VentureTech Alliance Fund III, L.P. (VTAF III)     98 %     98 %  
 
  VentureTech Alliance Fund II, L.P. (VTAF II)     98 %     98 %  
 
  Emerging Alliance Fund, L.P. (Emerging Alliance)     99.5 %     99.5 %  
 
  Global Unichip Corporation (GUC)     36 %     37 %   GUC became a consolidated entity of TSMC as GUC’s president was assigned by TSMC and TSMC has a controlling interest over the financial, operating and personnel hiring decisions of GUC.
 
  XinTec Inc. (XinTec)     42 %     43 %   TSMC obtained three out of five director positions in March 2007 and TSMC has a controlling interest in XinTec.
 
  TSMC Partners, Ltd. (TSMC Partners)     100 %     100 %  
 
                       
TSMC International
  TSMC Technology, Inc. (TSMC Technology)     100 %     100 %  
 
  TSMC Development, Inc. (TSMC Development)     100 %     100 %  
 
  InveStar Semiconductor Development Fund, Inc. (ISDF)     97 %     97 %  
 
  InveStar Semiconductor Development Fund, Inc. (II) LDC. (ISDF II)     97 %     97 %  
 
                       
TSMC Development
  WaferTech, LLC (WaferTech)     99.996 %     99.996 %  
 
                       
VTAF III
  Mutual-Pak Technology Co., Ltd. (Mutual-Pak)     51 %     51 %  
 
  Growth Fund Limited (Growth Fund)     100 %         Newly established.
 
                       
VTAF III, VTAF II and Emerging Alliance
  VentureTech Alliance Holdings, L.L.C. (VTA Holdings)     100 %     100 %  
(Continued)

- 12 -


 

                         
        Percentage of Ownership    
        December 31    
Name of Investor   Name of Investee   2008   2007   Remark
 
                       
GUC
  Global Unichip Corporation-NA (GUC-NA)     100 %     100 %  
 
  Global Unichip Japan Co., Ltd. (GUC-Japan)     100 %     100 %  
 
  Global Unichip Europe B.V. (GUC-Europe)     100 %         Newly established.
 
                       
TSMC Partners
  TSMC Design Technology Canada Inc. (TSMC Canada)     100 %     100 %  
(Concluded)
    The following diagram presents information regarding the relationship and ownership percentages between TSMC and its consolidated investees as of December 31, 2008:
(CHART)
    TSMC North America is engaged in selling and marketing of integrated circuits and semiconductor devices. TSMC Japan, TSMC Korea and TSMC Europe are engaged mainly in marketing or customer service and technical supporting activities. TSMC International is engaged in investment in companies involved in the design, manufacture, and other related business in the semiconductor industry. TSMC Global, TSMC Partners and TSMC Development are engaged in investing activities. TSMC Shanghai is engaged in the manufacturing and selling of integrated circuits pursuant to the orders from and product design specifications provided by customers. Emerging Alliance, VTAF II, VTAF III, VTA Holdings, ISDF, ISDF II, and Growth Fund are engaged in investing in new start-up technology companies. TSMC Canada and TSMC Technology are 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, GUC-Japan, and GUC-Europe are engaged in providing products consulting in North America, Japan, and Europe, respectively. XinTec is engaged in the provision of wafer packaging service. Mutual-Pak is engaged in the manufacturing and selling of electronic parts, and researching, developing and testing of RFID.
 
    Chi Cherng and Hsin Ruey, both 100% owned subsidiaries of TSMC, were engaged in investing activities. To simplify the organization structure of investment, TSMC merged Chi Cherng and Hsin Ruey in the third quarter of 2008.
 
    TSMC together with its subsidiaries are hereinafter referred to collectively as the “Company”.
 
    Minority interests in the aforementioned subsidiaries are presented as a separate component of shareholders’ equity.

- 13 -


 

    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 assets held for trading purposes and assets expected to be converted to cash, sold or consumed within one year from the balance sheet date. Current liabilities are obligations incurred for trading purposes and obligations expected to be settled within one year from the balance sheet date. Assets and liabilities that are not classified as current are noncurrent assets and liabilities, respectively.
 
    Cash Equivalents
 
    Repurchase agreements collateralized by government bonds, asset-backed commercial papers and corporate notes 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 changes in fair value recognized in earnings. A regular way purchase or sale of financial assets is accounted for using settlement date accounting.
 
    Fair value is determined as follows: Publicly traded stocks — closing prices at the end of the year; 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.
 
    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. 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 value is determined as follows: Structured time deposits — using valuation techniques; open-end mutual funds and money market funds — net asset values at the end of the year; publicly traded stocks — closing prices at the end of the year; and other debt securities — average of bid and asked prices at the end of the year.
 
    Cash dividends are recognized as investment income upon resolution of shareholders of an investee but are accounted for as a reduction to the original cost of investment if such dividends are declared on the earnings of the investee attributable to the period prior to the purchase of the investment. Stock dividends are recorded as an increase in the number of shares held and do not affect investment income. The cost per share is recalculated based on the new total number of shares.
 
    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.

- 14 -


 

    If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. If, in a subsequent period, the amount of the impairment loss decreases, for equity securities, the previously recognized impairment loss is reversed to the extent of the decrease and recorded as an adjustment to shareholders’ equity; for debt securities, the amount of the decrease is recognized in earnings, provided that the decrease is clearly attributable to an event which occurred after the impairment loss was recognized.
 
    Held-to-maturity Financial Assets
 
    Debt securities for which the Company has a positive intention and ability to hold to maturity are categorized as held-to-maturity financial assets and are carried at amortized cost under the effective interest method except for structured time deposits which are carried at acquisition cost. Those financial assets are initially recognized at fair value plus transaction costs that are directly attributable to the acquisition. Gains or losses are recognized at the time of derecognition, impairment or amortization. A regular way purchase or sale of financial assets is accounted for using settlement date accounting.
 
    If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. If, in a subsequent period, the amount of the impairment loss decreases and the decrease is clearly attributable to an event which occurred after the impairment loss was recognized, the previously recognized impairment loss is reversed to the extent of the decrease. The reversal may not result in a carrying amount that exceeds the amortized cost that would have been determined as if no impairment loss had been recognized.
 
    Allowance for Doubtful Receivables
 
    An allowance for doubtful receivables is provided based on a review of the collectibility of notes and accounts receivable. The Company determines the amount of the allowance for doubtful receivables by examining the aging analysis of outstanding notes and accounts receivable and current trends in the credit quality of its customers as well as its internal credit policies.
 
    Revenue Recognition and Allowance for Sales Returns and Others
 
    The Company recognizes revenue when evidence of an arrangement exists, the rewards of ownership and significant risk of the goods has been transferred to the buyer; price is fixed or determinable, and collectibility is reasonably assured. Provisions for estimated sales returns and others are recorded in the year the related revenue is recognized, based on historical experience, management’s judgment, and any known factors that would significantly affect the allowance.
 
    Sales prices are determined using fair value taking into account related sales discounts agreed to by the Company and its customers. Sales agreements typically provide that payment is due 30 days from invoice date for a majority of the customers and 30 to 45 days after the end of the month in which sales occur for some customers. Since the receivables from sales are collectible within one year and such transactions are frequent, fair value of the receivables is equivalent to the nominal amount of the cash to be received.
 
    Inventories
 
    Inventories are 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. Year-end inventories are evaluated for estimated excess quantities and obsolescence based on a demand forecast within a specific time horizon, which is generally 180 days or less. Estimated losses on scrap and slow-moving items are recognized and included in the allowance for losses.

- 15 -


 

    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. Effective January 1, 2006, pursuant to the revised Statement of Financial Accounting Standards No. 5, “Long-term Investments Accounted for Using the Equity Method”, the cost of an investment shall be analyzed and the cost of investment in excess of the fair value of identifiable net assets acquired, representing goodwill, shall not be amortized. If the fair value of identifiable net assets acquired exceeds the cost of investment, the excess shall be proportionately allocated as reductions to fair values of non-current assets (except for financial assets other than investments accounted for using the equity method and deferred income tax assets). If there is objective evidence which indicates that a investment is impaired, the carrying amount of the investment is reduced, with the related impairment loss recognized in earnings.
 
    When the Company subscribes for additional investee’s shares at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment in the investee differs from the amount of the Company’s share of the investee’s equity. The Company records such a difference as an adjustment to long-term investments with the corresponding amount charged or credited to capital surplus.
 
    Gains or losses on sales from the Company to equity method investees or from equity method investees to the Company are deferred in proportion to the Company’s ownership percentages in the investees until such gains or losses are realized through transactions with third parties.
 
    If an investee’s functional currency is a foreign currency, differences will result from the translation of the investee’s financial statements into the reporting currency of the Company. Such differences are charged or credited to cumulative translation adjustments, a separate component of shareholders’ equity.
 
    Financial Assets Carried at Cost
 
    Investments for which the Company does not exercise significant influence and that do not have a quoted market price in an active market and whose fair value cannot be reliably measured, such as non-publicly traded stocks and mutual funds, are carried at their original cost. The costs of non-publicly traded stocks and mutual funds are determined using the weighted-average method. If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. A subsequent reversal of such impairment loss is not allowed.
 
    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.
 
    Property, Plant and Equipment, Assets Leased to Others and Idle Assets
 
    Property, plant and equipment and assets leased to others are stated at cost less accumulated depreciation. 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 year are capitalized. Maintenance and repairs are expensed as incurred.

- 16 -


 

    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 and assets leased to others, the related cost and accumulated depreciation are deducted from the corresponding accounts, with any gain or loss recorded as non-operating gains or losses in the period of sale or disposal.
 
    When property, plant and equipment are determined to be idle or useless, they are transferred to idle assets at the lower of the net realizable value or carrying amount. Depreciation on the idle assets is provided continuously, and the idle assets are tested for impairment on a periodical basis.
 
    Intangible Assets
 
    Goodwill represents the excess of the consideration paid for acquisition over the fair value of identifiable net assets acquired. Prior to January 1, 2006, goodwill was amortized using the straight-line method over the estimated life of 10 years. Effective January 1, 2006, pursuant to the newly revised Statement of Financial Accounting Standards No. 25, “Business Combinations — Accounting Treatment under Purchase Method”, goodwill is no longer amortized and instead is tested for impairment annually. If an event occurs or circumstances change which indicated that the fair value of goodwill is more likely than not below its carrying amount, an impairment loss is recognized. A subsequent reversal of such impairment loss is not allowed.
 
    Deferred charges consist of technology license fees, software and system design costs and other charges. The amounts are amortized over the following periods: Technology license fees — the shorter of the estimated life of the technology or the term of the technology transfer contract; software and system design costs and other charges — 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 previously recognized impairment loss would be reversed and recognized as a gain. However, the adjusted amount may not exceed the carrying amount that would have been determined, net of amortization, as if no impairment loss had been recognized.
 
    Expenditures related to research activities and those related to development activities that do not meet the criteria for capitalization are charged to expenses when incurred.
 
    Pension Costs
 
    For employees who participate in defined contribution pension plans, pension costs are recorded based on the actual contributions made to employees’ individual pension accounts during their service periods. For employees who participate in defined benefit pension plans, pension costs are recorded based on actuarial calculations.
 
    Government Subsidies
 
    Income-related subsidies from governments are recognized in earnings when the requirements for subsidies are met.

- 17 -


 

    Income Tax
 
    The Company applies an inter-period allocation for its income tax whereby deferred income tax assets and liabilities are recognized for the tax effects of temporary differences, 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 expenditures, and investments in important technology-based enterprises are recognized using the flow-through method.
 
    Adjustments of prior years’ tax liabilities are added to or deducted from the current year’s tax provision.
 
    Income tax on unappropriated earnings (excluding earnings from foreign consolidated subsidiaries) at a rate of 10% is expensed in the year of shareholder approval which is the year subsequent to the year the earnings are generated.
 
    Stock-based Compensation
 
    Employee stock options that were granted or modified in the period from January 1, 2004 to December 31, 2007 are accounted for by the interpretations issued by the Accounting Research and Development Foundation of the Republic of China. The Company adopted the intrinsic value method and any compensation cost determined using this method is recognized in earnings over the employee vesting period. Employee stock option plans that were granted or modified after December 31, 2007 are accounted for using fair value method in accordance with Statement of Financial Accounting Standards No. 39, “Accounting for Share-based Payment”. The Company did not grant or modify employee stock options since January 1, 2008.
 
    Treasury Stock
 
    Treasury stock is stated at cost and shown as a deduction in shareholders’ equity. When TSMC retires treasury stock, the treasury stock account is reduced and the common stock as well as the capital surplus — additional paid-in capital are reversed on a pro rata basis. When the book value of the treasury stock exceeds the sum of the par value and additional paid-in capital, the difference is charged to capital surplus — treasury stock transactions and to retained earnings for any remaining amount.
 
    TSMC’s stock held by its subsidiaries is treated as treasury stock and reclassified from investments accounted for using equity method to treasury stock. The gains resulted from disposal of the treasury stock held by subsidiaries and cash dividends received by subsidiaries from TSMC are recorded under capital surplus — treasury stock transactions.
 
    Foreign-currency Transactions
 
    Foreign-currency transactions other than derivative contracts are recorded in New Taiwan dollars at the rates of exchange in effect when the transactions occur. Exchange gains or losses derived from foreign-currency transactions or monetary assets and liabilities denominated in foreign currencies are recognized in earnings.
 
    At the balance sheet date, monetary assets and liabilities denominated in foreign currencies are revalued at prevailing exchange rates with the resulting gains or losses recognized in earnings.

- 18 -


 

    Translation of Foreign-currency Financial Statements
 
    The financial statements of foreign subsidiaries are translated into New Taiwan dollars at the following exchange rates: Assets and liabilities — spot rates at year-end; shareholders’ equity — historical rates; income and expenses — average rates during the year. The resulting translation adjustments are recorded as a separate component of shareholders’ equity.
 
    Recent Accounting Pronouncements
 
    The Accounting Research and Development Foundation (ARDF) of the R.O.C. revised Statement of Financial Accounting Standards No. 10, “Accounting for Inventories” (SFAS No. 10) in November 2007, which requires inventories to be stated at the lower of cost or net realizable value item by item. Inventories are recorded by the specific identification method, first-in, first-out method or weighted average method. The last-in, first-out method is no longer permitted. The revised SFAS No. 10 should be applied to financial statements for the fiscal years beginning on or after January 1, 2009.
 
    Reclassification
 
    Certain accounts in the consolidated financial statements as of and for the year ended December 31, 2007 have been reclassified to be consistent with the consolidated financial statements as of and for the year ended December 31, 2008.
3.   ACCOUNTING CHANGES
    Effective January 1, 2008, the Company adopted Interpretation 2007-052, “Accounting for Bonuses to Employees, Directors and Supervisors” issued in March 2007 by the ARDF, which requires companies to record bonuses paid to employees, directors and supervisors as an expense rather than as an appropriation of earnings. The adoption of this interpretation resulted in a decrease in net income and earnings per share of NT$12,827,595 thousand and NT$0.50, respectively, for the year ended December 31, 2008.
 
    Effective January 1, 2008, the Company adopted Statement of Financial Accounting Standards No. 39, “Accounting for Share-based Payment”, which requires companies to record share-based payment transactions in the financial statements at fair value. Such a change in accounting principle did not have any effect on the Company’s consolidated financial statements as of and for the year ended December 31, 2008.
4.   CASH AND CASH EQUIVALENTS
                 
    December 31  
    2008     2007  
 
               
Cash and deposits in banks
  $ 185,943,439     $ 84,105,377  
Repurchase agreements collateralized by government bonds
    8,670,313       10,067,843  
Asset-backed commercial papers
          522,116  
Corporate notes
          291,152  
 
           
 
               
 
  $ 194,613,752     $ 94,986,488  
 
           

- 19 -


 

5.   FINANCIAL ASSETS/LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
                 
    December 31  
    2008     2007  
Trading financial assets
               
Publicly traded stocks
  $ 13,258     $ 1,590,188  
Forward exchange contracts
    28,423       6,632  
Cross currency swap contracts
    14,049       35,567  
 
           
 
               
 
  $ 55,730     $ 1,632,387  
 
           
 
               
Trading financial liabilities
               
Forward exchange contracts
  $ 35,812     $ 185,583  
Cross currency swap contracts
    49,375       63,730  
 
           
 
               
 
  $ 85,187     $ 249,313  
 
           
    The Company entered into derivative contracts during the years ended December 31, 2008 and 2007 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. Therefore, the Company did not apply hedge accounting treatment for its derivative contracts.
 
    Outstanding forward exchange contracts consisted of the following:
         
        Contract
        Amount
    Maturity Date   (in Thousands)
December 31, 2008
       
 
       
Sell US$/buy NT$
  January 2009 to February 2009   US$138,900/NT$4,558,672
Sell EUR/buy NT$
  January 2009   EUR1,500/NT$63,150
Sell RMB/buy US$
  January 2009 to April 2009   RMB55,010/US$8,000
Sell US$/buy JPY
  January 2009 to February 2009   US$131/JPY11,800
 
       
December 31, 2007
       
 
       
Sell US$/buy NT$
  January 2008   US$111,000/NT$3,605,846
Sell EUR$/buy NT$
  February 2008 to July 2008   EUR48,000/NT$2,090,589
    Outstanding cross currency swap contracts consisted of the following:
             
        Range of   Range of
    Contract Amount   Interest Rates   Interest Rates
Maturity Date   (in Thousands)   Paid   Received
 
           
December 31, 2008
           
 
           
January 2009
  US$307,000/NT$10,061,232   0.54%-5.00%   0.00%-3.83%
 
           
December 31, 2007
           
 
           
January 2008 to February 2008
  US$975,000/NT$31,630,180   3.53%-5.60%   0.02%-3.01%

- 20 -


 

    For the years ended December 31, 2008 and 2007, net losses and gains arising from financial assets/liabilities at fair value through profit or loss were NT$1,081,019 thousand and NT$63,017 thousand, respectively.
6.   AVAILABLE-FOR-SALE FINANCIAL ASSETS
                 
    December 31  
    2008     2007  
 
Agency bonds
  $ 5,696,511     $ 8,635,796  
Corporate bonds
    3,279,073       10,745,145  
Corporate issued asset-backed securities
    2,334,873       5,357,032  
Money market funds
    1,000,086       19,212,110  
Government bonds
    340,893       7,767,637  
Publicly traded stocks
    279,937       905,254  
Structured time deposits
          499,410  
Open-end mutual funds
          14,966,675  
 
           
 
    12,931,373       68,089,059  
Current portion
    (10,898,715 )     (66,688,368 )
 
           
 
               
 
  $ 2,032,658     $ 1,400,691  
 
           
    Structured time deposits categorized as available-for-sale financial assets consisted of the following:
                                 
    Principal     Carrying              
    Amount     Amount     Interest Rate     Maturity Date  
December 31, 2007
                               
 
                               
Step-up callable deposits
                       
Domestic deposits
  $ 500,000     $ 499,410     1.76%   March 2008
 
                           
    The interest rate of the step-up callable deposits was pre-determined by the Company and the banks.
 
