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1934 Act Registration No. 1-14700
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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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 October 2003
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Taiwan Semiconductor Manufacturing Company Ltd.
(Translation of Registrant's Name Into English)
No. 8, Li-Hsin Rd. 6,
Science-Based Industrial Park,
Hsin-Chu, Taiwan
(Address of Principal Executive Offices)
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(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 [X] Form 40-F [_]
(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 [_] No [X]
(If "Yes" is marked, indicated below the file number assigned to the registrant
in connection with Rule 12g3-2(b): 82: _______.)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Taiwan Semiconductor Manufacturing
Company Ltd.
Date: October 30,2003 By /s/ Lora Ho
--------------------------------------
Lora Ho
Vice President & Chief Financial
Officer
Taiwan Semiconductor Manufacturing
Company Ltd.
Financial Statements for the Nine Months Ended
September 30, 2003 and 2002
Together with Independent Accountants' Report
Readers are advised that the original version of these financial statements
is in Chinese. This English translation is solely for the readers'
convenience. If there is any conflict between these financial statements
and the Chinese version or any difference in the interpretation of the two
versions, the Chinese-language financial statements shall prevail.
English Translation of a Report Originally Issued in Chinese
------------------------------------------------------------
INDEPENDENT ACCOUNTANTS' REPORT
The Board of Directors and Shareholders
Taiwan Semiconductor Manufacturing Company Ltd.
We have reviewed the accompanying balance sheets of Taiwan Semiconductor
Manufacturing Company Ltd. as of September 30, 2003 and 2002 and the related
statements of income and cash flows for the nine months then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to issue a report on these financial statements based on our
reviews.
We conducted our reviews in accordance with Statement on of Auditing Standards
No. 36 "Review of Financial Statements" issued by the Auditing Committee of the
Accounting Research and Development Foundation of the Republic of China. A
review consists principally of applying analytical procedures to financial data
and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in Republic of China, the objective
of which is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the financial statements referred to above for them to be in
conformity with accounting principles generally accepted in the Republic of
China.
As disclosed in Note 3 to the financial statements, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 30, "Accounting for
Treasury Stock" on January 1, 2002. SFAS No. 30 requires a parent company to
record stock held by its subsidiary as treasury stock.
Deloitte & Touche
(T N Soong & Co and Deloitte & Touche (Taiwan)
Established Deloitte & Touche Effective June 1, 2003)
Taipei, Taiwan
The Republic of China
October 16, 2003
Notice to Readers
-----------------
The accompanying financial statements are intended only to present the financial
position, results of operations and cash flows in accordance with accounting
principles and practices generally accepted in the Republic of China and not
those of any other jurisdictions. The standards, procedures and practices to
review such financial statements are those generally accepted and applied in the
Republic of China.
-1-
English Translation of Financial Statements Originally Issued in Chinese
------------------------------------------------------------------------
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD.
BALANCE SHEETS
(UNAUDITED)
SEPTEMBER 30, 2003 AND 2002
(In Thousand New Taiwan Dollars, Except Par Value)
--------------------------------------------------------------------------------
2003 2002
-------------------- --------------------
ASSETS Amount % Amount %
-------------- ---- -------------- ----
CURRENT ASSETS
Cash and cash equivalents (Notes 2 and 4) $ 82,730,782 22 $ 64,516,454 17
Short-term investments (Notes 2 and 5) 11,664,302 3 -- --
Receivables from related parties (Note 18) 15,295,065 4 11,221,381 3
Notes receivable 43,709 -- 30,889 --
Accounts receivable 12,704,943 3 10,539,193 3