    For the years ended December 31, 2008 and 2007, the loss on impairment of available-for-sale financial assets was recognized NT$934,584 thousand and nil, respectively.
7.   HELD-TO-MATURITY FINANCIAL ASSETS
                 
    December 31  
    2008     2007  
 
               
Corporate bonds
  $ 18,158,679     $ 10,900,247  
Government bonds
    1,506,572       7,824,425  
Structured time deposits
    1,643,000       1,500,000  
 
           
 
    21,308,251       20,224,672  
Current portion
    (5,881,999 )     (11,526,946 )
 
           
 
               
 
  $ 15,426,252     $ 8,697,726  
 
           

- 21 -


 

    Structured time deposits categorized as held-to-maturity financial assets consisted of the following:
                                 
    Principal     Interest     Range of        
    Amount     Receivable     Interest Rates     Maturity Date  
December 31, 2008
                               
 
                               
Step-up callable deposits
                       
Foreign deposits
  $ 1,643,000     $ 660     4.82%   December 2011
 
                           
 
                               
December 31, 2007
                               
 
                               
Step-up callable deposits
                       
Domestic deposits
  $ 1,500,000     $ 5,585     1.77%-1.83%   April 2008 to October 2008
 
                           
    As of December 31, 2008, the principal of the structured time deposits that resided in banks located in Hong Kong amounted to US$50,000 thousand.
8.   ALLOWANCES FOR DOUBTFUL RECEIVABLES, SALES RETURNS AND OTHERS
    Movements of the allowance for doubtful receivables were as follows:
                 
    Years Ended December 31  
    2008     2007  
 
               
Balance, beginning of year
  $ 701,807     $ 749,888  
Effect of inclusion of newly consolidated subsidiaries
          45  
Provision
    14,880       2,964  
Write-off
    (260,936 )     (51,090 )
 
           
 
               
Balance, end of year
  $ 455,751     $ 701,807  
 
           
    Movements of the allowance for sales returns and others were as follows:
                 
    Years Ended December 31  
    2008     2007  
 
               
Balance, beginning of year
  $ 4,089,035     $ 2,870,802  
Effect of inclusion of newly consolidated subsidiaries
          12,956  
Provision
    8,825,695       5,705,576  
Write-off
    (6,843,704 )     (4,500,299 )
 
           
 
               
Balance, end of year
  $ 6,071,026     $ 4,089,035  
 
           

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9.   INVENTORIES
                 
    December 31  
    2008     2007  
 
               
Finished goods
  $ 5,863,614     $ 4,321,870  
Work in process
    9,078,716       17,346,862  
Raw materials
    1,082,700       1,862,543  
Supplies and spare parts
    1,152,971       1,261,715  
 
           
 
    17,178,001       24,792,990  
Allowance for losses
    (2,301,356 )     (930,730 )
 
           
 
               
 
  $ 14,876,645     $ 23,862,260  
 
           
10.   INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD
                                 
    December 31  
    2008     2007  
            % of             % of  
    Carrying     Owner-     Carrying     Owner-  
    Amount     ship     Amount     ship  
       
Vanguard International Semiconductor Corporation (VIS)
  $ 9,787,275       37     $ 11,220,101       37  
Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)
    6,808,192       39       9,092,741       39  
VisEra Holding Company (VisEra Holding)
    2,277,126       49       2,204,447       49  
Aiconn Technology Corporation (Aiconn)
    34,565       44              
 
                           
 
                               
 
  $ 18,907,158             $ 22,517,289          
 
                           
    In August 2007, the Company acquired 169,600 thousand shares in VIS for NT$4,927,865 thousand; after the acquisition, the Company’s percentage of ownership in VIS increased from 27% to 37%.
 
    For the years ended December 31, 2008 and 2007, net equity in earnings of equity method investees of NT$701,533 thousand and NT$2,507,869 thousand was recognized, respectively. The related equity in earnings of equity method investees was determined based on the audited financial statements of the investees for the same periods as the Company.
 
    As of December 31, 2008 and 2007, fair values of publicly traded stocks in investments accounted for using equity method (VIS) was NT$4,680,264 thousand and NT$15,189,200 thousand, respectively.
 
    Movements of the difference between the cost of investments and the Company’s share in investees’ net assets allocated to depreciable assets were as follows:
                 
    Years Ended December 31  
    2008     2007  
 
               
Balance, beginning of year
  $ 2,589,742     $ 952,159  
Addition
          1,968,622  
Amortization
    (599,121 )     (331,039 )
 
           
 
               
Balance, end of year
  $ 1,990,621     $ 2,589,742  
 
           

- 23 -


 

    As of December 31, 2008 and 2007, the ending balances of the aforementioned difference allocated to goodwill were both NT$1,061,885 thousand.
11.   FINANCIAL ASSETS CARRIED AT COST
                 
    December 31  
    2008     2007  
 
               
Non-publicly traded stocks
  $ 3,453,454     $ 3,462,372  
Mutual funds
    161,993       383,247  
 
           
 
               
 
  $ 3,615,447     $ 3,845,619  
 
           
    For the years ended December 31, 2008 and 2007, the loss on impairment of financial assets carried at cost was recognized NT$625,471 thousand and NT$54,208 thousand, respectively.
12.   PROPERTY, PLANT AND EQUIPMENT
                                                 
    Year Ended December 31, 2008  
    Balance,                             Effect of        
    Beginning of     Addition                     Exchange Rate     Balance,  
    Year     (Deductions)     Disposals     Reclassification     Changes     End of Year  
Cost
                                               
Land and land improvements
  $ 942,197     $     $     $ 821     $ 10,839     $ 953,857  
Buildings
    118,640,027       12,750,078       (8,524 )     (706 )     869,121       132,249,996  
Machinery and equipment
    646,419,427       50,423,075       (1,320,975 )     131,067       1,846,149       697,498,743  
Office equipment
    11,829,640       997,253       (294,526 )     (167,598 )     66,031       12,430,800  
Leased asset
    652,296       13,832                   56,211       722,339  
 
                                   
 
    778,483,587     $ 64,184,238     $ (1,624,025 )   $ (36,416 )   $ 2,848,351       843,855,735  
 
                                   
Accumulated depreciation
                                               
Land and land improvements
    262,703     $ 28,613     $     $     $ 4,582       295,898  
Buildings
    63,239,922       9,117,602       (8,524 )     393       332,306       72,681,699  
Machinery and equipment
    467,665,072       68,349,425       (1,179,517 )     (35,055 )     1,162,366       535,962,291  
Office equipment
    8,796,752       1,223,475       (293,433 )     (84,663 )     51,678       9,693,809  
Leased asset
    135,118       33,901                   13,551       182,570  
 
                                   
 
    540,099,567     $ 78,753,016     $ (1,481,474 )   $ (119,325 )   $ 1,564,483       618,816,267  
 
                                   
Advance payments and construction in progress
    21,868,167     $ (3,205,711 )   $     $ (98,013 )   $ 41,439       18,605,882  
 
                                   
 
                                               
Net
  $ 260,252,187                                     $ 243,645,350  
 
                                           
                                                         
    Year Ended December 31, 2007  
            Effect of                                      
            Inclusion of                                      
    Balance,     Newly                             Effect of     Balance,  
    Beginning of     Consolidated                             Exchange Rate     Ending of  
    Year     Subsidiaries     Addition     Disposals     Reclassification     Changes     Year  
Cost
                                                       
Land and land improvements
  $ 844,644     $ 101,518     $     $     $     $ (3,965 )   $ 942,197  
Buildings
    112,595,124       71,053       5,522,828       (31,836 )     (11,518 )     494,376       118,640,027  
Machinery and equipment
    579,825,289       2,430,982       63,828,487       (504,132 )     241,750       597,051       646,419,427  
Office equipment
    10,646,725       547,188       1,064,259       (350,611 )     (78,898 )     977       11,829,640  
Leased asset
    612,941                               39,355       652,296  
 
                                         
 
    704,524,723     $ 3,150,741     $ 70,415,574     $ (886,579 )   $ 151,334     $ 1,127,794       778,483,587  
 
                                         
Accumulated depreciation
                                                       
Land and land improvements
    234,377     $     $ 29,798     $     $     $ (1,472 )     262,703  
Buildings
    54,288,225       1,111       8,901,910       (30,957 )     2,709       76,924       63,239,922  
Machinery and equipment
    400,579,587       584,690       67,018,215       (255,143 )     (156,839 )     (105,438 )     467,665,072  
Office equipment
    7,839,303       76,238       1,232,781       (350,147 )     (2,362 )     939       8,796,752  
Leased asset
    96,592             31,429                   7,097       135,118  
 
                                         
 
    463,038,084     $ 662,039     $ 77,214,133     $ (636,247 )   $ (156,492 )   $ (21,950 )     540,099,567  
 
                                         
Advance payments and construction in progress
    12,607,551     $ 480,580     $ 8,474,380     $     $ 288,805     $ 16,851       21,868,167  
 
                                         
 
                                                       
Net
  $ 254,094,190                                             $ 260,252,187  
 
                                                   
    The Company entered into agreements to lease buildings that qualify as capital leases. The terms of the leases ranged from December 2003 to December 2013. The future minimum lease payments as of December 31, 2008 is NT$803,603 thousand.

- 24 -


 

13.   DEFERRED CHARGES, NET
                                                         
    Year Ended December 31, 2008  
    Balance,                                     Effect of     Balance,  
    Beginning of                                     Exchange     Ending of  
    Year     Addition     Amortization     Disposals     Reclassification     Rate Changes     Year  
 
                                                       
Technology license fee
  $ 5,819,148     $ 9,256     $ (1,691,242 )   $     $     $ (11,950 )   $ 4,125,212  
Software and system design costs
    1,449,603       1,171,163       (806,096 )     (14,279 )     59       1,381       1,801,831  
Patent and others
    654,850       754,402       (218,957 )                 8,490       1,198,785  
 
                                         
 
                                                       
 
  $ 7,923,601     $ 1,934,821     $ (2,716,295 )   $ (14,279 )   $ 59     $ (2,079 )   $ 7,125,828  
 
                                         
                                                                 
    Year Ended December 31, 2007  
            Effect of                                              
            Inclusion of                                              
    Balance,     Newly                                     Effect of     Balance,  
    Beginning of     Consolidated                                     Exchange     Ending of  
    Year     Subsidiaries     Addition     Amortization     Disposals     Reclassification     Rate Changes     Year  
 
                                                               
Technology license fee
  $ 4,132,174     $ 201,941     $ 3,515,908     $ (1,739,949 )   $     $ (296,423 )   $ 5,497     $ 5,819,148  
Software and system design costs
    1,669,781       2,778       1,275,329       (929,920 )     (321 )     (569,648 )     1,604       1,449,603  
Patent and others
    134,960       29,779       311,827       (124,209 )     (134 )     296,423       6,204       654,850  
 
                                               
 
                                                               
 
  $ 5,936,915     $ 234,498     $ 5,103,064     $ (2,794,078 )   $ (455 )   $ (569,648 )   $ 13,305     $ 7,923,601  
 
                                               
14.   BONDS PAYABLE
                 
    December 31  
    2008     2007  
Domestic unsecured bonds:
               
Issued in January 2002 and repayable in 2009 and 2012 in two installments, 2.75% and 3.00% interest payable annually, respectively
  $ 12,500,000     $ 12,500,000  
 
               
Current portion
    (8,000,000 )      
 
           
 
               
 
  $ 4,500,000     $ 12,500,000  
 
           
    As of December 31, 2008, future principal repayments for the bonds payable were as follows:
         
Year of Repayment   Amount  
 
       
2009
  $ 8,000,000  
2012
    4,500,000  
 
     
 
       
 
  $ 12,500,000  
 
     
15.   LONG-TERM BANK LOANS
                 
    December 31  
    2008     2007  
Secured loans:
               
Repayable from August 2009 in 17 quarterly installments, annual interest at 2.56%-3.67% in 2008 and 2.91%-2.99% in 2007
  $ 728,400     $ 630,000  
US$20,000 thousand, repayable in full in one lump sum payment in November 2010, annual interest at 3.62% in 2008 and 5.88% in 2007
    658,719       648,941  
(Continued)

- 25 -


 

                 
    December 31  
    2008     2007  
       
Repayable from December 2007 in 8 semi-annual installments, annual interest at 2.42%-3.23% in 2008 and 2.39%-3.20% in 2007
  $ 168,750     $ 456,750  
Repayable from May 2007 in 16 quarterly installments, annual interest at 2.42%-3.00% in 2008 and 2.48%-2.85% in 2007
    37,828       54,641  
Repayable from March 2007 in 12 quarterly installments, annual interest at 2.53%-3.21% in 2008 and 2.79%-3.16% in 2007
    32,472       124,944  
Repayable from April 2005 in 16 quarterly installments, annual interest at 2.42%-3.00% in 2008 and 2.51%-2.85% in 2007
    8,995       44,975  
Repayable from February 2005 in 17 quarterly installments, annual interest at 2.56%-3.15% in 2008 and 2.65%-4.53% in 2007
    7,710       40,670  
Unsecured loans:
               
Science Park Administration (SPA) SOC loan, repayable from October 2003 in 20 quarterly installments, interest-free
          2,088  
 
           
 
    1,642,874       2,003,009  
Current portion
    (222,398 )     (280,813 )
 
           
 
               
 
  $ 1,420,476     $ 1,722,196  
 
           
(Concluded)
    Pursuant to the loan agreements, financial ratios calculated based on annual audited financial statements of TSMC-Shanghai as well as semi-annual and annual financial statements of XinTec must comply with predetermined financial covenants. As of December 31, 2008, TSMC Shanghai and XinTec were in compliance with all such financial covenants.
 
    As of December 31, 2008, future principal repayments for the long-term bank loans were as follows:
         
Year of Repayment   Amount  
 
       
2009
  $ 222,398  
2010
    916,847  
2011
    212,269  
2012
    174,816  
2013 and thereafter
    116,544  
 
     
 
       
 
  $ 1,642,874  
 
     
16.   OTHER LONG-TERM PAYABLES
                 
    December 31  
    2008     2007  
 
               
Payables for acquisition of property, plant and equipment (Note 28i)
  $ 8,579,726     $ 7,908,516  
Payables for royalties
    2,095,046       5,174,644  
 
           
 
    10,674,772       13,083,160  
Current portion (classified under accrued expenses and other current liabilities)
    (1,126,546 )     (3,673,182 )
 
           
 
               
 
  $ 9,548,226     $ 9,409,978  
 
           

- 26 -


 

    The payables for royalties were primarily attributable to several license arrangements that the Company entered into for certain semiconductor-related patents.
 
    As of December 31, 2008, future payments for other long-term payables were as follows:
         
Year of Payment   Amount  
 
       
2009
  $ 1,126,546  
2010
    541,320  
2011
    427,180  
2012
     
2013 and thereafter
    8,579,726  
 
     
 
       
 
  $ 10,674,772  
 
     
17.   PENSION PLANS
    The pension mechanism under the Labor Pension Act is deemed a defined contribution plan. Pursuant to the Act, TSMC, GUC, XinTec and Mutual-Pak have made monthly contributions equal to 6% of each employee’s monthly salary to employees’ pension accounts. Furthermore, TSMC North America, TSMC Shanghai, TSMC Europe and TSMC Canada are required by local regulations to make monthly contributions at certain percentages of the basic salary of their employees. Pursuant to the aforementioned Act and local regulations, the Company recognized pension costs of NT$779,612 thousand and NT$725,789 thousand for the years ended December 31, 2008 and 2007, respectively.
 
    TSMC, GUC and XinTec have defined benefit plans under the Labor Standards Law that provide benefits based on an employee’s service years and average monthly salary for the six-month period prior to retirement. The aforementioned companies contribute an amount equal to 2% of salaries paid each month to their respective pension funds (the Funds), which are administered by the Labor Pension Fund Supervisory Committee (the Committee) and deposited in the Committee’s name in the Bank of Taiwan (originally the Central Trust of China, which was dissolved after merger with the Bank of Taiwan on July 1, 2007).
 
    Pension information on the defined benefit plans is summarized as follows:
  a.   Components of net periodic pension cost for the year
                 
    2008     2007  
 
               
Service cost
  $ 151,656     $ 184,275  
Interest cost
    171,345       156,391  
Projected return on plan assets
    (68,373 )     (51,309 )
Amortization
    4,461       35,853  
 
           
 
               
Net periodic pension cost
  $ 259,089     $ 325,210  
 
           

- 27 -


 

  b.   Reconciliation of funded status of the plans and accrued pension cost at December 31, 2008 and 2007
                     
                              2008     2007  
Benefit obligation
               
Vested benefit obligation
  $ 114,930     $ 120,146  
Nonvested benefit obligation
    4,182,434       3,479,132  
 
               
Accumulated benefit obligation
    4,297,364       3,599,278  
Additional benefits based on future salaries
    3,263,413       2,444,451  
 
               
Projected benefit obligation
    7,560,777       6,043,729  
Fair value of plan assets
    (2,487,577 )     (2,238,997 )
 
               
Funded status
    5,073,200       3,804,732  
Unrecognized net transition obligation
    (101,326 )     (109,873 )
Prior service cost
    169,216        
Unrecognized net loss
    (1,439,506 )     (41,995 )
 
               
 
                   
Accrued pension cost
  $ 3,701,584     $ 3,652,864  
 
               
 
                   
Vested benefit
  $ 126,259     $ 120,146  
 
               
 
                   
 
c.
Actuarial assumptions at December 31, 2008 and 2007                
 
                   
Discount rate used in determining present values
    2.00%-2.50 %     2.75%-3.00 %
Future salary increase rate
    2.00%-3.00 %     2.00%-3.00 %
Expected rate of return on plan assets
    2.25%-2.50 %     2.50%-3.00 %
 
                   
 
d.
Contributions to the Funds for the year   $ 206,873     $ 209,423  
 
               
 
                   
 
e.
Payments from the Funds for the year   $ 28,990     $ 15,003  
 
               
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:
                 
    Years Ended December 31  
    2008     2007  
 
               
Income tax expense based on “income before income tax” at statutory rates
  $ 27,970,388     $ 30,829,431  
The effect of the following:
               
Tax-exempt income
    (9,670,500 )     (7,668,367 )
Temporary and permanent differences
    2,122,899       (150,946 )
Others
    44,073        
Additional tax at 10% on unappropriated earnings
    13,926       2,710,909  
Net operating loss carryforwards used
    (205,234 )     (814,120 )
Income tax credits used
    (11,109,313 )     (13,899,628 )
 
           
 
               
Income tax currently payable
  $ 9,166,239     $ 11,007,279  
 
           

- 28 -


 

  b.   Income tax expense consisted of the following:
                 
    Years Ended December 31  
    2008     2007  
 
               
Income tax currently payable
  $ 9,166,239     $ 11,007,279  
Other income tax adjustments
    (502,668 )     (240,779 )
Net change in deferred income tax assets
               
Investment tax credits
    1,060,599       5,122,450  
Temporary differences
    (2,129,121 )     (800,374 )
Net operating loss carryforwards
    411,368       841,502  
Valuation allowance
    2,942,592       (4,220,452 )
 
           
 
               
Income tax expense
  $ 10,949,009     $ 11,709,626  
 
           
  c.   Net deferred income tax assets consisted of the following:
                 
    December 31  
    2008     2007  
Current deferred income tax assets
               
Investment tax credits
  $ 2,885,762     $ 5,372,761  
Temporary differences
    1,556,474       674,154  
Valuation allowance
    (472,906 )     (474,581 )
 
           
 
               
 
  $ 3,969,330     $ 5,572,334  
 
           
 
               
Noncurrent deferred income tax assets
               
Investment tax credits
  $ 11,311,852     $ 9,885,452  
Temporary differences
    (1,628,279 )     (2,848,052 )
Net operating loss carryforwards
    3,588,968       3,963,123  
Valuation allowance
    (6,635,668 )     (3,687,240 )
 
           
 
               
 
  $ 6,636,873     $ 7,313,283  
 
           
      As of December 31, 2008, the net operating loss carryforwards generated by WaferTech, TSMC Development, TSMC Technology and Mutual-Pak would expire on various dates through 2026.
  d.   Integrated income tax information:
 
      The balance of the imputation credit account (ICA) of TSMC as of December 31, 2008 and 2007 was NT$521,634 thousand and NT$3,012,848 thousand, respectively.
 