Allowance for doubtful receivables (Note 2) ( 1,021,399) -- ( 1,149,973) --
Allowance for sales returns and others (Note 2) ( 2,055,142) ( 1) ( 2,736,996) ( 1)
Other financial assets 1,192,351 -- 1,069,861 --
Inventories--net (Notes 2 and 6) 11,813,455 3 13,321,458 3
Deferred income taxes (Notes 2 and 13) 2,117,000 1 2,125,541 1
Prepaid expenses and other current assets (Notes 2 and 21) 688,212 -- 1,466,825 --
-------------- ---- -------------- ----
Total current assets 135,173,278 35 100,404,633 26
-------------- ---- -------------- ----
LONG-TERM INVESTMENTS (Notes 2, 3, 7 and 21)
Equity method 33,932,303 9 35,292,167 9
Cost method 464,629 -- 915,750 1
Funds 272,024 -- 199,599 --
Allowance for losses -- -- ( 58,588) --
-------------- ---- -------------- ----
Total Long-term Investments 34,668,956 9 36,348,928 10
-------------- ---- -------------- ----
PROPERTY, PLANT AND EQUIPMENT (Notes 2, 8 and 18)
Cost
Buildings 70,767,593 18 67,640,598 18
Machinery and equipment 324,426,114 85 284,024,938 75
Office equipment 6,077,495 2 5,779,890 2
-------------- ---- -------------- ----
Total cost 401,271,202 105 357,445,426 95
Accumulated depreciation ( 233,609,935) ( 61) ( 177,804,640) ( 47)
Advance payments and construction in progress 24,632,558 6 37,864,711 10
-------------- ---- -------------- ----
Net property, plant and equipment 192,293,825 50 217,505,497 58
-------------- ---- -------------- ----
GOODWILL (Note 2) 2,351,634 1 2,700,024 1
-------------- ---- -------------- ----
OTHER ASSETS
Deferred income taxes (Notes 2 and 13) 8,841,310 3 11,428,625 3
Deferred charges--net (Notes 2 and 9) 8,415,357 2 8,378,661 2
Refundable deposits (Notes 18 and 20) 287,403 -- 579,147 --
Assets leased to others (Note 2) 85,072 -- 87,966 --
Idle asset (Note 2) 74,644 -- -- --
Miscellaneous -- -- 9,250 --
-------------- ---- -------------- ----
Total other assets 17,703,786 5 20,483,649 5
-------------- ---- -------------- ----
TOTAL ASSETS $ 382,191,479 100 $ 377,442,731 100
============== ==== ============== ====
2003 2002
-------------------- --------------------
LIABILITIES AND SHAREHOLDERS' EQUITY Amount % Amount %
-------------- --- -------------- ---
CURRENT LIABILITIES
Payables to related parties (Note 18) $ 3,790,399 1 $ 2,830,264 1
Accounts payable 5,596,631 1 4,645,596 1
Payables to contractors and equipment suppliers 9,480,795 3 17,451,662 5
Accrued expenses and other current liabilities
(Notes 2, 7, 11 and 21) 8,319,012 2 7,419,677 2
Current portion of bonds (Note 10) -- -- 9,000,000 2
-------------- --- -------------- ---
Total current liabilities 27,186,837 7 41,347,199 11
-------------- --- -------------- ---
LONG-TERM LIABILITIES
Bonds payable (Note 10) 35,000,000 9 35,000,000 9
Other long-term payable (Notes 11 and 20) 3,660,493 1 3,648,931 1
-------------- --- -------------- ---
Total long-term liabilities 38,660,493 10 38,648,931 10
-------------- --- -------------- ---
OTHER LIABILITIES
Accrued pension cost (Notes 2 and 12) 2,533,864 1 2,178,064 1
Guarantee deposits (Note 20) 838,864 -- 1,507,971 --
Deferred gain on sales and leaseback (Note 2) -- -- 153,237 --
-------------- --- -------------- ---
Total other liabilities 3,372,728 1 3,839,272 1
-------------- --- -------------- ---
Total liabilities 69,220,058 18 83,835,402 22
-------------- --- -------------- ---
SHAREHOLDERS' EQUITY (Note 15)
Capital stock--$10 par value
Authorized: 24,600,000 thousand shares
Issued:
Preferred--1,300,000 thousand shares -- -- 13,000,000 4
Common--20,266,619 thousand shares in 2003 and
18,622,887 thousand shares in 2002 202,666,189 53 186,228,867 49
Capital surplus:
Merger and others (Note 2) 56,797,280 15 56,961,753 15
Treasury stock (Note 3) 50,137 -- 43,036 --
Retained earnings:
Appropriated as legal reserve 20,802,137 5 18,641,108 5
Appropriated as special reserve 68,945 -- -- --
Unappropriated earnings 34,226,657 9 19,598,315 5
Others:
Unrealized loss on long-term investments (Note 2) ( 2,441) -- ( 68,960) --
Cumulative translation adjustments (Note 2) 5,921 -- 1,117,910 --
Treasury stock (at cost)--40,784 thousand shares in 2003
and 42,001 thousand shares in 2002 (Notes 2, 3 and 16) ( 1,643,404) -- ( 1,914,700) --
-------------- --- -------------- ---
Total shareholders' equity 312,971,421 82 293,607,329 78
-------------- --- -------------- ---
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 382,191,479 100 $ 377,442,731 100
============== === ============== ===
The accompanying notes are an integral part of the financial statements.