      The estimated creditable ratio for distribution of TSMC’s earnings of 2008 and 2007 was 0.51% and 9.83%, respectively.
 
      The imputation credit allocated to the shareholders is based on its balance as of the date of dividend distribution. The estimated creditable ratio may change when the actual distribution of imputation credit is made.
  e.   All of TSMC’s earnings generated prior to December 31, 1997 have been appropriated.

- 29 -


 

  f.   As of December 31, 2008, investment tax credits of TSMC, GUC, XinTec and Mutual-Pak consisted of the following:
                             
        Total     Remaining        
        Creditable     Creditable     Expiry  
Law/Statute   Item   Amount     Amount     Year  
 
                           
Statute for Upgrading Industries
  Purchase of machinery and equipment   $ 22,242     $       2008  
 
        233,915       5,921       2009  
 
        6,178,371       114,761       2010  
 
        4,664,206       4,664,206       2011  
 
        2,664,162       2,664,162       2012  
 
                       
 
                           
 
      $ 13,762,896     $ 7,449,050          
 
                       
 
                           
Statute for Upgrading Industries
  Research and development expenditures   $ 1,009,834     $       2008  
 
        1,173,395             2009  
 
        3,263,421       673,789       2010  
 
        2,825,115       2,825,115       2011  
 
        3,188,670       3,188,670       2012  
 
                       
 
                           
 
      $ 11,460,435     $ 6,687,574          
 
                       
 
                           
Statute for Upgrading Industries
  Personnel training expenditures   $ 21,998     $       2009  
 
        23,791       23,183       2010  
 
        37,021       37,021       2011  
 
        786       786       2012  
 
                       
 
                           
 
      $ 83,596     $ 60,990          
 
                       
  g.   The profits generated from the following projects of TSMC, GUC and XinTec are exempt from income tax for a five-year period:
     
    Tax-Exemption Period
 
   
Construction of Fab 14 — Module A
  2006 to 2010
Construction of Fab 12 — Module B and expansion of Fab 14 — Module A
  2007 to 2011
Construction of Fab 14 — Module B and expansion of Fab 12 and others
  2008 to 2012
2003 plant expansion of GUC
  2007 to 2011
2003 plant expansion of XinTec
  2007 to 2011
  h.   The tax authorities have examined income tax returns of TSMC through 2006.

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19.   LABOR COST, DEPRECIATION AND AMORTIZATION
                         
    Year Ended December 31, 2008  
            Classified as        
    Classified as     Operating        
    Cost of Sales     Expenses     Total  
Labor cost
                       
Salary and bonus
  $ 19,574,249     $ 15,654,567     $ 35,228,816  
Labor and health insurance
    766,952       489,601       1,256,553  
Pension
    634,730       403,962       1,038,692  
Meal
    474,048       188,407       662,455  
Welfare
    640,817       273,055       913,872  
Others
    262,144       171,631       433,775  
 
                 
 
                       
 
  $ 22,352,940     $ 17,181,223     $ 39,534,163  
 
                 
 
                       
Depreciation
  $ 74,703,223     $ 4,033,588     $ 78,736,811  
 
                 
Amortization
  $ 1,837,540     $ 878,755     $ 2,716,295  
 
                 
                         
    Year Ended December 31, 2007  
            Classified as        
    Classified as     Operating        
    Cost of Sales     Expenses     Total  
Labor cost
                       
Salary
  $ 11,990,153     $ 7,562,966     $ 19,553,119  
Labor and health insurance
    685,922       416,131       1,102,053  
Pension
    646,999       404,128       1,051,127  
Meal
    463,453       180,474       643,927  
Welfare
    249,133       266,412       515,545  
Others
    176,192       226,747       402,939  
 
                 
 
                       
 
  $ 14,211,852     $ 9,056,858     $ 23,268,710  
 
                 
 
                       
Depreciation
  $ 73,070,781     $ 4,100,533     $ 77,171,314  
 
                 
Amortization
  $ 1,849,917     $ 943,064     $ 2,792,981  
 
                 
20.   SHAREHOLDERS’ EQUITY
    As of December 31, 2008, 1,092,053 thousand ADSs of TSMC were traded on the NYSE. The number of common shares represented by the ADSs was 5,460,265 thousand (one ADS represents five common shares).
 
    Capital surplus can only be used to offset a deficit under the Company Law. However, the capital surplus generated from donations and the excess of the issuance price over the par value of capital stock (including the stock issued for new capital, mergers, convertible bonds and the surplus from treasury stock transactions) may be appropriated as stock dividends, which are limited to a certain percentage of TSMC’s paid-in capital. Also, the capital surplus from long-term investment may not be used for any purpose.

- 31 -


 

    Capital surplus consisted of the following:
                 
    December 31  
    2008     2007  
 
               
From merger
  $ 22,805,390     $ 24,003,546  
Additional paid-in capital
    17,962,468       19,526,492  
From convertible bonds
    8,893,190       9,360,424  
From long-term investments
    214,152       351,215  
Donations
    55       55  
From treasury stock transactions
          490,950  
 
           
 
               
 
  $ 49,875,255     $ 53,732,682  
 
           
    TSMC’s Articles of Incorporation provide that, when allocating the net profits for each fiscal year, TSMC shall first offset its losses in previous years and then set aside the following items accordingly:
  a.   Legal capital reserve at 10% of the profits left over, until the accumulated legal capital reserve equals TSMC’s paid-in capital;
 
  b.   Special capital reserve in accordance with relevant laws or regulations or as requested by the authorities in charge;
 
  c.   Bonus to directors and bonus to employees of 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. TSMC may issue stock bonuses to employees of an affiliated company meeting the conditions set by the Board of Directors or, by the person duly authorized by the Board of Directors;
 
  d.   Any balance left over shall be allocated according to the resolution of the shareholders’ meeting.
    TSMC’s Articles of Incorporation also provide 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 subjected to shareholders’ approval in the following year.
 
    For the year ended December 31, 2008, TSMC has recorded bonuses to employees and directors with a charge to earnings of approximately 15% of net income. If the actual amounts subsequently resolved by the shareholders differ from the proposed amounts by the Board of Directors, the differences are recorded in the year of shareholders’ resolution as a change in accounting estimate. If stock bonuses are resolved to be distributed to employees, the number of shares is determined by dividing the amount of bonuses by the closing price (after considering the effect of cash and stock dividends) of the shares on the day preceding the shareholders’ meeting.
 
    TSMC no longer has supervisors since January 1, 2007. The required duties of supervisors are being fulfilled by the Audit Committee.
 
    The appropriation for legal capital reserve shall be made until the reserve equals 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.

- 32 -


 

    A special capital reserve equivalent to the net debit balance of the other components of shareholders’ equity (for example, cumulative translation adjustments and unrealized loss on financial instruments, but excluding treasury stock) shall be made from unappropriated earnings pursuant to existing regulations promulgated by the Securities and Futures Bureau (SFB). Any special reserve appropriated may be reversed to the extent that the net debit balance reverses.
 
    The appropriations of earnings for 2007 and 2006 had been approved in TSMC’s shareholders’ meetings held on June 13, 2008 and May 7, 2007, 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 2007     Year 2006     Year 2007     Year 2006  
 
                               
Legal capital reserve
  $ 10,917,709     $ 12,700,973                  
Special capital reserve
    (237,693 )     (11,192 )                
Bonus to employees — in cash
    3,939,883       4,572,798                  
Bonus to employees — in stock
    3,939,883       4,572,798                  
Cash dividends to shareholders
    76,881,311       77,489,064     $ 3.00     $ 3.00  
Stock dividends to shareholders
    512,542       516,594       0.02       0.02  
Bonus to directors and supervisors
    176,890       285,800                  
 
                           
 
                               
 
  $ 96,130,525     $ 100,126,835                  
 
                           
    TSMC’s shareholders meetings held on June 13, 2008 and May 7, 2007 also resolved to distribute stock dividends out of capital surplus in the amount of NT$768,813 thousand and NT$774,891 thousand, respectively.
 
    The amounts of the appropriations of earnings for 2007 and 2006 were consistent with the resolutions of the meetings of the Board of Directors held on February 19, 2008 and February 6, 2007, respectively. If the above bonus to employees, directors and supervisors had been paid entirely in cash and charged to earnings of 2007 and 2006, the basic earnings per share (after income tax) for the years ended December 31, 2007 and 2006 shown in the respective financial statements would have decreased from NT$4.14 to NT$3.84 and NT$4.93 to NT$4.56, respectively. The shares distributed as a bonus to employees represented 1.49% and 1.77% of TSMC’s total outstanding common shares as of December 31, 2007 and 2006, respectively.
 
    As of January 17, 2009, the Board of Directors has not resolved the appropriation for earnings of 2008.
 
    The information about the appropriations of bonus to employees, directors and supervisors is available at the Market Observation Post System website.
 
    Under the Integrated Income Tax System that became effective on January 1, 1998, R.O.C. resident shareholders are allowed a tax credit for their proportionate share of the income tax paid by TSMC on earnings generated since January 1, 1998.

- 33 -


 

21.   STOCK-BASED COMPENSATION PLANS
    TSMC’s Employee Stock Option Plans, consisting of the TSMC 2004 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 2004 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 of TSMC 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 plans that had never been granted or had been granted but subsequently canceled had expired as of December 31, 2008.
 
    Information about TSMC’s outstanding options for the years ended December 31, 2008 and 2007 was as follows:
                 
            Weighted-
            average
    Number of   Exercise
    Options   Price
    (in Thousands)   (NT$)
Year ended December 31, 2008
               
 
               
Balance, beginning of year
    41,875     $ 35.6  
Options granted
    767       35.2  
Options exercised
    (6,027 )     37.7  
Options canceled
    (381 )     46.5  
 
               
 
               
Balance, end of year
    36,234       35.3  
 
               
 
               
Year ended December 31, 2007
               
 
               
Balance, beginning of year
    52,814     $ 37.9  
Options granted
    1,094       37.9  
Options exercised
    (10,988 )     39.8  
Options canceled
    (1,045 )     45.9  
 
               
 
               
Balance, end of year
    41,875       37.4  
 
               
    The number of outstanding options and exercise prices have been adjusted to reflect the appropriations of earnings by TSMC in accordance with the plans. The options granted were the result of the aforementioned adjustment.

- 34 -


 

    As of December 31, 2008, information about TSMC’s 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$)  
 
                                       
$24.2-$33.9
    25,633       4.15     $ 31.0       25,633     $ 31.0  
  38.2-  50.4
    10,601       5.89       45.8       8,669       45.5  
 
                                   
 
                                       
 
    36,234               35.3       34,302       34.6  
 
                                   
    GUC’s Employee Stock Option Plans, consisting of the 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 of GUC 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, the GUC 2007 Plan, GUC 2006 Plan, and GUC 2004 Plan were approved by the SFB on November 28, 2007, July 3, 2006, and August 16, 2004 to grant a maximum of 1,999 options, 3,665 options and 2,500 options, respectively, with each option eligible to subscribe for one thousand common shares of GUC when exercisable. The options may be granted to qualified employees of GUC or any of its subsidiaries. Except for the options of the GUC 2006 Plan which are valid until August 15, 2011, the options of the other two GUC option Plans are valid for six years. Options of all three Plans are exercisable at certain percentages subsequent to the second anniversary of the grant date.
 
    Information about GUC’s outstanding options for the years ended December 31, 2008 and 2007 was as follows:
                 
            Weighted-
            average
            Exercise
    Number of   Prices
    Options   (NT$)
Year ended December 31, 2008
               
 
               
Balance, beginning of year
    7,598     $ 60.3  
Options granted
    284       14.8  
Options exercised
    (2,115 )     14.0  
Options canceled
    (210 )     168.4  
 
               
 
               
Balance, end of year
    5,557       66.6  
 
               
 
               
Year ended December 31, 2007
               
 
               
Balance, beginning of year
    7,342     $ 14.0  
Options granted
    2,053       183.6  
Options exercised
    (1,563 )     10.2  
Options canceled
    (234 )     13.5  
 
               
 
               
Balance, end of year
    7,598       60.3  
 
               

- 35 -


 

    The number of outstanding options and exercise prices have been adjusted to reflect the appropriation of earnings by GUC in accordance with the plans. The options granted were the result of the aforementioned adjustment.
 
    As of December 31, 2008, information about GUC’s outstanding and exercisable options was as follows:
                                         
    Options Outstanding     Options Exercisable  
            Weighted-     Weighted-             Weighted-  
            average     average             average  
Range of           Remaining     Exercise             Exercise  
Exercise   Number of     Contractual     Price     Number of     Price  
Price (NT$)   Options     Life (Years)     (NT$)     Options     (NT$)  
 
                                       
$8.9-$10.5
    1,450       2.75     $ 9.2       343     $ 9.9  
  16.4
    2,361       2.67       16.4       528       16.4  
  182.0
    1,746       5.00       182.0              
 
                                   
 
                                       
 
    5,557               66.6       871       13.9  
 
                                   
    XinTec’s Employee Stock Option Plans, consisting of the XinTec 2007 Plan and XinTec 2006 Plan, were approved by the SFB on June 26, 2007 and July 3, 2006, respectively. The maximum number of options authorized to be granted under the XinTec 2007 Plan and XinTec 2006 Plan was 6,000 thousand each, with each option eligible to subscribe for one common share of XinTec when exercisable. The options may be granted to qualified employees of XinTec or any of its subsidiaries. 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.
 
    Information about XinTec’s outstanding options for the years ended December 31, 2008 and 2007 was as follows:
                 
            Weighted-
            average
    Number of   Exercise
    Options   Price
    (in Thousands)   (NT$)
Year ended December 31, 2008
               
 
               
Balance, beginning of year
    9,642     $ 15.1  
Options exercised
    (728 )     12.4  
Options canceled
    (1,472 )     15.5  
 
               
 
               
Balance, end of year
    7,442       14.8  
 
               
 
               
Year ended December 31, 2007
               
 
               
Balance, beginning of year
    4,968     $ 13.0  
Options granted
    5,555       17.3  
Options canceled
    (881 )     14.1  
 
               
 
               
Balance, end of year
    9,642       15.1  
 
               
    The exercise prices have been adjusted to reflect the appropriation of earnings by XinTec in accordance with the plans.

- 36 -


 

    As of December 31, 2008, information about XinTec’s 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$)  
 
                                       
$12.4-$14.3
    4,050       7.90     $ 12.7       1,425     $ 12.4  
  15.4-  19.4
    3,392       8.73       17.4              
 
                                   
 
                                       
 
    7,442               14.8       1,425       12.4  
 
                                   
    No compensation cost was recognized under the intrinsic value method for the years ended December 31, 2008 and 2007. Had the Company used the fair value based method to evaluate the options using the Black-Scholes model, the assumptions and pro forma results of the Company for the years ended December 31, 2008 and 2007 would have been as follows:
                     
        2008   2007
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   0.00%-0.60%   0.00%-0.60%
 
  Expected volatility   22.65%-45.47%   22.65%-45.47%
 
  Risk free interest rate   2.12%-2.56%   2.12%-2.56%
 
  Expected life   3-6 years   3-6 years
 
                   
XinTec
  Expected dividend yield   0.80%   0.80%
 
  Expected volatility   31.79%-47.42%   31.79%-47.42%
 
  Risk free interest rate   1.88%-2.45%   1.88%-2.45%
 
  Expected life   3 years   3 years
 
                   
Net income attributable to shareholders of the parent:                
As reported
      $ 99,933,168     $ 109,177,093  
Pro forma
        100,037,622       109,054,923  
 
                   
Earnings per share (EPS) — after income tax (NT$):                
Basic EPS as reported
      $ 3.86     $ 4.06  
Pro forma basic EPS
        3.86       4.06  
Diluted EPS as reported
        3.83       4.06  
Pro forma diluted EPS
        3.83       4.06  

- 37 -


 

22.   TREASURY STOCK
                                         
    (Shares in Thousands)
 
                                       
    Beginning           Stock           Ending
    Shares   Addition   Dividends   Retirement   Shares
Year ended December 31, 2008
                                       
 
                                       
Parent company stock held by subsidiaries
    34,096             171       34,267        
Repurchase under share buyback plan
    800,000       495,549             1,295,549        
 
                                       
 
                                       
 
    834,096       495,549       171       1,329,816        
 
                                       
 
                                       
Year ended December 31, 2007
                                       
 
                                       
Parent company stock held by subsidiaries
    33,926             170             34,096  
Repurchase under share buyback plan
          800,000                   800,000  
 
                                       
 
                                       
 
    33,926       800,000       170             834,096  
 
                                       
    As of December 31, 2007, the book value of the treasury stock was NT$49,385,032 thousand; the market value was NT$51,713,947 thousand. TSMC’s common shares held by subsidiaries were treated as treasury stock and the holders are entitled to the rights of shareholders, with the exception of voting rights.
 
    TSMC held a meeting of the Board of Directors on November 13, 2007 and approved a share buyback plan to repurchase the TSMC’s common shares up to 800,000 shares listed on the TSE during the period from November 14, 2007 to January 13, 2008 for the buyback price in the range from NT$43.2 to NT$94.2. TSMC had repurchased 800,000 thousand common shares. All the treasury stock repurchased under this share buyback plan was retired in February 2008.
 
    TSMC held a meeting of the Board of Directors on May 13, 2008 and approved a share buyback plan to repurchase the TSMC’s common shares up to 500,000 thousand shares listed on the TSE during the period from May 14, 2008 to July 13, 2008 for the buyback price in the range from NT$48.25 to NT$100.50. TSMC had repurchased 216,674 thousand common shares. All the treasury stock repurchased under this share buyback plan was retired in August 2008.
 
    TSMC held a meeting of the Board of Directors on August 12, 2008 and approved a share buyback plan to repurchase the TSMC’s common shares up to 283,000 thousand shares listed on the TSE during the period from August 13, 2008 to October 12, 2008 for the buyback price in the range from NT$42.85 to NT$86.20. TSMC had repurchased 278,875 thousand common shares. All the treasury stock repurchased under this share buyback plan was retired in November 2008.
 
    TSMC merged Chi Cherng and Hsin Ruey in the third quarter of 2008. TSMC’s common shares held by Chi Cherng and Hsin Ruey in the number of 34,267 thousand shares were retired on August 2008.

- 38 -


 

23.   EARNINGS PER SHARE
    EPS is computed as follows:
                                         
                    Number of     EPS (NT$)  
    Amounts (Numerator)     Shares     Before     After  
    Before     After     (Denominator)     Income     Income  
    Income Tax     Income Tax     (in Thousands)     Tax     Tax  
Year ended December 31, 2008
                                       
 
                                       
Basic EPS
                                       
Earnings attributable to shareholders of the parent
  $ 110,847,835     $ 99,933,168       25,909,643     $ 4.28     $ 3.86  
 
                                   
Effect of dilutive potential common shares
                                       
Bonus to employees
                181,943                  
Stock options
                15,090                  
 
                                 
 
                                       
Diluted EPS
                                       
Earnings attributable to shareholders of the parent (including effect of dilutive potential common shares)
  $ 110,847,835     $ 99,933,168       26,106,676     $ 4.25     $ 3.83  
 
                             
 
                                       
Year ended December 31, 2007
                                       
 
                                       
Basic EPS
                                       
Earnings attributable to shareholders of the parent
  $ 120,890,678     $ 109,177,093       26,870,684     $ 4.50     $ 4.06  
 
                                   
Effect of dilutive potential common shares
                                       
Stock options
                21,652                  
 
                                 
 
                                       
Diluted EPS
                                       
Earnings attributable to shareholders of the parent (including effect of dilutive potential common shares)
  $ 120,890,678     $ 109,177,093       26,892,336     $ 4.50     $ 4.06  
 
                             
    As discussed in Note 3, effective January 1, 2008, the Company adopted Interpretation 2007-052 that requires companies to record bonuses paid to employees as an expense rather than as an appropriation of earnings. If the Company may settle the obligation by cash, by issuing share, or in combination of both cash and shares, potential shares from bonus to employees which will be settled in shares should be included in the weighted average number of shares outstanding in calculation of diluted EPS, if the shares have a dilutive effect. The number of shares is estimated by dividing the amount of bonus to employees by the closing price (after consideration of the dilutive effect of dividends) of the common shares on the balance sheet date. Such dilutive effect of the potential shares needs to be included in the calculation of diluted EPS until the shares of employee bonus are resolved in the shareholders’ meeting in the following year.
 
    The average number of shares outstanding for EPS calculation has been retroactively adjusted for the issuance of stock dividends and employee stock bonuses. This adjustment caused both of the basic and diluted after income tax EPS for the year ended December 31, 2007 to decrease from NT$4.14 to NT$4.06.

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24.   DISCLOSURES FOR FINANCIAL INSTRUMENTS
  a.   Fair values of financial instruments were as follows:
                                 
    December 31
    2008   2007
    Carrying           Carrying    
    Amount   Fair Value   Amount   Fair Value
Assets
                               
 
                               
Financial assets at fair value through profit or loss
  $ 55,730     $ 55,730     $ 1,632,387     $ 1,632,387  
Available-for-sale financial assets
    12,931,373       12,931,373       68,089,059       68,089,059  
Held-to-maturity financial assets
    21,308,251       21,457,008       20,224,672       20,192,188  
 
                               
Liabilities
                               
 
                               
Financial liabilities at fair value through profit or loss
    85,187       85,187       249,313       249,313  
Bonds payable (including current portion)
    12,500,000       12,612,423       12,500,000       12,669,987  
Long-term bank loans (including current portion)
    1,642,874       1,642,874       2,003,009       2,003,009  
Other long-term payables (including current portion)
    10,674,772       10,674,772       13,083,160       13,083,160  
Obligations under capital leases
    722,339       722,339       652,296       652,296  
  b.   Methods and assumptions used in estimating fair values of financial instruments
  1)   The aforementioned financial instruments do not include cash and cash equivalents, receivables, other financial assets, refundable deposits, payables, and payables to contractors and equipment suppliers and guarantee deposits. The carrying amounts of these financial instruments approximate their fair values due to their short maturities.
 
  2)   Except for derivatives and structured time deposits, fair values of financial assets at fair value through profit or loss, available-for-sale and held-to-maturity financial assets were based on their quoted market prices.
 
  3)   For those derivatives and structured time deposits with no quoted market prices, their fair values are determined using valuation techniques incorporating estimates and assumptions that were consistent with prevailing market conditions.
 
  4)   Fair value of bonds payable was based on their quoted market price.
 
  5)   Fair values of long-term bank loans, other long-term payables and obligations under capital leases were based on the present value of expected cash flows, which approximate their carrying amounts.
  c.   The changes in fair value of derivatives contracts which were outstanding as of December 31, 2008 and 2007 estimated using valuation techniques were recognized as valuation losses of NT$42,715 thousand and NT$207,114 thousand, respectively.
 
  d.   As of December 31, 2008 and 2007, financial assets exposed to fair value interest rate risk were NT$34,002,159 thousand and NT$87,450,676 thousand, respectively; financial liabilities exposed to fair value interest rate risk were NT$12,585,187 thousand and NT$12,749,313 thousand, respectively, and financial assets exposed to cash flow interest rate risk were nil and NT$7,171,120 thousand, respectively, and financial liabilities exposed to cash flow interest rate risk were NT$1,642,874 thousand and NT$2,000,921 thousand, respectively.

- 40 -


 

  e.   Movements of the unrealized gain/loss on financial instruments for the years ended December 31, 2008 and 2007 were as follows:
                         
    Year Ended December 31, 2008  
    From
Available-
for-sale
Financial
Assets
    From
Available-
for-sale
Financial
Assets Held
by Investees
    Total  
 
                       
Balance, beginning of year
  $ 627,838     $ 53,159     $ 680,997  
Recognized directly in shareholders’ equity
    738,569       (142,088 )     596,481  
Removed from shareholders’ equity and recognized in earnings
    (1,564,820 )           (1,564,820 )
 
                 
 
                       
Balance, end of year
  $ (198,413 )   $ (88,929 )   $ (287,342 )
 
                 
                         
    Year Ended December 31, 2007  
    From
Available-
for-sale
Financial
Assets
    From
Available-
for-sale
Financial
Assets Held
by Investees
    Total  
 
                       
Balance, beginning of year
  $ 386,017     $ 175,598     $ 561,615  
Recognized directly in shareholders’ equity
    849,823       (122,439 )     727,384  
Removed from shareholders’ equity and recognized in earnings
    (608,002 )           (608,002 )
 
                 
 
                       
Balance, end of year
  $ 627,838     $ 53,159     $ 680,997  
 
                 
  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 market price fluctuations. The derivative financial instruments categorized as financial assets/liabilities at fair value through profit or loss are mainly used to hedge the exchange rate fluctuations of foreign-currency assets and liabilities; therefore, the market risk of derivatives will be offset by the foreign exchange risk of these hedged items. Available-for-sale financial assets held by the Company are mainly fixed-interest-rate debt securities; therefore, the fluctuations in market interest rates would result in changes in fair value of these debt securities. Subject to recent turmoil in the global financial market, the Company evaluated its financial assets and determined that certain impairment for its asset-backed securities is other-than-temporary. The Company had appropriately recognized related impairment losses.
 
  2)   Credit risk. Credit risk represents the potential loss that would be incurred by the Company if the counter-parties or third-parties breached contracts. Financial instruments with positive fair values at the balance sheet date are evaluated for credit risk. Subject to recent turmoil in the global financial market, the Company evaluated the financial instruments for any possible counter-party or third-party default. As a result of the evaluation, the Company determined that certain financial instruments are exposed to credit risk and had appropriately recognized related impairment losses.

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  3)   Liquidity risk. The Company has sufficient operating capital to meet cash needs upon settlement of derivative financial instruments, bonds payable and bank loans. Therefore, the liquidity risk is low.
 
  4)   Cash flow interest rate risk. The Company mainly invests in fixed-interest-rate debt securities. Therefore, cash flows are not expected to fluctuate significantly due to changes in market interest rates.
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.   Investees of TSMC
 
      VIS (accounted for using equity method)
SSMC (accounted for using equity method)
 
  b.   VisEra Technology Company, Ltd. (VisEra), an indirect investee accounted for using equity method.
 
  c.   Others
 
      Related parties over which the Company exercises significant influence but with which the Company had no material transactions.
                                 
    2008     2007  
    Amount     %     Amount     %  
For the year
                               
 
                               
Sales
                               
VIS
  $ 80,067           $ 59,163        
VisEra
    30,821             739,879        
SSMC
    1,869             2,928        
 
                       
 
                               
 
  $ 112,757           $ 801,970        
 
                       
 
                               
Purchases
                               
SSMC
  $ 4,441,795       2     $ 5,468,410       3  
VIS
    3,260,160       2       4,208,207       2  
VisEra
    594             594        
 
                       
 
                               
 
  $ 7,702,549       4     $ 9,677,211       5  
 
                       
 
                               
Manufacturing expenses
                               
VisEra
  $ 133,051           $ 63,933        
VIS
                366        
 
                       
 
                               
 
  $ 133,051           $ 64,299        
 
                       
 
                               
Research and development expenses
                               
VisEra
  $ 518           $ 43,056        
 
                       

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    2008     2007  
    Amount     %     Amount     %  
Non-operating income and gains
                               
VIS (primarily technical service income; see Note 28f)
  $ 296,250       3     $ 346,260       3  
SSMC (primarily technical service income; see Note 28e)
    244,865       2       290,586       2  
VisEra
    101,605       1       321,819       3  
 
                       
 
                               
 
  $ 642,720       6     $ 958,665       8  
 
                       
As of December 31
                               
 
                               
Receivables
                               
VisEra
  $ 407       100     $ 10,885       100  
 
                       
 
                               
Other receivables
                               
SSMC
  $ 56,949       57     $ 84,778       35  
VIS
    42,969       43       118,749       49  
VisEra
                40,093       16  
 
                       
 
                               
 
  $ 99,918       100     $ 243,620       100  
 
                       
 
                               
Payables
                               
VIS
  $ 317,890       65     $ 839,624       56  
SSMC
    162,807       33       655,029       44  
VisEra
    9,160       2       8,723        
 
                       
 
                               
 
  $ 489,857       100     $ 1,503,376       100  
 
                       
 
                               
Deferred credits
                               
VisEra
  $           $ 62,175       5  
 
                       
    The sales prices and payment terms to related parties were not significantly different from those of sales to third parties. For other related party transactions, prices and terms were determined in accordance with mutual agreements.
 
    TSMC deferred the net gains (classified under deferred credits) derived from sales of property, plant and equipment to VisEra, and then recognized such gains (classified under non-operating income and gains) over the depreciable lives of the disposed assets.
 
    TSMC leased certain buildings and facilities to VisEra. The related rental income was classified under non-operating income. The lease terms and prices were determined in accordance with mutual agreements. The lease agreement between TSMC and VisEra expired in April 2008.
 
    Compensation of directors and management personnel:
                 
    Years Ended December 31  
    2008     2007  
 
               
Salaries, incentives and special compensation
  $ 352,227     $ 275,219  
Bonus
    705,376       1,096,233  
 
           
 
               
 
  $ 1,057,603     $ 1,371,452  
 
           

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    The information about the compensation of directors and management personnel is available in the annual report for the shareholders’ meeting. Total compensation expense for the year ended December 31, 2008 includes estimated bonuses to employees and directors of the Company that relate to 2008 but will be paid in the following year. The actual amount will be finalized and approved upon the resolution of the shareholders’ meeting in 2009. The total compensation for the year ended December 31, 2007 included the bonuses appropriated from earnings of 2007 which was approved by the shareholders’ meeting held in 2008.
26.   PLEDGED OR MORTGAGED ASSETS
    The Company provided certain assets as collateral mainly for long-term bank loans and land lease agreements, which were as follows:
                 
    December 31  
    2008     2007  
 
               
Other financial assets
  $ 33,377     $ 48,929  
Property, plant and equipment, net
    4,032,571       5,733,263  
 
           
 
               
 
  $ 4,065,948     $ 5,782,192  
 
           
27.   SIGNIFICANT LONG-TERM LEASES
    The Company leases several parcels of land and office premises from the SPA and Jhongli Industrial Park Service Center. These operating leases expire on various dates from December 2009 to December 2028 and can be renewed upon expiration.
 
    The Company entered into lease agreements for its office premises and certain equipment located in the United States, Europe, Japan, Shanghai and Taiwan. These operating leases expire between 2009 and 2018 and can be renewed upon expiration.
 
    As of December 31, 2008, future lease payments were as follows:
         
Year   Amount  
 
       
2009
  $ 556,596  
2010
    489,115  
2011
    430,132  
2012
    420,978  
2013 and thereafter
    3,009,030  
 
     
 
       
 
  $ 4,905,851  
 
     

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28.   SIGNIFICANT COMMITMENTS AND CONTINGENCIES
    Significant commitments and contingencies of the Company as of December 31, 2008, excluding those disclosed in other notes, were as follows:
  a.   On June 20, 2004, TSMC and Philips (Philips parted with its semiconductor company which was renamed as NXP B.V. in September 2006) amended the Technical Cooperation Agreement, which was originally signed on May 12, 1997. The amended Technical Cooperation Agreement is for five years beginning from January 1, 2004. Upon expiration, this amended Technical Cooperation Agreement will be terminated and will not be automatically renewed; however, the patent cross license arrangement between TSMC and Philips (now NXP B.V.) will survive the expiration of the amended Technical Cooperation Agreement. Under this amended Technical Cooperation Agreement, TSMC will pay Philips (now NXP B.V.) royalties based on a fixed amount mutually agreed-on, rather than under a certain percentage of the TSMC’s annual net sales. TSMC and Philips (now NXP B.V.) agreed to cross license the patents owned by each party. TSMC also obtained through Philips (now NXP B.V.) a number of cross patent licenses
 
  b.   Under a technical cooperation agreement with ITRI, the R.O.C. Government or its designee approved by TSMC can use up to 35% of TSMC’s capacity if TSMC’s outstanding commitments to its customers are not prejudiced. The term of this agreement is for five years beginning from January 1, 1987 and is automatically renewed for successive periods of five years unless otherwise terminated by either party with one year prior notice.
 
  c.   Under several foundry agreements, TSMC shall reserve a portion of its production capacity for certain major customers that have guarantee deposits with TSMC. As of December 31, 2008, TSMC had a total of US$43,421 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. TSMC’s equity interest in SSMC was 32%. Nevertheless, Philips parted with its semiconductor company which was renamed as NXP B.V. in September 2006. TSMC and NXP B.V. purchased all the SSMC shares owned by EDB Investments Pte Ltd. pro rata according to the Shareholders Agreement on November 15, 2006. After the purchase, TSMC and NXP B.V. currently own approximately 39% and 61% of the SSMC shares respectively. TSMC and Philips (now NXP) committed to buy specific percentages of the production capacity of SSMC. TSMC and Philips (now NXP B.V.) are required, in the aggregate, to purchase up to 70% of SSMC’s capacity, but TSMC alone is not required to purchase more than 28% of the capacity. If any party defaults on the commitment and the capacity utilization of SSMC fall below a specific percentage of its capacity, the defaulting party is required to compensate SSMC for all related unavoidable costs.
 
  e.   TSMC provides technical services to SSMC under a Technical Cooperation Agreement (the Agreement) effective March 30, 1999. TSMC receives compensation for such services computed at a specific percentage of net selling price of all products sold by SSMC. The Agreement shall remain in force for ten years and may be automatically renewed for successive periods of five years each unless pre-terminated by either party under certain conditions
 
  f.   TSMC provides a technology transfer to VIS under a Manufacturing License and Technology Transfer Agreement entered into on April 1, 2004. TSMC receives compensation for such technology transfer in the form of royalty payments from VIS computed at specific percentages of net selling price of certain products sold by VIS. VIS agreed to reserve its certain capacity to manufacture for TSMC certain products at prices as agreed by the parties.

- 45 -


 

  g.   TSMC, TSMC North America and WaferTech filed a series of lawsuits in late 2003 and 2004 against Semiconductor Manufacturing International Corporation, SMIC (Shanghai) and SMIC Americas (aggregately referring to as “SMIC”). The lawsuits alleged that SMIC infringed multiple TSMC, TSMC North America and WaferTech patents and misappropriated TSMC, TSMC North America and WaferTech’s trade secrets. These suits were settled out of court on January 30, 2005. As part of the settlement, Semiconductor Manufacturing International Corporation shall pay US$175 million over six years to resolve TSMC, TSMC North America and WaferTech’s claims. As of December 31, 2008, SMIC had paid US$120 million in accordance with the terms of this settlement agreement. In August 2006, TSMC, TSMC North America and WaferTech filed a lawsuit against SMIC in Alameda County Superior Court in California for breach of aforementioned settlement agreement, breach of promissory notes and trade secret misappropriation, seeking injunctive relief and monetary damages. In September 2006, SMIC filed a cross-complaint against TSMC, TSMC North America and WaferTech in the same court, alleging TSMC, TSMC North America and WaferTech of breach of the settlement agreement and implied covenant of good faith and fair dealing, in response to TSMC, TSMC North America and WaferTech’s August complaint. In November 2006, SMIC filed a complaint with Beijing People’s High Court against TSMC, TSMC North America and WaferTech alleging defamation and breach of good faith. The California State Superior Court of Alameda County issued an Order on TSMC, TSMC North America and WaferTech’s pre-trial motion for a preliminary injunction against SMIC on September 7, 2007. In the Order, the Court found “TSMC has demonstrated a significant likelihood that it will ultimately prevail on the merits of its claim for breach of certain paragraphs of the (2005) Settlement Agreement” with SMIC. The Court also found “TSMC has demonstrated a significant probability of establishing that SMIC retains and is using TSMC Information in SMIC’s 0.13um and smaller technologies, and there is significant threat of serious irreparable harm to TSMC if SMIC were to disclose or transfer that information before final resolution of the case.” Therefore, the Court ordered that, effective immediately, SMIC must provide advance notice and an opportunity for TSMC, TSMC North America and WaferTech to object before disclosing items enumerated in the Court Order to SMIC’s third party partners. The Court, however, did not grant a preliminary injunction as requested by TSMC, TSMC North America and WaferTech. The result of the above-mentioned litigation cannot be determined at this time.
 
  h.   In April 2004, UniRAM Technology, Inc. (“UniRAM”) filed an action against MoSys Inc., TSMC and TSMC North America in the U.S. District Court for the Northern District of California, alleging patent infringement and trade secret misappropriation and seeking injunctive relief and damages. TSMC appealed after the United States District Court for the Northern District of California rendered judgment in favor of UniRAM in May 2008. In the third quarter of 2008, TSMC and TSMC North America had reached agreement with UniRAM to settle the dispute. In accordance with the settlement, the judgment has been vacated and the claims asserted by UniRAM are fully and finally settled. As of December 31, 2008, TSMC had accounted for the result of the settlement in accordance with the aforementioned settlement agreement.
 
  i.   The Company entered into an agreement with a counterparty in 2003 whereby 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. The property, plant and equipment have been in use by TSMC Shanghai since 2004 and are being depreciated over their estimated service lives. The related obligation totaled NT$8,579,726 thousand and NT$7,908,516 thousand as of December 31, 2008 and 2007, respectively, which is included in other long-term payables on the Company’s consolidated balance sheets.

- 46 -


 

29.   ADDITIONAL DISCLOSURES
    Following are the additional disclosures required by the SFB for TSMC and its investees in which all significant intercompany balances and transactions are eliminated upon consolidation:
  a.   Financing provided: None;
 
  b.   Endorsement/guarantee provided: None;
 
  c.   Marketable securities held: Please see Table 1 attached;
 
  d.   Marketable securities acquired and disposed of at costs or prices of at least NT$100 million or 20% of the paid-in capital: Please see Table 2 attached;
 
  e.   Acquisition of individual real estate properties at costs of at least NT$100 million or 20% of the paid-in capital: Please see Table 3 attached;
 
  f.   Disposal of individual real estate properties at prices of at least NT$100 million or 20% of the paid-in capital: None;
 
  g.   Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the paid-in capital: Please see Table 4 attached;
 
  h.   Receivable from related parties amounting to at least NT$100 million or 20% of the paid-in capital: Please see Table 5 attached;
 
  i.   Names, locations, and related information of investees over which TSMC exercises significant influence: Please see Table 6 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 investee: Please see Table 7 attached.
 
  2)   Significant direct or indirect transactions with the investee, its prices and terms of payment, unrealized gain or loss, and other related information which is helpful to understand the impact of investment in mainland China on financial reports: Please see Table 8 attached.
  k.   Intercompany relationships and significant intercompany transactions: Please see Table 8 attached.
30.   SEGMENT FINANCIAL INFORMATION
  a.   Industry financial information
 
      The Company operates in one industry. Therefore, the disclosure of industry financial information is not applicable to the Company.