(With Deloitte & Touche report dated October 16, 2003)
-2-
English Translation of Financial Statements Originally Issued in Chinese
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TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD.
STATEMENTS OF INCOME
(UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002 (In Thousand New Taiwan
Dollars, Except Earnings Per Share)
================================================================================
2003 2002
--------------------- ---------------------
Amount % Amount %
-------------- ---- -------------- ----
GROSS SALES (Notes 2 and 18) $ 147,294,673 $ 122,717,952
SALES RETURNS AND ALLOWANCES (Note 2) ( 3,169,937) ( 2,910,766)
-------------- --------------
NET SALES 144,124,736 100 119,807,186 100
COST OF SALES (Notes 14 and 18) 93,940,362 65 78,522,219 65
-------------- ---- -------------- ----
GROSS PROFIT 50,184,374 35 41,284,967 35
-------------- ---- -------------- ----
OPERATING EXPENSES (Notes 14 and 18)
Research and development 8,657,300 6 7,902,586 7
General and administrative 4,572,503 3 3,984,151 3
Marketing 932,482 1 873,312 1
-------------- ---- -------------- ----
Total operating expenses 14,162,285 10 12,760,049 11
-------------- ---- -------------- ----
INCOME FROM OPERATIONS 36,022,089 25 28,524,918 24
-------------- ---- -------------- ----
NON-OPERATING INCOME AND GAIN
Interest 580,879 1 770,208 1
Gain on sales of property, plant and equipment
(Notes 2 and 18) 347,656 -- 255,480 --
Technical service income (Notes 18 and 20) 158,925 -- 142,729 --
Gain on sales of long-term investments (Note 2) 66,428 -- -- --
Other (Note 18) 273,013 -- 226,814 --
-------------- ---- -------------- ----
Total non-operating income and gain 1,426,901 1 1,395,231 1
-------------- ---- -------------- ----
NON-OPERATING EXPENSES AND LOSS
Loss on property, plant and equipment and idle assets
(Note 2) 1,430,763 1 -- --
Interest (Notes 2, 8 and 21) 1,323,510 1 1,633,817 2
Foreign exchange loss--net (Notes 2 and 21) 426,256 1 101,254 --
Investment loss recognized by equity method--net
(Notes 2 and 7) 343,951 -- 3,554,173 3
Loss on disposal of property, plant and equipment
(Note 2) 291,077 -- 119,109 --
Premium expense from option contracts--net (Notes 2
and 21) 153,783 -- 291,721 --
(Continued)
-3-
English Translation of Financial Statements Originally Issued in Chinese
------------------------------------------------------------------------
2003 2002
--------------------- ---------------------
Amount % Amount %
-------------- ---- -------------- ----
Casualty loss--net (Note 2) $ -- -- $ 117,470 --
Other 19,440 -- 67,863 --
-------------- ---- -------------- ----
Total non-operating expenses and loss 3,988,780 3 5,885,407 5
-------------- ---- -------------- ----
INCOME BEFORE INCOME TAX 33,460,210 23 24,034,742 20
INCOME TAX EXPENSE (Notes 2 and 13) 2,203,861 1 4,977,225 4
-------------- ---- -------------- ----
NET INCOME $ 31,256,349 22 $ 19,057,517 16
============== ==== ============== ====
2003 2002
--------------------------- ---------------------------
Before After Before After
Income Income Income Income
Tax Tax Tax Tax
------------ ------------ ------------ ------------
EARNINGS PER SHARE (Note 17)
Basic earnings per share $ 1.65 $ 1.54 $ 1.17 $ 0.93
============ ============ ============ ============
Diluted earnings per share $ 1.65 $ 1.54 $ 1.17 $ 0.93
============ ============ ============ ============
The pro forma net income and earnings per share for the adoption of SFAS No. 30
"Accounting for Treasury Stock" is as follows (Notes 3 and 16):
2003 2002
--------------------------- ---------------------------
Before After Before After
Income Tax Income Tax Income Tax Income Tax
------------ ------------ ------------ ------------
NET INCOME $ 31,332,102 $ 19,100,553
============ ============
EARNINGS PER SHARE
Basic earnings per share $ 1.65 $ 1.54 $ 1.17 $ 0.93
============ ============ ============ ============
Diluted earnings per share $ 1.65 $ 1.54 $ 1.17 $ 0.93
============ ============ ============ ============
The accompanying notes are an integral part of the financial statements.