- 47 -


 

  b.   Geographic information:
                                 
    North America             Adjustments        
    and Others     Taiwan     and Elimination     Consolidated  
2008
                               
 
                               
Sales to other than consolidated entities
  $ 193,727,539     $ 139,430,121     $     $ 333,157,660  
Sales among consolidated entities
    16,280,818       194,731,514       (211,012,332 )      
 
                       
 
                               
Total sales
  $ 210,008,357     $ 334,161,635     $ (211,012,332 )   $ 333,157,660  
 
                       
 
                               
Gross profit
  $ 2,114,127     $ 140,540,236     $ (904,802 )   $ 141,749,561  
 
                       
Operating expenses
                            (37,314,193 )
Non-operating income and gains
                            10,821,449  
Non-operating expenses and losses
                            (3,784,571 )
 
                       
 
                               
Income before income tax
                          $ 111,472,246  
 
                       
 
                               
Identifiable assets
  $ 122,781,555     $ 425,545,212     $ (29,391,693 )   $ 518,935,074  
 
                       
Long-term investments
                            39,981,515  
 
                       
 
                               
Total assets
                          $ 558,916,589  
 
                       
 
                               
2007
                               
 
                               
Sales to other than consolidated entities
  $ 193,066,238     $ 129,564,358     $     $ 322,630,596  
Sales among consolidated entities
    18,084,068       194,035,526       (212,119,594 )      
 
                       
 
                               
Total sales
  $ 211,150,306     $ 323,599,884     $ (212,119,594 )   $ 322,630,596  
 
                       
 
                               
Gross profit
  $ 3,895,144     $ 139,227,508     $ (772,441 )   $ 142,350,211  
 
                       
Operating expenses
                            (30,628,304 )
Non-operating income and gains
                            11,933,803  
Non-operating expenses and losses
                            (2,013,684 )
 
                       
 
                               
Income before income tax
                          $ 121,642,026  
 
                       
 
                               
Identifiable assets
  $ 145,483,411     $ 439,675,938     $ (50,755,448 )   $ 534,403,901  
 
                       
Long-term investments
                            36,461,325  
 
                       
 
                               
Total assets
                          $ 570,865,226  
 
                       

- 48 -


 

  c.   Export sales
                 
    Years Ended December 31  
Area   2008     2007  
 
                               
Asia
  $ 55,383,901     $ 40,609,413  
Europe and others
    41,890,123       34,518,668  
             
 
                               
 
  $ 97,274,024     $ 75,128,081  
             
      The export sales information is based on the amounts billed to customers within the areas.
  d.   Major customers representing at least 10% of gross sales
                                 
    Years Ended December 31  
    2008     2007  
    Amount     %     Amount     %  
 
                               
Customer A
  $ 46,523,059       14     $ 37,731,028       11  
 
                       

- 49 -


 

     
TABLE 1
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
MARKETABLE SECURITIES HELD
DECEMBER 31, 2008
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
                                                 
                December 31, 2008    
                                        Market Value or Net    
                Shares/Units   Carrying Value   Percentage of   Asset Value    
Held Company Name   Marketable Securities Type and Name   Relationship with the Company   Financial Statement Account   (in Thousands)   (US$ in Thousands)   Ownership (%)   (US$ in Thousands)   Note
TSMC
  Corporate bond                                            
 
  Taiwan Mobile Co., Ltd.     Available-for-sale financial assets         $ 2,032,658       N/A     $ 2,032,658      
 
  Taiwan Power Company     Held-to-maturity financial assets           4,209,629       N/A       4,215,260      
 
  Formosa Petrochemical Corporation     ²           3,554,908       N/A       3,540,418      
 
  Nan Ya Plastics Corporation     ²           3,487,804       N/A       3,512,202      
 
  Formosa Plastic Corporation     ²           2,385,285       N/A       2,391,955      
 
  CPC Corporation, Taiwan     ²           1,000,124       N/A       999,740      
 
  China Steel Corporation     ²           1,000,000       N/A       990,897      
 
  Shanghai Commercial & Saving Bank     ²           299,092       N/A       298,988      
 
  Formosa Chemicals & Fiber Corporation     ²           199,910       N/A       199,890      
 
                                               
 
  Government bond                                            
 
  2003 Asian Development Bank Govt. Bond     Held-to-maturity financial assets           873,237       N/A       875,103      
 
  European Investment Bank Bonds     ²           383,387       N/A       400,000      
 
  2004 Government Bond Series B     ²           249,948       N/A       250,280      
 
                                               
 
  Stocks                                            
 
  TSMC Global   Subsidiary   Investments accounted for using equity method     1       45,756,519       100       45,756,519      
 
  TSMC International   Subsidiary   ²     987,968       29,637,057       100       29,637,057      
 
  VIS   Investee accounted for using equity method   ²     628,223       9,787,275       37       4,680,265      
 
  SSMC   Investee accounted for using equity method   ²     314       6,808,192       39       6,036,045      
 
  TSMC Partners   Subsidiary   ²     300       3,730,913       100       3,730,913      
 
  TSMC North America   Subsidiary   ²     11,000       2,435,666       100       2,435,666      
 
  XinTec   Investee with a controlling financial interest   ²     92,620       1,506,384       42       1,443,752      
 
  GUC   Investee with a controlling financial interest   ²     44,904       950,263       36       5,208,842      
 
  TSMC Japan   Subsidiary   ²     6       137,617       100       137,617      
 
  TSMC Europe   Subsidiary   ²           124,594       100       124,594      
 
  TSMC Korea   Subsidiary   ²     80       15,117       100       15,117      
 
  United Industrial Gases Co., Ltd.     Financial assets carried at cost     16,783       193,584       10       292,902      
 
  Shin-Etsu Handotai Taiwan Co., Ltd.     ²     10,500       105,000       7       384,157      
 
  W.K. Technology Fund IV     ²     4,000       40,000       2       38,479      
 
  Hontung Venture Capital Co., Ltd.     ²     2,633       18,925       10       18,816      
 
                                               
 
  Fund                                            
 
  Horizon Ventures Fund     Financial assets carried at cost           103,992       12       103,992      
 
  Crimson Asia Capital     ²           58,001       1       58,001      
 
                                               
 
  Capital                                            
 
  TSMC Shanghai   Subsidiary   Investments accounted for using equity method           6,267,128       100       6,269,794      
 
  VTAF III   Subsidiary   ²           1,305,605       98       1,291,057      
 
  VTAF II   Subsidiary   ²           975,367       98       970,912      
 
  Emerging Alliance   Subsidiary   ²           433,481       99       433,481      
(Continued)

- 50 -


 

                                                 
                December 31, 2008    
                                        Market Value or Net    
                Shares/Units   Carrying Value   Percentage of   Asset Value    
Held Company Name   Marketable Securities Type and Name   Relationship with the Company   Financial Statement Account   (in Thousands)   (US$ in Thousands)   Ownership (%)   (US$ in Thousands)   Note
TSMC North America
  Preferred stock                                            
 
  NeXen, Inc.     Financial assets carried at cost     328     US$ 656       1     US$ 1,912      
 
                                               
TSMC International
  Corporate bond                                            
 
  General Elec Cap Corp. Mtn     Held-to-maturity financial assets         US$ 20,791       N/A     US$ 20,671      
 
  General Elec Cap Corp. Mtn     ²         US$ 20,294       N/A     US$ 20,050      
 
                                               
 
  Stocks                                            
 
  TSMC Development, Inc. (TSMC Development)   Subsidiary   Investments accounted for using equity method     1     US$ 690,095       100     US$ 690,095      
 
  InveStar Semiconductor Development Fund, Inc. (II) LDC. (ISDF II)   Subsidiary   ²     32,289     US$ 25,586       97     US$ 25,586      
 
  TSMC Technology   Subsidiary   ²     1     US$ 8,408       100     US$ 8,408      
 
  InveStar Semiconductor Development Fund, Inc. (ISDF)   Subsidiary   ²     7,680     US$ 6,529       97     US$ 6,529      
 
                                               
TSMC Development
  Corporate bond                                            
 
  GE Capital Corp.     Held-to-maturity financial assets         US$ 20,447       N/A     US$ 20,050      
 
                                               
 
  Stocks                                            
 
  WaferTech   Subsidiary   Investments accounted for using equity method     293,637     US$ 204,558       100     US$ 204,558      
 
                                               
TSMC Partners
  Common stock                                            
 
  VisEra Holding Company   Investee accounted for using equity method   Investments accounted for using equity method     43,000     US$ 69,298       49     US$ 69,298      
 
  TSMC Canada   Subsidiary   ²     2,300     US$ 2,570       100     US$ 2,570      
 
                                               
Emerging Alliance
  Common stock                                            
 
  Pixim, Inc.     Financial assets carried at cost     203     US$ 54           US$ 54      
 
  RichWave Technology Corp.     ²     4,247     US$ 1,648       10     US$ 1,648      
 
  Global Investment Holding Inc.     ²     10,800     US$ 3,065       6     US$ 3,065      
 
                                               
 
  Preferred stock                                            
 
  Audience, Inc.     Financial assets carried at cost     1,654     US$ 250       1     US$ 250      
 
  Axiom Microdevices, Inc.     ²     1,000     US$ 1,000       1     US$ 1,000      
 
  GemFire Corporation     ²         US$ 31           US$ 31      
 
  Miradia, Inc.     ²     3,040     US$ 1,000       2     US$ 1,000      
 
  Mosaic Systems, Inc.     ²     2,481     US$ 12       6     US$ 12      
 
  Next IO, Inc.     ²     800     US$ 500       1     US$ 500      
 
  Optichron, Inc.     ²     714     US$ 1,000       2     US$ 1,000      
 
  Optimal Corporation     ²         US$ 229           US$ 229      
 
  Pixim, Inc.     ²     4,439     US$ 1,083       2     US$ 1,083      
 
  QST Holding, LLC     ²         US$ 131       4     US$ 131      
 
  Teknovus, Inc.     ²     6,977     US$ 1,327       2     US$ 1,327      
 
                                               
 
  Capital                                            
 
  VentureTech Alliance Holdings, L.L.C. (VTA Holdings)   Subsidiary   Investments accounted for using equity method                 8            
 
                                               
VTAF II
  Common stock                                            
 
  Sentelic     Financial assets carried at cost     1,200     US$ 2,040       15     US$ 2,040      
 
  Aquantia     ²     2,108     US$ 2,573       5     US$ 2,573      
 
  Leadtrend     ²     1,265     US$ 660       5     US$ 660      
 
                                               
 
  Preferred stock                                            
 
  5V Technologies, Inc.     Financial assets carried at cost     2,890     US$ 2,168       15     US$ 2,168      
 
  Audience, Inc.     ²     5,335     US$ 1,390       2     US$ 1,390      
 
  Axiom Microdevices, Inc.     ²     5,046     US$ 2,481       5     US$ 2,481      
(Continued)

- 51 -


 

     
                                                 
                December 31, 2008    
                                        Market Value or Net    
                Shares/Units   Carrying Value   Percentage of   Asset Value    
Held Company Name   Marketable Securities Type and Name   Relationship with the Company   Financial Statement Account   (in Thousands)   (US$ in Thousands)   Ownership (%)   (US$ in Thousands)   Note
 
  Beceem Communications     Financial assets carried at cost     650     US$ 1,600       1     US$ 1,600      
 
  GemFire Corporation     ²     600     US$ 68       1     US$ 68      
 
  Impinj, Inc.     ²     475     US$ 1,000           US$ 1,000      
 
  Miradia, Inc.     ²     3,416     US$ 3,106       3     US$ 3,106      
 
  Next IO, Inc.     ²     2,775     US$ 756       2     US$ 756      
 
  Optichron, Inc.     ²     1,050     US$ 1,844       4     US$ 1,844      
 
  Pixim, Inc.     ²     6,348     US$ 1,141       2     US$ 1,141      
 
  Power Analog Microelectronics     ²     5,232     US$ 2,790       18     US$ 2,790      
 
  QST Holding, LLC     ²         US$ 415       13     US$ 415      
 
  RichWave Technology Corp.     ²     1,043     US$ 730       1     US$ 730      
 
  Teknovus, Inc.     ²     1,599     US$ 454           US$ 454      
 
  Tzero Technologies, Inc.     ²     1,167     US$ 569       2     US$ 569      
 
  Xceive     ²     870     US$ 1,177       2     US$ 1,177      
 
                                               
 
  Capital                                            
 
  VTA Holdings   Subsidiary   Investments accounted for using equity method                 24            
 
                                               
VTAF III
  Common stock                                            
 
  Mutual-pak Technology Co., Ltd.   Subsidiary   Investments accounted for using equity method     4,590     US$ 1,705       51     US$ 1,705      
 
  Acionn Technology Corporation   Investee accounted for using equity method   ²     4,500     US$ 1,052       44     US$ 1,052      
 
  Auramicro, Inc.     Financial assets carried at cost     3,816     US$ 1,145       20     US$ 1,145      
 
  InvenSence, Inc.     ²     816     US$ 1,000       1     US$ 1,000      
 
                                               
 
  Preferred stock                                            
 
  Advasense Sensors, Inc.     Financial assets carried at cost     1,929     US$ 1,834       6     US$ 1,834      
 
  BridgeLux, Inc.     ²     3,333     US$ 5,000       3     US$ 5,000      
 
  Exclara, Inc. (Formerly SynDitec, Inc.)     ²     21,708     US$ 4,568       18     US$ 4,568      
 
  GTBF, Inc.     ²     1,154     US$ 1,500       N/A     US$ 1,500      
 
  LiquidLeds Lighting Corp.     ²     1,600     US$ 800       11     US$ 800      
 
  M2000, Inc.     ²     3,000     US$ 3,000       5     US$ 3,000      
 
  Neoconix, Inc.     ²     2,458     US$ 4,000       6     US$ 4,000      
 
  Powervation, Ltd.     ²     191     US$ 2,930       19     US$ 2,930      
 
  Quellan, Inc.     ²     3,106     US$ 3,500       6     US$ 3,500      
 
  Silicon Technical Services, LLC     ²     1,055     US$ 1,208       2     US$ 1,208      
 
  Tilera, Inc.     ²     1,698     US$ 2,360       3     US$ 2,360      
 
  Validity Sensors, Inc.     ²     6,424     US$ 2,545       3     US$ 2,545      
 
                                               
 
  Capital                                            
 
  Growth Fund Limited (Growth Fund)   Subsidiary   Investments accounted for using equity method         US$ 100       100     US$ 100      
 
  VTA Holdings   Subsidiary   ²                 68            
 
                                               
Growth Fund
  Common stock                                            
 
  Staccato     Financial assets carried at cost     10     US$ 25           US$ 25      
 
                                               
ISDF
  Common stock                                            
 
  Capella Microsystems (Taiwan), Inc.     Financial assets carried at cost     530     US$ 154       2     US$ 154      
 
                                               
 
  Preferred stock                                            
 
  Memsic, Inc.     Available-for-sale financial assets     1,364     US$ 2,250       6     US$ 2,250      
 
  Integrated Memory Logic, Inc.     Financial assets carried at cost     2,872     US$ 1,221       9     US$ 1,221      
 
  IP Unity, Inc.     ²     1,008     US$ 290       1     US$ 290      
 
  NanoAmp Solutions, Inc.     ²     541     US$ 541       2     US$ 541      
 
  Sonics, Inc.     ²     230     US$ 1,843       2     US$ 1,843      
(Continued)

- 52 -


 

     
                                                 
                December 31, 2008    
                                        Market Value or Net    
                Shares/Units   Carrying Value   Percentage of   Asset Value    
Held Company Name   Marketable Securities Type and Name   Relationship with the Company   Financial Statement Account   (in Thousands)   (US$ in Thousands)   Ownership (%)   (US$ in Thousands)   Note
 
                                               
ISDF II
  Common stock                                            
 
  Rich Tek Technology Corp.    
Financial assets at fair value through profit or loss
    101     US$ 403           US$ 403      
 
  Rich Tek Technology Corp.     Available-for-sale financial assets     288     US$ 1,148           US$ 1,148      
 
  Ralink Technology (Taiwan), Inc.     ²     1,512     US$ 3,232       1     US$ 3,232      
 
  eLCOS Microdisplay Technology, Ltd.     Financial assets carried at cost     270     US$ 27       1     US$ 27      
 
  EoNEX Technologies, Inc.     ²     55     US$ 305       5     US$ 305      
 
  Sonics, Inc.     ²     278     US$ 1,597       3     US$ 1,597      
 
  Epic Communication, Inc.     ²     191     US$ 23       1     US$ 23      
 
  EON Technology, Corp.     ²     2,494     US$ 691       3     US$ 691      
 
  Goyatek Technology, Corp.     ²     2,088     US$ 545       12     US$ 545      
 
  Trendchip Technologies Corp.     ²     1,020     US$ 574       3     US$ 574      
 
  Capella Microsystems (Taiwan), Inc.     ²     534     US$ 210       2     US$ 210      
 
  Auden Technology MFG. Co., Ltd.     ²     1,049     US$ 223       3     US$ 223      
 
                                               
 
  Preferred stock                                            
 
  Memsic, Inc.     Available-for-sale financial assets     1,145     US$ 1,888       5     US$ 1,888      
 
  Alchip Technologies Limited     Financial assets carried at cost     6,979     US$ 3,664       19     US$ 3,664      
 
  eLCOS Microdisplay Technology, Ltd.     ²     3,500     US$ 878       8     US$ 878      
 
  FangTek, Inc.     ²     7,064     US$ 3,428       16     US$ 3,428      
 
  Kilopass Technology, Inc.     ²     3,887     US$ 1,746       5     US$ 1,746      
 
  NanoAmp Solutions, Inc.     ²     375     US$ 375       1     US$ 375      
 
  Sonics, Inc.     ²     264     US$ 1,517       3     US$ 1,517      
 
                                               
GUC
  Common stock                                            
 
  GUC-NA   Subsidiary  
Investments accounted for using equity method
    800     $ 34,019       100     $ 34,019      
 
  GUC-Japan   Subsidiary   ²     1       11,854       100       11,854      
 
  GUC-Europe   Subsidiary   ²           2,563       100       2,563      
 
                                               
XinTec
  Capital                                            
 
  Compositech Ltd.     Financial assets carried at cost     587             3            
 
                                               
TSMC Global
  Agency bonds                                            
 
  Fed Hm Ln Pc Pool 1b1225     Available-for-sale financial assets         US$ 75       N/A     US$ 75      
 
  Fed Hm Ln Pc Pool 1b2566     ²         US$ 118       N/A     US$ 118      
 
  Fed Hm Ln Pc Pool 1b2632     ²         US$ 145       N/A     US$ 145      
 
  Fed Hm Ln Pc Pool 1b2642     ²         US$ 195       N/A     US$ 195      
 
  Fed Hm Ln Pc Pool 1b2776     ²         US$ 282       N/A     US$ 282      
 
  Fed Hm Ln Pc Pool 1b2792     ²         US$ 193       N/A     US$ 193      
 
  Fed Hm Ln Pc Pool 1b2810     ²         US$ 246       N/A     US$ 246      
 
  Fed Hm Ln Pc Pool 1b7453     ²         US$ 2,302       N/A     US$ 2,302      
 
  Fed Hm Ln Pc Pool 1g0038     ²         US$ 243       N/A     US$ 243      
 
  Fed Hm Ln Pc Pool 1g0053     ²         US$ 289       N/A     US$ 289      
 
  Fed Hm Ln Pc Pool 1g0104     ²         US$ 119       N/A     US$ 119      
 
  Fed Hm Ln Pc Pool 1g1282     ²         US$ 3,285       N/A     US$ 3,285      
 
  Fed Hm Ln Pc Pool 1g1411     ²         US$ 2,979       N/A     US$ 2,979      
 
  Fed Hm Ln Pc Pool 1h2520     ²         US$ 2,152       N/A     US$ 2,152      
 
  Fed Hm Ln Pc Pool 1h2524     ²         US$ 1,614       N/A     US$ 1,614      
 
  Fed Hm Ln Pc Pool 780870     ²         US$ 481       N/A     US$ 481      
 
  Fed Hm Ln Pc Pool 781959     ²         US$ 2,841       N/A     US$ 2,841      
 
  Fed Hm Ln Pc Pool 782785     ²         US$ 198       N/A     US$ 198      
 
  Fed Hm Ln Pc Pool 782837     ²         US$ 390       N/A     US$ 390      
 
  Fed Hm Ln Pc Pool 783022     ²         US$ 443       N/A     US$ 443      
(Continued)

- 53 -


 

     
                                                 
                December 31, 2008    
                                        Market Value or Net    
                Shares/Units   Carrying Value   Percentage of   Asset Value    
Held Company Name   Marketable Securities Type and Name   Relationship with the Company   Financial Statement Account   (in Thousands)   (US$ in Thousands)   Ownership (%)   (US$ in Thousands)   Note
 
  Fed Hm Ln Pc Pool 783026     Available-for-sale financial assets         US$ 239       N/A     US$ 239      
 
  Fed Hm Ln Pc Pool B19205     ²         US$ 5,501       N/A     US$ 5,501      
 
  Fed Hm Ln Pc Pool E01492     ²         US$ 1,544       N/A     US$ 1,544      
 
  Fed Hm Ln Pc Pool E89857     ²         US$ 1,152       N/A     US$ 1,152      
 
  Fed Hm Ln Pc Pool G11295     ²         US$ 911       N/A     US$ 911      
 
  Fed Hm Ln Pc Pool M80855     ²         US$ 2,526       N/A     US$ 2,526      
 
  Federal Home Ln Mtg Corp.     ²         US$ 348       N/A     US$ 348      
 
  Federal Home Ln Mtg Corp.     ²         US$ 187       N/A     US$ 187      
 
  Federal Home Ln Mtg Corp.     ²         US$ 3,108       N/A     US$ 3,108      
 
  Federal Home Ln Mtg Corp.     ²         US$ 1,603       N/A     US$ 1,603      
 
  Federal Home Ln Mtg Corp.     ²         US$ 1,727       N/A     US$ 1,727      
 
  Federal Home Ln Mtg Corp.     ²         US$ 1,185       N/A     US$ 1,185      
 
  Federal Home Ln Mtg Corp.     ²         US$ 2,782       N/A     US$ 2,782      
 
  Federal Home Ln Mtg Corp.     ²         US$ 1,383       N/A     US$ 1,383      
 
  Federal Home Ln Mtg Corp.     ²         US$ 2,358       N/A     US$ 2,358      
 
  Federal Home Ln Mtg Corp.     ²         US$ 2,233       N/A     US$ 2,233      
 
  Federal Home Ln Mtg Corp.     ²         US$ 2,880       N/A     US$ 2,880      
 
  Federal National Mort Assoc     ²         US$ 2,049       N/A     US$ 2,049      
 
  Federal National Mortgage Asso     ²         US$ 2,879       N/A     US$ 2,879      
 
  Federal Natl Mtg Assn     ²         US$ 1,328       N/A     US$ 1,328      
 
  Federal Natl Mtg Assn     ²         US$ 1,315       N/A     US$ 1,315      
 
  Federal Natl Mtg Assn     ²         US$ 1,372       N/A     US$ 1,372      
 
  Federal Natl Mtg Assn     ²         US$ 2,868       N/A     US$ 2,868      
 
  Federal Natl Mtg Assn Gtd     ²         US$ 1,298       N/A     US$ 1,298      
 
  Fnma Pool 255883     ²         US$ 2,724       N/A     US$ 2,724      
 
  Fnma Pool 257245     ²         US$ 3,513       N/A     US$ 3,513      
 
  Fnma Pool 555549     ²         US$ 1,184       N/A     US$ 1,184      
 
  Fnma Pool 555715     ²         US$ 142       N/A     US$ 142      
 
  Fnma Pool 632399     ²         US$ 337       N/A     US$ 337      
 
  Fnma Pool 662401     ²         US$ 451       N/A     US$ 451      
 
  Fnma Pool 667766     ²         US$ 1,068       N/A     US$ 1,068      
 
  Fnma Pool 680932     ²         US$ 952       N/A     US$ 952      
 
  Fnma Pool 681393     ²         US$ 2,045       N/A     US$ 2,045      
 
  Fnma Pool 685116     ²         US$ 489       N/A     US$ 489      
 
  Fnma Pool 691283     ²         US$ 3,039       N/A     US$ 3,039      
 
  Fnma Pool 694287     ²         US$ 17       N/A     US$ 17      
 
  Fnma Pool 703711     ²         US$ 402       N/A     US$ 402      
 
  Fnma Pool 725095     ²         US$ 865       N/A     US$ 865      
 
  Fnma Pool 730033     ²         US$ 138       N/A     US$ 138      
 
  Fnma Pool 740934     ²         US$ 889       N/A     US$ 889      
 
  Fnma Pool 742232     ²         US$ 13       N/A     US$ 13      
 
  Fnma Pool 750798     ²         US$ 18       N/A     US$ 18      
 
  Fnma Pool 773246     ²         US$ 183       N/A     US$ 183      
 
  Fnma Pool 793932     ²         US$ 367       N/A     US$ 367      
 
  Fnma Pool 794040     ²         US$ 579       N/A     US$ 579      
 
  Fnma Pool 795548     ²         US$ 133       N/A     US$ 133      
 
  Fnma Pool 799664     ²         US$ 77       N/A     US$ 77      
 
  Fnma Pool 799868     ²         US$ 26       N/A     US$ 26      
 
  Fnma Pool 804764     ²         US$ 303       N/A     US$ 303      
 
  Fnma Pool 804852     ²         US$ 264       N/A     US$ 264      
 
  Fnma Pool 804962     ²         US$ 323       N/A     US$ 323      
 
  Fnma Pool 805163     ²         US$ 347       N/A     US$ 347      
 
  Fnma Pool 806642     ²         US$ 457       N/A     US$ 457      
(Continued)

- 54 -


 

     
                                                 
                December 31, 2008    
                                        Market Value or Net    
                Shares/Units   Carrying Value   Percentage of   Asset Value    
Held Company Name   Marketable Securities Type and Name   Relationship with the Company   Financial Statement Account   (in Thousands)   (US$ in Thousands)   Ownership (%)   (US$ in Thousands)   Note
 
  Fnma Pool 806721     Available-for-sale financial assets         US$ 548       N/A     US$ 548      
 
  Fnma Pool 814418     ²         US$ 297       N/A     US$ 297      
 
  Fnma Pool 815626     ²         US$ 1,833       N/A     US$ 1,833      
 
  Fnma Pool 819423     ²         US$ 453       N/A     US$ 453      
 
  Fnma Pool 821129     ²         US$ 430       N/A     US$ 430      
 
  Fnma Pool 888499     ²         US$ 1,588       N/A     US$ 1,588      
 
  Fnma Pool 888502     ²         US$ 204       N/A     US$ 204      
 
  Fnma Pool 888507     ²         US$ 783       N/A     US$ 783      
 
  Fnma Pool 888515     ²         US$ 847       N/A     US$ 847      
 
  Fnma Pool 888519     ²         US$ 99       N/A     US$ 99      
 
  Fnma Pool 888527     ²         US$ 57       N/A     US$ 57      
 
  Fnma Pool 888738     ²         US$ 3,776       N/A     US$ 3,776      
 
  Fnma Pool 888793     ²         US$ 4,242       N/A     US$ 4,242      
 
  Fnma Pool 900296     ²         US$ 2,415       N/A     US$ 2,415      
 
  Gnma Ii Pool 081150     ²         US$ 331       N/A     US$ 331      
 
  Gnma Ii Pool 081153     ²         US$ 1,030       N/A     US$ 1,030      
 
  Gnma Pool 646061     ²         US$ 2,468       N/A     US$ 2,468      
 
  Government Natl Mtg Assn Gtd     ²         US$ 1,861       N/A     US$ 1,861      
 
  Fed Home Ln Bank     ²         US$ 5,305       N/A     US$ 5,305      
 
  Federal Farm Cr Bks     ²         US$ 3,610       N/A     US$ 3,610      
 
  Federal Farm Credit Bank     ²         US$ 3,433       N/A     US$ 3,433      
 
  Federal Home Ln Bks     ²         US$ 3,854       N/A     US$ 3,854      
 
  Federal Home Ln Bks     ²         US$ 5,320       N/A     US$ 5,320      
 
  Federal Home Ln Bks     ²         US$ 4,148       N/A     US$ 4,148      
 
  Federal Home Ln Mtg     ²         US$ 5,340       N/A     US$ 5,340      
 
  Federal Home Ln Mtg Corp.     ²         US$ 3,428       N/A     US$ 3,428      
 
  Federal Home Ln Mtg Corp.     ²         US$ 3,560       N/A     US$ 3,560      
 
  Federal Home Ln Mtg Corp.     ²         US$ 3,743       N/A     US$ 3,743      
 
  Federal Home Loan Bank     ²         US$ 4,710       N/A     US$ 4,710      
 
  Federal Natl Mtg Assn     ²         US$ 4,134       N/A     US$ 4,134      
 
  Federal Natl Mtg Assn     ²         US$ 3,713       N/A     US$ 3,713      
 
  Federal Natl Mtg Assn     ²         US$ 4,169       N/A     US$ 4,169      
 
  Federal Natl Mtg Assn     ²         US$ 3,809       N/A     US$ 3,809      
 
  Federal Natl Mtg Assn Mtn     ²         US$ 3,108       N/A     US$ 3,108      
 
                                               
 
  Corporate issued asset-backed securities                                            
 
  Banc Amer Coml Mtg Inc.     Available-for-sale financial assets         US$ 4,584       N/A     US$ 4,584      
 
  Banc Amer Fdg 2006 I Tr     ²         US$ 2,066       N/A     US$ 2,066      
 
  Bear Stearns Adjustable Rate     ²         US$ 60       N/A     US$ 60      
 
  Bear Stearns Arm Tr     ²         US$ 1,909       N/A     US$ 1,909      
 
  Bear Stearns Arm Tr     ²         US$ 1,160       N/A     US$ 1,160      
 
  Bear Stearns Arm Tr     ²         US$ 129       N/A     US$ 129      
 
  Bear Stearns Coml Mtg Secs Inc.     ²         US$ 96       N/A     US$ 96      
 
  Bear Stearns Coml Mtg Secs Inc.     ²         US$ 2,690       N/A     US$ 2,690      
 
  Cbass Tr     ²         US$ 709       N/A     US$ 709      
 
  Chase Mtg Fin Tr     ²         US$ 576       N/A     US$ 576      
 
  Chase Mtg Fin Tr     ²         US$ 1,171       N/A     US$ 1,171      
 
  Chase Mtg Fin Tr     ²         US$ 1,704       N/A     US$ 1,704      
 
  Chase Mtge Finance Corp.     ²         US$ 865       N/A     US$ 865      
 
  Cit Equip Coll Tr     ²         US$ 3,884       N/A     US$ 3,884      
 
  Credit Suisse First Boston Mtg     ²         US$ 439       N/A     US$ 439      
 
  Credit Suisse First Boston Mtg     ²         US$ 1,513       N/A     US$ 1,513      
 
  Credit Suisse First Boston Mtg     ²         US$ 4,349       N/A     US$ 4,349      
(Continued)

- 55 -


 

     
                                                 
                December 31, 2008    
                                        Market Value or Net    
                Shares/Units   Carrying Value   Percentage of   Asset Value    
Held Company Name   Marketable Securities Type and Name   Relationship with the Company   Financial Statement Account   (in Thousands)   (US$ in Thousands)   Ownership (%)   (US$ in Thousands)   Note
 
  First Franklin Mtg Ln Tr     Available-for-sale financial assets         US$ 413       N/A     US$ 413      
 
  First Horizon     ²         US$ 29       N/A     US$ 29      
 
  First Un Natl Bk Coml Mtg Tr     ²         US$ 1,051       N/A     US$ 1,051      
 
  First Un Natl Bk Coml Mtg Tr     ²         US$ 4,715       N/A     US$ 4,715      
 
  First Un Natl Bk Coml Mtg Tr     ²         US$ 2,019       N/A     US$ 2,019      
 
  Gs Mtg Secs Corp.     ²         US$ 991       N/A     US$ 991      
 
  Home Equity Mortgage Trust     ²         US$ 1,237       N/A     US$ 1,237      
 
  Home Equity Mtg Tr 2006 4     ²         US$ 485       N/A     US$ 485      
 
  JP Morgan Mtg Tr     ²         US$ 588       N/A     US$ 588      
 
  JP Morgan Mtg Tr     ²         US$ 630       N/A     US$ 630      
 
  JP Morgan Mtg Tr     ²         US$ 559       N/A     US$ 559      
 
  Lb Ubs Coml Mtg Tr     ²         US$ 3,495       N/A     US$ 3,495      
 
  Nomura Asset Accep Corp.     ²         US$ 660       N/A     US$ 660      
 
  Residential Asset Mtg Prods     ²         US$ 1,515       N/A     US$ 1,515      
 
  Residential Fdg Mtg Secs I Inc.     ²         US$ 1,074       N/A     US$ 1,074      
 
  Residential Fdg Mtg Secs I Inc.     ²         US$ 2,331       N/A     US$ 2,331      
 
  Sequoia Mtg Tr     ²         US$ 288       N/A     US$ 288      
 
  Sequoia Mtg Tr     ²         US$ 158       N/A     US$ 158      
 
  Sequoia Mtg Tr     ²         US$ 147       N/A     US$ 147      
 
  Terwin Mtg Tr     ²         US$ 1,041       N/A     US$ 1,041      
 
  Tiaa Seasoned Coml Mtg Tr     ²         US$ 3,163       N/A     US$ 3,163      
 
  Wamu Mtg     ²         US$ 2,925       N/A     US$ 2,925      
 
  Wamu Mtg Pass Through Ctfs     ²         US$ 114       N/A     US$ 114      
 
  Wamu Mtg Pass Through Ctfs     ²         US$ 1,521       N/A     US$ 1,521      
 
  Washington Mut Mtg Secs Corp.     ²         US$ 1,641       N/A     US$ 1,641      
 
  Wells Fargo Mtg Backed Secs     ²         US$ 2,405       N/A     US$ 2,405      
 
  Wells Fargo Mtg Backed Secs     ²         US$ 2,632       N/A     US$ 2,632      
 
  Wells Fargo Mtg Backed Secs     ²         US$ 2,391       N/A     US$ 2,391      
 
  Wells Fargo Mtg Bkd Secs     ²         US$ 845       N/A     US$ 845      
 
  Wells Fargo Mtg Bkd Secs     ²         US$ 2,088       N/A     US$ 2,088      
 
                                               
 
  Corporate bonds                                            
 
  American Gen Fin Corp. Mtn     Available-for-sale financial assets         US$ 1,156       N/A     US$ 1,156      
 
  Chase Manhattan Corp. New     ²         US$ 1,505       N/A     US$ 1,505      
 
  Chase Manhattan Corp. New     ²         US$ 2,066       N/A     US$ 2,066      
 
  Chase Manhattan Corp. New     ²         US$ 3,353       N/A     US$ 3,353      
 
  Credit Suisse First Boston USA     ²         US$ 347       N/A     US$ 347      
 
  Deutsche Bank Ag London     ²         US$ 3,013       N/A     US$ 3,013      
 
  Fleet Boston Corp.     ²         US$ 2,589       N/A     US$ 2,589      
 
  General Elec Cap Corp. Mtn     ²         US$ 2,988       N/A     US$ 2,988      
 
  General Elec Cap Corp. Mtn     ²         US$ 673       N/A     US$ 673      
 
  Goldman Sachs Group     ²         US$ 2,029       N/A     US$ 2,029      
 
  JP Morgan Chase     ²         US$ 1,994       N/A     US$ 1,994      
 
  Mellon Fdg Corp.     ²         US$ 2,669       N/A     US$ 2,669      
 
  Morgan Stanley     ²         US$ 4,552       N/A     US$ 4,552      
 
  U S Bancorp Mtn Bk Ent     ²         US$ 1,369       N/A     US$ 1,369      
 
  Wachovia Corp. New     ²         US$ 3,135       N/A     US$ 3,135      
 
  Wells Fargo + Co. New Med Trm     ²         US$ 4,493       N/A     US$ 4,493      
 
                                               
 
  Money market funds                                            
 
  Ssga Cash Mgmt Global Offshore     Available-for-sale financial assets         US$ 30,435       N/A     US$ 30,435      
 
                                               
 
  Government bonds                                            
 
  United States Treas Nts     Available-for-sale financial assets         US$ 10,374       N/A     US$ 10,374      
(Concluded)

- 56 -


 

TABLE 2
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2008
(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Specified)
                                                                                                 
                    Beginning Balance   Acquisition   Disposal (Note 2)    
        Financial                   Amount   Shares/Units   Amount           Amount   Carrying Value   Gain (Loss) or   Ending Balance (Note 3)
    Marketable Securities Type and   Statement       Nature of   Shares/Units   (US$ in   (in Thousands)   (US$ in   Shares/Units   (US$ in   (US$ in   Disposal (US$   Shares/Units   Amount (US$
Company Name   Name   Account   Counter-party   Relationship   (in Thousands)   Thousands)   (Note 1)   Thousands)   (In Thousands)   Thousands)   Thousands)   in Thousands)   (In Thousands)   in Thousands)
                                                                                                 
TSMC
  Open-end mutual funds                                                                                            
 
  NITC Bond Fund   Available-for-sale
financial assets
  National Investment Trust Co., Ltd.       12,239     $ 2,045,935       6,257     $ 1,058,000       18,496     $ 3,119,140     $ 3,047,038     $ 72,102           $  
 
  Fuh Hwa Bond Fund   ²   Fuh Hwa Investment Trust Co., Ltd.       132,997       1,801,674       129,864       1,775,000       262,861       3,598,480       3,543,862       54,618              
 
  NITC Taiwan Bond Fund   ²   National Investment Trust Co., Ltd.       103,016       1,474,856       153,113       2,214,000       256,129       3,703,023       3,656,443       46,580              
 
  ING Taiwan Bond Fund   ²   ING Securities Investment Trust Co., Ltd       85,581       1,310,030       140,522       2,170,000       226,103       3,497,877       3,470,000       27,877              
 
  Prudential Financial Bond Fund   ²   Prudential Financial Securities
Investment Trust Enterprise
      83,306       1,236,728                   83,306       1,245,214       1,204,418       40,796              
 
  Uni-President James Bond Fund   ²   Uni-President Assets Management Corp.       77,128       1,208,799       120,183       1,900,000       197,311       3,125,566       3,100,000       25,566              
 
  JF Taiwan Bond Fund   ²   JF Asset Management (Taiwan) Ltd.       59,049       915,252       45,425       712,000       104,474       1,635,181       1,612,083       23,098              
 
  ING Taiwan Income Bond Fund   ²   ING Securities Investment Trust Co., Ltd.       54,621       878,682       60,839       988,000       115,460       1,877,230       1,842,149       35,081              
 
  Taishin Lucky Investment Trust Fund   ²   Taishin Investment Trust Co., Ltd.       68,945       718,556                   68,945       724,340       701,524       22,816              
 
  AIG Taiwan Bond Fund   ²   AIG Global Asset Management Corporation (Taiwan) Ltd.       54,469       705,033                   54,469       708,863       700,000       8,863              
 