(With Deloitte & Touche report dated October 16, 2003) (Concluded)
-4-
English Translation of Financial Statements Originally Issued in Chinese
------------------------------------------------------------------------
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(In Thousand New Taiwan Dollars)
================================================================================
2003 2002
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 31,256,349 $ 19,057,517
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 46,290,739 41,540,962
Deferred income taxes 2,074,257 4,967,904
Investment loss recognized by equity method--net 343,951 3,554,173
Loss on property, plant, and equipment, and idle assets 1,430,763 --
Loss (gain) on sales of long-term investments--net ( 66,428) 2,509
Gain on disposal of property, plant and equipment--net ( 56,579) ( 136,371)
Pension cost accrued 323,322 323,211
Allowance for doubtful receivables 91,535 49,481
Allowance for sales returns and others ( 307,925) 155,445
Changes in operating assets and liabilities:
Decrease (increase) in:
Receivables from related parties ( 5,111,577) ( 10,611,798)
Notes receivable 16,531 145,693
Accounts receivable ( 3,209,496) 9,332,721
Inventories--net ( 1,473,119) ( 4,817,040)
Other financial assets ( 222,682) ( 359,700)
Prepaid expenses and other current assets 1,326,149 459,316
Increase (decrease) in:
Payables to related parties 1,323,401 747,658
Accounts payable 747,397 3,521,702
Accrued expenses and other current liabilities 2,408,255 2,434,440
-------------- --------------
Net cash provided by operating activities 77,184,843 70,367,823
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in short-term investments--net ( 11,664,302) --
Acquisitions of:
Long-term investments ( 1,050,942) ( 9,025,004)
Property, plant and equipment ( 24,415,743) ( 36,580,635)
Proceeds from disposal of:
Property, plant and equipment 158,858 443,502
Long-term investments 458,308 938
Increase in deferred charges ( 1,792,664) ( 2,995,792)
Decrease in refundable deposits 256,066 193,765
Decrease in other assets--miscellaneous 9,250 --
-------------- --------------
Net cash used in investing activities ( 38,041,169) ( 47,963,226)
-------------- --------------
(Continued)
-5-
English Translation of Financial Statements Originally Issued in Chinese
------------------------------------------------------------------------
2003 2002
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of (repayment on) bonds payable ($ 4,000,000) $ 15,000,000
Redemption of preferred stock ( 13,000,000) --
Decrease in guarantee deposits ( 556,202) ( 5,703,001)
Remuneration to directors and supervisors ( 58,485) ( 133,848)
Cash dividends paid for preferred stock ( 455,000) ( 455,000)
-------------- --------------
Net cash provided by (used in) financing activities ( 18,069,687) 8,708,151
-------------- --------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 21,073,987 31,112,748
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD 61,656,795 33,403,706
-------------- --------------
CASH AND CASH EQUIVALENTS, END OF THE PERIOD $ 82,730,782 $ 64,516,454
============== ==============
SUPPLEMENTAL INFORMATION
Interest paid (excluding the amounts capitalized of NT$4,020 thousand
and NT$112,245 thousand in 2003 and 2002, respectively) (Note 8) $ 687,283 $ 383,213
============== ==============
Income tax paid $ 2,500 $ 74,551
============== ==============
Non-cash investing and financing activities:
Reclassification of parent company stock held by subsidiaries from
long-term investments to treasury stock $ -- $ 1,914,700
============== ==============
Credit balances of long-term investments reclassified as part of
other current liabilities $ -- $ 63,568
============== ==============
Current portion of bonds $ -- $ 9,000,000
============== ==============
Current portion of other long-term payables $ 1,228,568 $ 531,774
============== ==============
The accompanying notes are an integral part of the financial statements.