  Cathay Bond Fund   ²   Cathay Securities Investment Trust Co., Ltd.       60,126       703,824                   60,126       709,289       700,000       9,289              
 
  Dresdner Bond DAM Fund   ²   Allianz Global Investors Taiwan Ltd.       54,319       639,542                   54,319       644,310       624,828       19,482              
 
  JF Taiwan First Bond Fund   ²   JF Asset Management (Taiwan) Ltd.       35,324       504,206                   35,324       508,184       500,342       7,842              
 
  HSBC NTD Money Management Fund   ²   HSBC Asset Management (Taiwan) Ltd.       27,416       413,504                   27,416       416,788       402,614       14,174              
 
  INVESCO Bond Fund   ²   INVESCO Taiwan Limited       27,176       410,054                   27,176       412,892       403,727       9,165              
 
  IBT Ta-Chong Bond Fund   ²   IBT Asset Magement Co., Ltd.                   74,771       1,000,000       74,771       1,002,474       1,000,000       2,474              
 
  PCA Well Pool Fund   ²   PCA Securities Investment Trust Co., Ltd.                   187,050       2,400,000       187,050       2,411,016       2,400,000       11,016              
 
  Capital Income Fund   ²   Capital Investment Trust
Corporation
                  228,072       3,480,000       228,072       3,491,264       3,480,000       11,264              
                                                                                                 
 
  Government Bond                                                                                            
 
  2004 Government Bond Series B   Available-for-sale
financial assets
  Grand Cathay Securities Corp. and several financial institutions             1,197,121                         1,203,434       1,201,660       1,774              
 
  2004 Government Bond Series G   ²   ²             200,065                         201,301       200,841       460              
 
  2004 Government Bond Series B   Held-to-maturity
financial assets
  Sinopac Securities Corp. and several financial institutions                         249,603                                     249,948  
 
  2003 Government Bond Series H   ²   ²             400,709             299,852                                      
                                                                                                 
 
  Corporate bond                                                                                            
 
  Taiwan Mobile Co., Ltd   Available-for-sale
financial assets
  Grand Cathay Securities Corp. and several financial institutions                         2,000,000                                     2,032,658  

(Continued)

- 57 -


 

                                                                                                 
                    Beginning Balance   Acquisition   Disposal (Note 2)    
        Financial                   Amount   Shares/Units   Amount           Amount   Carrying Value   Gain (Loss) or   Ending Balance (Note 3)
    Marketable Securities Type and   Statement       Nature of   Shares/Units   (US$ in   (in Thousands)   (US$ in   Shares/Units   (US$ in   (US$ in   Disposal (US$   Shares/Units   Amount (US$
Company Name   Name   Account   Counter-party   Relationship   (in Thousands)   Thousands)   (Note 1)   Thousands)   (In Thousands)   Thousands)   Thousands)   in Thousands)   (In Thousands)   in Thousands)
                                                                                                 
 
  Formosa Chemicals & Fiber Corporation   Held-to-maturity
financial assets
  Grand Cathay Securities Corp. and several financial institutions           $           $ 198,914           $     $     $           $ 199,910  
 
  Formosa Petrochemical Corporation   ²   ²             3,581,667             959,827                                     3,554,908  
 
  Taiwan Power Company   ²   ²             2,630,064             3,192,915                                     4,209,629  
 
  Formosa Plastic Corporation   ²   ²             391,134             1,984,471                                     2,385,285  
 
  Nan Ya Plastics Corporation   ²   ²             1,804,346             2,486,383                                     3,487,804  
                                                                                                 
 
  Capital                                                                                            
 
  VTAF III   Investments
accounted for using
equity method
    Subsidiary           906,536             466,783                                     1,305,605  
                                                                                                 
TSMC International
  Corporate bond                                                                                            
 
  General Elec Cap Corp. Mtn   Held-to-maturity
financial assets
  BNP PARIBAS, London                       US$ 20,864                                   US$ 20,791  
 
  General Elec Cap Corp. Mtn   ²   ²                       US$ 20,316                                   US$ 20,294  
                                                                                                 
TSMC Development
  Corporate bond                                                                                            
 
  GE Capital Corp.   Held-to-maturity
financial assets
  BNP PARIBAS, London                       US$ 20,478                                   US$ 20,447  
                                                                                                 
GUC
  Open-end mutual funds                                                                                            
 
  PCA Well Pool Fund   Available-for-sale
financial assets
  PCA Securities Investment Trust Co., Ltd.                   19,654       252,000       19,654       252,536       252,000       536              
 
  Prudential Financial Bond Fund   ²   Prudential Financial Securities Investment Trust Enterprise                   18,087       271,000       18,087       271,331       271,000       331              
 
  Uni-President James Bond Fund   ²   Uni-President Assets Management Corp.                   17,430       275,000       17,430       275,390       275,000       390              
 
  Cathay Bond Fund   ²   Cathay Securities Investment Trust Co., Ltd.                   16,096       190,000       16,096       190,077       190,000       77              
 
  NITC Taiwan Bond Fund   ²   National Investment Trust Co., Ltd.                   15,575       225,000       15,575       225,206       225,000       206              
 
  IBT 1699 Bond Fund   ²   IBT Asset Magement Co., Ltd.                   13,383       170,000       13,383       170,333       170,000       333              
 
  ING Taiwan Bond Fund   ²   ING Securities Investment Trust Co., Ltd                   13,262       205,000       13,262       205,393       205,000       393              
 
  IBT Ta-Chong Bond Fund   ²   IBT Asset Magement Co., Ltd.                   11,631       155,000       11,631       155,255       155,000       255              
 
  Fuh Hwa Bond Fund   ²   Fuh Hwa Investment Trust Co., Ltd.                   12,602       172,000       12,602       172,353       172,000       353              
 
  Mega Diamond Bond Fund   ²   Mega International Investment Trust Co., Ltd.                   12,484       147,000       12,484       147,117       147,000       117              
 
  Polaris De-Li Fund   ²   Polaris Securities Investment Trust Co., Ltd.                   10,042       154,000       10,042       154,298       154,000       298              
 
  NITC Bond Fund   ²   National Investment Trust Co., Ltd.                   796       135,000       796       135,133       135,000       133              
                                                                                                 
TSMC Global
  Agency bonds                                                                                            
 
  Fnma Pool 257245   Available-for-sale
financial assets
                    3,716     US$ 3,741                               3,716     US$ 3,513  
 
  Federal Home Ln Bks   ²         9,000     US$ 8,977                   9,000     US$ 9,002     US$ 8,716     US$ 286              
 
  Federal Home Ln Bks   ²                     9,000     US$ 8,783       9,000     US$ 9,162     US$ 8,783     US$ 379              
 
  Federal Home Ln Bks   ²         9,000     US$ 8,939                   9,000     US$ 9,003     US$ 8,735     US$ 268              
 
  Federal Home Ln Bks   ²                     3,725     US$ 3,721                               3,725     US$ 3,854  
 
  Federal Home Ln Bks   ²         5,000     US$ 4,965                   5,000     US$ 5,003     US$ 4,850     US$ 153              
 
  Federal Home Ln Bks   ²         5,000     US$ 4,980                   5,000     US$ 4,999     US$ 4,882     US$ 117              
 
  Federal Home Ln Bks   ²                     7,100     US$ 7,204       7,100     US$ 7,420     US$ 7,204     US$ 216              

(Continued)

- 58 -


 

                                                                                                 
                    Beginning Balance   Acquisition   Disposal (Note 2)    
        Financial                   Amount   Shares/Units   Amount           Amount   Carrying Value   Gain (Loss) or   Ending Balance (Note 3)
    Marketable Securities Type and   Statement       Nature of   Shares/Units   (US$ in   (in Thousands)   (US$ in   Shares/Units   (US$ in   (US$ in   Disposal (US$   Shares/Units   Amount (US$
Company Name   Name   Account   Counter-party   Relationship   (in Thousands)   Thousands)   (Note 1)   Thousands)   (In Thousands)   Thousands)   Thousands)   in Thousands)   (In Thousands)   in Thousands)
                                                                                                 
 
  Federal Home Ln Bks   Available-for-sale
financial assets
            US$       12,100     US$ 12,464       8,100     US$ 8,399     US$ 8,328     US$ 71       4,000     US$ 4,148  
 
  Federal Home Ln Bks   ²         18,665     US$ 19,023                   18,665     US$ 19,403     US$ 18,951     US$ 452              
 
  Federal Home Ln Bks   ²         21,900     US$ 22,342                   21,900     US$ 22,473     US$ 21,985     US$ 488              
 
  Federal Home Ln Mtg   ²                     5,000     US$ 5,186                               5,000     US$ 5,340  
 
  Federal Farm Credit Bank   ²                     7,200     US$ 7,241       7,200     US$ 7,475     US$ 7,241     US$ 234              
 
  Federal Farm Credit Bank   ²                     3,375     US$ 3,370                               3,375     US$ 3,433  
 
  Federal Home Ln Mtg Corp.   ²                     6,700     US$ 6,690       6,700     US$ 6,841     US$ 6,690     US$ 151              
 
  Federal Home Ln Mtg Corp.   ²                     3,340     US$ 3,336                               3,340     US$ 3,428  
 
  Federal Home Ln Mtg Corp.   ²                     3,500     US$ 3,494                               3,500     US$ 3,560  
 
  Federal Home Ln Mtg Corp.   ²                     7,000     US$ 7,572       3,500     US$ 3,712     US$ 3,786     US$ (74 )     3,500     US$ 3,743  
 
  Federal Home Ln Mtg Corp.   ²                     3,391     US$ 3,389                               3,391     US$ 3,108  
 
  Federal Home Ln Mtg Corp.   ²                     3,083     US$ 3,170                               3,083     US$ 2,880  
 
  Federal Home Loan Banks   ²         21,000     US$ 21,500                   21,000     US$ 21,646     US$ 21,356     US$ 290              
 
  Federal Natl Mtg Assn   ²                     7,200     US$ 7,248       7,200     US$ 7,424     US$ 7,248     US$ 176              
 
  Federal Natl Mtg Assn   ²                     3,700     US$ 3,700                               3,700     US$ 3,713  
 
  Federal Natl Mtg Assn   ²                     10,000     US$ 10,291       6,000     US$ 6,138     US$ 6,174     US$ (36 )     4,000     US$ 4,169  
 
  Federal Natl Mtg Assn   ²         5,000     US$ 5,169                   5,000     US$ 5,196     US$ 5,102     US$ 94              
 
  Federal Natl Mtg Assn   ²                     3,500     US$ 3,645                               3,500     US$ 3,809  
 
  Federal Natl Mtg Assn   ²                     3,750     US$ 4,151                               3,750     US$ 4,134  
 
  Federal Natl Mtg Assoc   ²                     3,450     US$ 3,463       3,450     US$ 3,450     US$ 3,463     US$ (13 )            
 
  Federal Natl Mtg Assn Mtn   ²         3,000     US$ 2,982                   3,000     US$ 3,006     US$ 2,909     US$ 97              
 
  Federal Natl Mtg Assn Mtn   ²         3,200     US$ 3,171                   3,200     US$ 3,201     US$ 3,090     US$ 111              
 
  Gnma Pool 646061   ²                     4,173     US$ 4,352                               4,173     US$ 2,468  
                                                                                                 
 
  Corporate issued asset-backed securities                                                                                            
 
  Capital One Multi Asset Exec   Available-for-sale
financial assets
        9,000     US$ 9,118                   9,000     US$ 8,710     US$ 8,998     US$ (288 )            
 
  Capital One Prime Auto Receiva   ²         3,500     US$ 3,498                   3,500     US$ 3,414     US$ 3,500     US$ (86 )            
 
  Daimlerchrysler Auto Tr   ²         4,335     US$ 4,337                   4,335     US$ 3,596     US$ 4,333     US$ (737 )            
 
  Usaa Auto Owner Tr   ²         5,000     US$ 4,998                   5,000     US$ 4,926     US$ 4,999     US$ (73 )            
 
  Wells Fargo Finl Auto Owner Tr   ²         5,000     US$ 4,956                   3,658     US$ 3,466     US$ 3,608     US$ (142 )     1,342        
                                                                                                 
 
  Corporate bonds                                                                                            
 
  American Honda Fin Corp. Mtn   Available-for-sale
financial assets
        3,150     US$ 3,107                   3,150     US$ 3,110     US$ 3,095     US$ 15              
 
  Burlington Res Inc.   ²         3,250     US$ 3,653                   3,250     US$ 3,437     US$ 3,647     US$ (210 )            
 
  Depfa Acs Bank   ²         20,000     US$ 20,402                   20,000     US$ 20,409     US$ 19,984     US$ 425              
 
  Deutschs Bank Ag London   ²                     2,995     US$ 3,041                               2,995     US$ 3,013  
 
  European Invt Bk   ²                     10,600     US$ 10,577       10,600     US$ 10,461     US$ 10,577     US$ (116 )            
 
  European Invt Bk   ²                     7,300     US$ 7,277       7,300     US$ 7,492     US$ 7,276     US$ 216              
 
  European Invt Bk   ²                     10,600     US$ 10,576       10,600     US$ 10,676     US$ 10,576     US$ 100              
 
  European Invt Bk   ²                     7,200     US$ 7,182       7,200     US$ 7,596     US$ 7,182     US$ 414              
 
  General Elec Cap Corp. Mtn   ²         4,000     US$ 3,978                   4,000     US$ 4,042     US$ 3,893     US$ 149              
 
  General Elec Cap Corp. Mtn   ²         3,000     US$ 3,047                   3,000     US$ 3,070     US$ 2,994     US$ 76              
 
  General Re Corp.   ²         3,000     US$ 3,263                   3,000     US$ 3,060     US$ 3,319     US$ (259 )            
 
  Hancock John Global Fdg Ii Mtn   ²         4,750     US$ 5,111                   4,750     US$ 4,707     US$ 5,170     US$ (463 )            
 
  International Business Machs   ²         3,500     US$ 3,555                   3,500     US$ 3,582     US$ 3,496     US$ 86              
 
  Keycorp Mtn Book Entry   ²         3,050     US$ 3,053                   3,050     US$ 3,041     US$ 3,016     US$ 25              
 
  Kreditanstalt Fur Wiederaufbau   ²                     8,700     US$ 8,679       8,700     US$ 8,973     US$ 8,679     US$ 294              
 
  Massmutual Global Fdg Ii Mtn   ²         3,800     US$ 3,737                   3,800     US$ 3,668     US$ 3,647     US$ 21              
 
  Metropolitan Life Golbal Mtn   ²         3,400     US$ 3,366                   3,400     US$ 3,409     US$ 3,325     US$ 84              
 
  Nationwide Life Global Fdg I   ²         3,500     US$ 3,631                   3,500     US$ 3,159     US$ 3,520     US$ (361 )            

(Continued)

- 59 -


 

                                                                                                 
                    Beginning Balance   Acquisition   Disposal (Note 2)    
        Financial                   Amount   Shares/Units   Amount           Amount   Carrying Value   Gain (Loss) or   Ending Balance (Note 3)
    Marketable Securities Type and   Statement       Nature of   Shares/Units   (US$ in   (in Thousands)   (US$ in   Shares/Units   (US$ in   (US$ in   Disposal (US$   Shares/Units   Amount (US$
Company Name   Name   Account   Counter-party   Relationship   (in Thousands)   Thousands)   (Note 1)   Thousands)   (In Thousands)   Thousands)   Thousands)   in Thousands)   (In Thousands)   in Thousands)
                                                                                                 
 
  Protective Life Secd Trs Mtn   Available-for-sale financial assets         3,500     US$ 3,484           US$       3,500     US$ 3,274     US$ 3,396     US$ (122 )         $  
 
  Sbc Communications Inc.   ²         3,400     US$ 3,372                   3,400     US$ 3,367     US$ 3,309     US$ 58              
                                                                                                 
 
  Money market funds                                                                                            
 
  Ssga Cash Mgmt Global Offshore   Available-for-sale
financial assets
        592,180     US$ 592,180       1,035,077     US$ 1,035,077       1,596,822     US$ 1,596,822     US$ 1,596,822     US$       30,435     US$ 30,435  
                                                                                                 
 
  Government bonds                                                                                            
 
  U S Treas Bond Call   Available-for-sale financial assets                     17,825     US$ 17,813       17,825     US$ 17,830     US$ 17,813     US$ 17              
 
  US Treasury N/B   ²                     31,300     US$ 31,414       31,300     US$ 31,514     US$ 31,413     US$ 101              
 
  US Treasury N/B   ²                     4,200     US$ 4,259       4,200     US$ 4,260     US$ 4,259     US$ 1              
 
  United States Treas Nts   ²                     19,400     US$ 19,353       19,400     US$ 19,460     US$ 19,353     US$ 107              
 
  United States Treas Nts   ²                     20,100     US$ 20,057       20,100     US$ 20,314     US$ 20,057     US$ 257              
 
  United States Treas Nts   ²                     19,500     US$ 19,474       19,500     US$ 19,451     US$ 19,474     US$ (23 )            
 
  United States Treas Nts   ²                     60,100     US$ 60,563       60,100     US$ 60,829     US$ 60,564     US$ 265              
 
  United States Treas Nts   ²                     20,800     US$ 20,751       20,800     US$ 21,292     US$ 20,751     US$ 541              
 
  United States Treas Nts   ²                     45,300     US$ 45,549       45,300     US$ 45,992     US$ 45,549     US$ 443              
 
  United States Treas Nts   ²                     17,000     US$ 16,886       17,000     US$ 16,917     US$ 16,885     US$ 32              
 
  United States Treas Nts   ²                     67,600     US$ 67,804       67,600     US$ 68,342     US$ 67,805     US$ 537              
 
  United States Treas Nts   ²                     7,800     US$ 7,787       7,800     US$ 7,757     US$ 7,787     US$ (30 )            
 
  United States Treas Nts   ²                     14,600     US$ 14,605       14,600     US$ 15,114     US$ 14,605     US$ 509              
 
  United States Treas Nts   ²                     26,500     US$ 26,636       26,500     US$ 26,614     US$ 26,636     US$ (22 )            
 
  United States Treas Nts   ²                     6,400     US$ 6,372       6,400     US$ 6,282     US$ 6,372     US$ (90 )            
 
  United States Treas Nts   ²         25,900     US$ 25,924                   25,900     US$ 26,091     US$ 25,941     US$ 150              
 
  United States Treas Nts   ²                     14,700     US$ 14,887       14,700     US$ 14,990     US$ 14,887     US$ 103              
 
  United States Treas Nts   ²                     11,500     US$ 11,615       11,500     US$ 11,652     US$ 11,615     US$ 37              
 
  United States Treas Nts   ²                     53,300     US$ 54,114       53,300     US$ 54,153     US$ 54,114     US$ 39              
 
  United States Treas Nts   ²                     4,000     US$ 4,057       4,000     US$ 3,969     US$ 4,057     US$ (88 )            
 
  United States Treas Nts   ²         5,000     US$ 5,070                   5,000     US$ 5,077     US$ 5,037     US$ 40              
 
  United States Treas Nts   ²                     3,750     US$ 3,958       3,750     US$ 3,861     US$ 3,958     US$ (97 )            
 
  United States Treas Nts   ²         5,500     US$ 5,613                   5,500     US$ 5,623     US$ 5,584     US$ 39              
 
  United States Treas Nts   ²         6,400     US$ 6,500                   6,400     US$ 6,594     US$ 6,407     US$ 187              
 
  United States Treas Nts   ²         41,900     US$ 42,509                   41,900     US$ 42,867     US$ 41,870     US$ 997              
 
  United States Treas Nts   ²                     4,000     US$ 4,200       4,000     US$ 4,210     US$ 4,199     US$ 11              
 
  United States Treas Nts   ²                     10,266     US$ 11,167                               10,266     US$ 10,374  
 
  United States Treas Nts   ²         5,000     US$ 5,160       2,000     US$ 2,062       7,000     US$ 7,308     US$ 7,119     US$ 189              
 
  United States Treas Nts   ²                     10,000     US$ 10,525       10,000     US$ 10,489     US$ 10,525     US$ (36 )            
 
  United States Treas Nts   ²         3,250     US$ 3,359                   3,250     US$ 3,347     US$ 3,298     US$ 49              
 
  United States Treas Nts   ²                     10,000     US$ 10,866       10,000     US$ 11,008     US$ 10,866     US$ 142              
 
  United States Treas Nts   ²         7,500     US$ 7,758                   7,500     US$ 7,855     US$ 7,742     US$ 113              
 
  United States Treas Nts   ²                     15,000     US$ 16,162       15,000     US$ 16,335     US$ 16,162     US$ 173              
 
  United States Treas Nts   ²         9,500     US$ 9,735                   9,500     US$ 9,757     US$ 9,479     US$ 278              
 
  United States Treas Nts   ²                     11,250     US$ 12,259       11,250     US$ 12,038     US$ 12,259     US$ (221 )            
 
  United States Treas Nts   ²                     19,700     US$ 19,900       19,700     US$ 20,045     US$ 19,900     US$ 145              
 
  Wi Treasury Sec   ²                     13,300     US$ 13,383       13,300     US$ 13,430     US$ 13,383     US$ 47              
 
Note 1:    The shares/units and amount of marketable securities acquired do not include stock dividends from investees.  
 
Note 2:    The data for marketable securities disposed exclude bonds maturities and capital return from subsidiaries.  
 
Note 3:    The ending balance includes the amortization of premium/discount on bonds investments, unrealized valuation gains/ losses on financial assets, translation adjustments or equity in earnings of equity method investees. (Concluded)

- 60 -


 

TABLE 3
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
ACQUISITION OF INDIVIDUAL REAL ESTATE PROPERTIES AT COSTS OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2008
(Amounts in Thousands of New Taiwan Dollars)
                                                         
Company   Types of       Transaction           Nature of   Prior Transaction of Related Counter-party   Price   Purpose of   Other
Name   Property   Transaction Date   Amount   Payment Term   Counter-party   Relationships   Owner   Relationships   Transfer Date   Amount   Reference   Acquisition   Terms
 
TSMC
  Fab   January 16, 2008 to January 19, 2008   $ 4,045,220     By the construction
progress
  Tasa Construction Corporation, Fu Tsu Construction, and China Steel Structure Co., Ltd.     N/A   N/A   N/A   N/A   Public bidding   Manufacturing
purpose
  None

- 61 -


 

TABLE 4
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
FOR THE YEAR ENDED DECEMBER 31, 2008
(Amounts in Thousands of New Taiwan Dollars)
                                                             
            Transaction Details   Abnormal Transaction   Notes/Accounts Payable or
Receivable
   
            Purchases/           % to       Unit Price   Payment Terms           % to    
Company Name   Related Party   Nature of Relationships   Sales   Amount   Total   Payment Terms   (Note)   (Note)   Ending Balance   Total   Note
 
                                                           
TSMC
  TSMC North America   Subsidiary   Sales   $ 192,986,719       58     Net 30 days after invoice date       $ 11,512,777       50      
 
  GUC   Investee with a
controlling financial
interest
  Sales     1,611,058       1     Net 30 days after monthly closing         215,190       1      
 
  TSMC Shanghai   Subsidiary   Sales     101,245           Net 30 days after monthly closing                
 
  WaferTech   Indirect subsidiary   Purchases     8,207,876       22     Net 30 days after monthly closing         (171,089 )     3      
 
  TSMC Shanghai   Subsidiary   Purchases     4,717,676       12     Net 30 days after monthly closing         (117,417 )     2      
 
  SSMC   Investee accounted for using equity method   Purchases     4,441,795       12     Net 30 days after monthly closing         (162,807 )     3      
 
  VIS   Investee accounted for using equity method   Purchases     3,209,028       8     Net 30 days after monthly closing         (317,491 )     6      
 
                                                           
GUC
  TSMC North America   Same parent company   Purchases     1,747,488       41     Net 30 days after invoice date/net 45 days after monthly closing         (148,680 )     20      
 
                                                           
XinTec
  OmniVision   Parent company of director (represented for XinTec)   Sales     2,522,749       81     Net 30 days after monthly closing         309,133       89      
 
  VisEra   Same president   Sales     23,650       1     Net 45 days after monthly closing         283        
 
Note:   The sales prices and payment terms to related parties were not significantly different from those of sales to third parties. For other related party transactions, prices and terms were determined in accordance with mutual agreements.

- 62 -


 

TABLE 5
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
DECEMBER 31, 2008
(Amounts in Thousands of New Taiwan Dollars)
                                                         
                                            Amounts Received    
                    Turnover Days   Overdue   in Subsequent   Allowance for Bad
Company Name   Related Party   Nature of Relationships   Ending Balance   (Note 1)   Amounts   Action Taken   Period   Debts
                                                         
TSMC
  TSMC North America   Subsidiary   $ 11,769,401       36     $ 4,130,119           $ 4,177,615     $  
 
  GUC   Investee with a controlling financial interest     215,190       33       1,869             103,680        
 
  TSMC Shanghai   Subsidiary     112,933     (Note 2)                        
                                                         
XinTec
  OmniVision   Parent company of director (represented for XinTec)     309,133       54                          
 
Note 1:    The calculation of turnover days excludes other receivables from related parties.
 
Note 2:    The ending balance primarily consisted of other receivables, which is not applicable for the calculation of turnover days.

- 63 -


 

TABLE 6
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES OVER WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE
DECEMBER 31, 2008
(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Specified)
                                                                         
                                                                Equity in the    
                Original Investment Amount   Balance as of December 31, 2008   Net Income   Earnings    
                December 31,   December 31,                   Carrying   (Losses) of the   (Losses)    
                2008   2007                   Value   Investee   (Note 1)    
                (Foreign   (Foreign                   (Foreign   (Foreign   (Foreign    
                Currencies in   Currencies in   Shares (in   Percentage of   Currencies in   Currencies in   Currencies in    
Investor Company   Investee Company   Location   Main Businesses and Products   Thousands)   Thousands)   Thousands)   Ownership   Thousands)   Thousands)   Thousands)   Note
 
                                                                       
TSMC
  TSMC Global   Tortola, British Virgin Islands   Investment activities   $ 42,327,245     $ 42,327,245       1       100     $ 45,756,519     $ 963,052     $ 963,052     Subsidiary
 
  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       29,637,057       2,082,332       2,082,332     Subsidiary
 
  VIS   Hsin-Chu, Taiwan   Research, design, development, manufacture, packaging, testing and sale of memory integrated circuits, LSI, VLSI and related parts     13,232,288       13,047,681       628,223       37       9,787,275       1,041,953       (114,707 )   Investee accounted for
using equity method
 
  SSMC   Singapore   Fabrication and supply of integrated circuits     5,120,028       8,840,895       314       39       6,808,192       2,460,149       757,241     Investee accounted for
using equity method
 
  TSMC Shanghai   Shanghai, China   Manufacturing and selling of integrated circuits at the order of and pursuant to product design specifications provided by customers     12,180,367       12,180,367             100       6,267,128       (2,904,565 )     (2,907,231 )   Subsidiary
 
  TSMC Partners   Tortola, British Virgin Islands   Investment activities     10,350       10,350       300       100       3,730,913       (973,153 )     (973,153 )   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       2,435,666       144,918       144,918     Subsidiary
 
  XinTec   Taoyuan, Taiwan   Wafer level chip size packaging service     1,357,890       1,357,890       92,620       42       1,506,384       198,178       30,811     Investee with a
controlling financial
interest
 
  VTAF III   Cayman Islands   Investing in new start-up technology companies     1,440,241       973,459             98       1,305,605       (92,095 )     (90,253 )   Subsidiary
 
  VTAF II   Cayman Islands   Investing in new start-up technology companies     1,036,422       1,095,622             98       975,367       (132,150 )     (129,507 )   Subsidiary
 
  GUC   Hsin-Chu, Taiwan   Researching, developing, manufacturing, testing and marketing of integrated circuits     386,568       386,568       44,904       36       950,263       747,049       269,544     Investee with a
controlling financial
interest
 
  Emerging Alliance   Cayman Islands   Investing in new start-up technology companies     986,797       1,019,042             99       433,481       (6,643 )     (6,610 )   Subsidiary
 
  TSMC Japan   Yokohama, Japan   Marketing activities     83,760       83,760       6       100       137,617       4,943       4,943     Subsidiary
 
  TSMC Europe   Amsterdam, the Netherlands   Marketing activities     15,749       15,749             100       124,594       38,454       38,454     Subsidiary
 
  TSMC Korea   Seoul, Korea   Customer service and technical support activities     13,656       13,656       80       100       15,117       3,232       3,232     Subsidiary
 
                                                                       
TSMC International
  TSMC Development   Delaware, U.S.A.   Investment activities   US$ 0.001     US$ 0.001       1       100     US$ 690,095     US$ 16,011     Note 2   Subsidiary
 
  ISDF II   Cayman Islands   Investing in new start-up technology companies   US$ 32,289     US$ 43,048       42,320       97     US$ 25,586     US$ 240     Note 2   Subsidiary
 
  TSMC Technology   Delaware, U.S.A.   Engineering support activities   US$ 0.001     US$ 0.001       1       100     US$ 8,408     US$ 1,816     Note 2   Subsidiary
 
  ISDF   Cayman Islands   Investing in new start-up technology companies   US$ 7,680     US$ 8,721       7,598       97     US$ 6,529     US$ (2,156 )   Note 2   Subsidiary
 
                                                                       
TSMC Development
  WaferTech   Washington, U.S.A.   Manufacturing, selling, testing and computer-aided designing of integrated circuits and other semiconductor devices   US$ 380,000     US$ 430,000       293,637       100     US$ 204,558     US$ 27,089     Note 2   Subsidiary
 
                                                                       
TSMC Partners
  VisEra Holding Company   Cayman Islands   Investment in companies involved in the design, manufacturing, and other related businesses in the semiconductor industry   US$ 43,000     US$ 43,000       43,000       49     US$ 69,298     US$ 4,633     Note 2   Investee accounted for
using equity method
 
  TSMC Canada   Ontario, Canada   Engineering support activities   US$ 2,300     US$ 2,300       2,300       100     US$ 2,570     US$ 286     Note 2   Subsidiary
 
                                                                       
VisEra Holding Company
  VisEra   Hsin-Chu, Taiwan   Manufacturing and selling of electronic parts and providing turn-key services in back-end color filter fabrication, package, test, and optical solutions   US$ 91,041     US$ 91,041       253,120       89     US$ 122,700     US$ 4,429     Note 2   Subsidiary

(Continued)

- 64 -


 

                                                                         
                                                                Equity in the    
                Original Investment Amount   Balance as of December 31, 2008   Net Income   Earnings    
                December 31,   December 31,                   Carrying   (Losses) of the   (Losses)    
                2008   2007                   Value   Investee   (Note 1)    
                (Foreign   (Foreign                   (Foreign   (Foreign   (Foreign    
                Currencies in   Currencies in   Shares (in   Percentage of   Currencies in   Currencies in   Currencies in    
Investor Company   Investee Company   Location   Main Businesses and Products   Thousands)   Thousands)   Thousands)   Ownership   Thousands)   Thousands)   Thousands)   Note
 
                                                                       
VTAF III
  Mutual-Pak Technology Co., Ltd.   Taipei, Taiwan   Manufacturing and selling of electronic parts and researching, developing, and testing of RFID   US$ 1,705     US$ 1,705       4,590       51     US$ 1,398     US$ (544 )   Note 2   Subsidiary
 
  Aiconn Technology Corp.   Taipei, Taiwan   Wholesaling telecommunication equipments, and manufacturing wired and wireless communication equipments                 4,500       44     US$ 1,052     US$ (1,339 )   Note 2   Investee accounted for
using equity method
 
  Growth Fund   Cayman Islands   Investing in new start-up technology companies   US$ 700                   100     US$ 100     US$ (600 )   Note 2   Subsidiary
 
  VTA Holdings   Delaware, U.S.A.   Investing in new start-up technology companies                       68                 Note 2   Subsidiary
 
                                                                       
VTAF II
  VTA Holdings   Delaware, U.S.A.   Investing in new start-up technology companies                       24                 Note 2   Subsidiary
 
                                                                       
GUC
  GUC-NA   U.S.A.   Consulting services in main products   US$ 800     US$ 100       800       100     $ 34,019     $ 2,774     Note 2   Subsidiary
 
  GUC-Japan   Japan   Consulting services in main products   JPY 30,000     JPY 10,000       1       100       11,854       459     Note 2   Subsidiary
 
  GUC-Europe   The Netherlands   Consulting services in main products   EUR 50                   100       2,563       254     Note 2   Subsidiary
 
                                                                       
Emerging Alliance
  VTA Holdings   Delaware, U.S.A.   Investing in new start-up technology companies                       8                 Note 2   Subsidiary
 
Note 1:   Equity in earnings/losses of investees exclude the effect of unrealized gross profit from affiliates.
 
Note 2:   The equity in the earnings (losses) of the investee company is not reflected herein as such amount is already included in the equity in the earnings (losses) of the investor company. (Concluded)

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TABLE 7
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
INFORMATION OF INVESTMENT IN MAINLAND CHINA
FOR THE YEAR ENDED DECEMBER 31, 2008
(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Specified)
                                                         
                Accumulated           Accumulated                            
                Outflow of           Outflow of                            
                Investment           Investment                           Accumulated
                from Taiwan as           from Taiwan as                           Inward
        Total Amount of       of   Investment Flows   of           Equity in the   Carrying Value   Remittance of
        Paid-in Capital       January 1, 2008   Outflow   Inflow   December 31,           Earnings   as of   Earnings as of
  Main Businesses and   (RMB in   Method of   (US$ in   (US$ in   (US$ in   2008 (US$ in   Percentage of   (Losses)   December 31,   December 31,
Investee Company   Products   Thousand)   Investment   Thousand)   Thousand)   Thousand)   Thousand)   Ownership   (Note 2)   2008   2008
 
                                                       
TSMC Shanghai
  Manufacturing and sales of integrated circuits at the order of and pursuant to product design specifications provided by customers   $12,180,367
(RMB3,070,623)
  (Note 1)   $12,180,367
(US$371,000)
  $—   $—   $12,180,367
(US$371,000)
    100 %   $ (2,907,231 )   $ 6,267,128     $—
         
Accumulated Investment in Mainland   Investment Amounts Authorized by    
China as of December 31, 2008   Investment Commission, MOEA   Upper Limit on Investment
(US$ in Thousand)   (US$ in Thousand)   (US$ in Thousand)
 
       
$12,180,367
(US$371,000)
  $12,180,367
(US$371,000)
  $12,180,367
(US$371,000)
 
Note 1:   Direct investments US$371,000 thousand in TSMC Shanghai.
 
Note 2:   Amount was recognized based on the audited financial statements.

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TABLE 8
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 YEAR ENDED DECEMBER 31, 2008
                                         
                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 North America   1   Sales   $ 192,986,719             56 %
 
              Receivables from related parties     11,512,777             2 %
 
              Other receivables from related parties     256,624              
 
              Payables to related parties     327,250              
 
      TSMC Shanghai   1   Sales     101,245              
 
              Purchases     4,717,676             1 %
 
              Gain on disposal of property, plant and equipment     197,681              
 
              Technical service income     99,737              
 
              Other receivables from related parties     112,933              
 
              Payables to related parties     117,417              
 
              Deferred credits     183,896              
 
      TSMC Japan   1   Marketing expenses — commission     251,367              
 
              Payables to related parties     20,528              
 
      TSMC Europe   1   Marketing expenses — commission     367,846              
 
              Payables to related parties     29,679              
 
      TSMC Korea   1   Marketing expenses — commission     16,408              
 
              Payables to related parties     1,313              
 
      GUC   1   Sales     1,611,058              
 
              General and administrative expenses — rental expense     1,050              
 
              Research and development expenses     18,940              
 
              Receivables from related parties     215,190              
 
              Payables to related parties     7,003              
 
      TSMC Technology   1   Research and development expenses     352,900              
 
              Payables to related parties     41,904              
 
      WaferTech   1   Sales     12,216              
 
              Purchases     8,207,876             2 %
 
              Other receivables from related parties     13,813              
 
              Payables to related parties     171,089              
 
      TSMC Canada   1   Research and development expenses     172,291              
 
              Payables to related parties     3,297              
 
      Emerging Alliance Fund   1   Other receivables from related parties     5,149              
2
  TSMC Partners   TSMC International   3   Other receivables     8,149,280             1 %
 
              Deferred revenue     8,149,280             1 %
(Continued)

- 67 -


 

                                         
                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
3
  GUC   TSMC North America   3   Purchases     1,747,488              
 
              Manufacturing overhead     298,926              
 
              Operating Expense     1,458              
 
              Payables to related parties     148,680              
 
      GUC-NA   3   Operating expenses     105,044              
 
              Payables to related parties     11,074              
 
      GUC-Japan   3   Operating expenses     28,480              
 
              Payables to related parties     2,260              
 
      GUC-Europe   3   Operating expenses     5,140              
 
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 and terms are determined in accordance with mutual agreements.
(Continued)

- 68 -


 

B. FOR THE YEAR ENDED DECEMBER 31, 2007
                                         
                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 North America   1   Sales   $ 192,846,641             59 %
 
              Receivables from related parties     26,626,880             5 %
 
              Other receivables from related parties     98,885              
 
              Payables to related parties     13,392              
 
      TSMC Shanghai   1   Sales     155,799              
 
              Purchases     5,828,541             2 %
 
              Gain on disposal of property, plant and equipment     216,267              
 
              Technical service income     121,771              
 
              Other receivables from related parties     151,037              
 
              Payables to related parties     596,581              
 
              Deferred credits     510,564              
 
      TSMC Japan   1   Marketing expenses — commission     220,858              
 
              Payables to related parties     18,449              
 
      TSMC Europe   1   Marketing expenses — commission     316,748              
 
              Payables to related parties     37,046              
 
      TSMC Korea   1   Marketing expenses — commission     26,818              
 
      GUC   1   Sales     795,232              
 
              General and administrative expenses — rental expense     6,139              
 
              Research and development expenses     56,887              
 
              Receivables from related parties     74,003              
 
              Payables to related parties     7,411              
 
      TSMC Technology   1   Payables to related parties     39,403              
 
              Research and development expenses     354,423              
 
      WaferTech   1   Sales     10,301              
 
              Purchases     8,774,750             3 %
 
              Payables to related parties     784,280              
 
      TSMC Canada   1   Research and development expenses     129,665              
1
  TSMC International   TSMC Technology   3   Deferred royalty income     640,658              
2
  TSMC Partners   TSMC International   3   Other receivables     9,901,544             2 %
 
              Deferred revenue     8,773,454             2 %
3
  GUC   TSMC North America   3   Purchases     1,766,788             1 %
 
              Manufacturing overhead     189,410              
 
              Payables to related parties     139,402              
 
      GUC-NA   3   Operating expenses     60,010              
 
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 and terms are determined in accordance with mutual agreements. (Concluded)

- 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: March 19, 2009  By   /s/ Lora Ho    
    Lora Ho   
    Vice President & Chief Financial Officer