(With Deloitte & Touche report dated October 16, 2003) (Concluded)
-6-
English Translation of Financial Statements Originally Issued in Chinese
------------------------------------------------------------------------
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(Amounts in Thousand New Taiwan Dollars, Unless Specified Otherwise)
================================================================================
1. GENERAL
Taiwan Semiconductor Manufacturing Company Ltd. (The Company or TSMC), a
Republic of China corporation, was incorporated as a venture among the
Government of the Republic of China, acting through the Development Fund of
the Executive Yuan; Koninklijke Philips Electronics N.V. and certain of its
affiliates (Philips); and certain other private investors. In September
1994, its shares were listed on the Taiwan Stock Exchange (TSE). On October
8, 1997, TSMC listed its shares of stock on the New York Stock Exchange
(NYSE) in the form of American Depositary Shares (ADSs).
TSMC is engaged mainly in the manufacturing, selling, packaging, testing
and designing of integrated circuits and other semiconductor devices, and
the manufacturing of masks.
2. SIGNIFICANT ACCOUNTING POLICIES
The financial statements are presented in conformity with the Guidelines
for Securities Issuers' Financial Reporting and accounting principles
generally accepted in the Republic of China. Significant accounting
policies are summarized as follows:
Classification of Current and Non-current Assets and Liabilities
Current assets are those expected to be converted to cash, sold or consumed
within one year from the balance sheet date. Current liabilities are
obligations due on demand within one year from the balance sheet date.
Assets and liabilities that are not classified as current are non-current
assets and liabilities, respectively.
Cash Equivalents
Government bonds under repurchase agreements acquired with maturities less
than three months from the date of purchase are classified as cash
equivalents.
Short-term Investments
Short-term investments are carried at the lower of cost or market value.
The market values of funds and government bonds are determined by the net
asset value of the open-end funds and the daily-volume-weighted-average
yield/price conversion of GreTai Securities Market, respectively. The costs
of investments sold are determined by the specific identification method.
Allowance for Doubtful Receivables
Allowance for doubtful receivables are provided based on a review of the
collectibility of accounts receivables. We determine the amount of
allowance for doubtful accounts by examining our historical collection
experience and current trends in the credit quality of our customers as
well as our internal credit policies.
-7-
Revenue Recognition and Allowance for Sales Returns and Others
The four criteria that we use to recognize revenue are the existence of
evidence of a contractual arrangement, whether delivery or performance has
occurred, whether the selling price is fixed or determinable and whether
collectibility is reasonably assured. Allowance for sales returns and
others is estimated based on historical experience and any known factors
that would affect the allowance. Such provisions are deducted from sales in
the year the products are sold and the estimated related costs are deducted
from cost of sales.
Sales are determined using the fair value taking into account related sales
discounts agreed to by the Company and customers. Since the receivables
from sales are collectible within one year and such transactions are
frequent, the fair value of receivables is equivalent to the nominal amount
of cash received.
Inventories
Inventories are stated at the lower of cost or market value. Inventories
are recorded at standard cost and adjusted to approximate weighted-average
cost at the end of each period. Market value represents net realizable
value for finished goods and work in process, and replacement value for raw
materials, supplies and spare parts. The scrap and slow-moving items are
recognized as inventory reserve.
Long-term Investments
Investments in shares of stock of companies wherein the Company exercises
significant influence on the operating and financial policy decisions are
accounted for using the equity method. The Company's proportionate share in
the net income or net loss of investee companies is recognized as
components of the "investment income/loss recognized by equity method--net"
account. When acquiring shares of stock, the difference between the cost of
investment and the Company's proportionate share of investee's net book
value is amortized using straight-line method over five years, and is also
recorded as a components of the "investment income/loss recognized by
equity method--net". The Company adopted Statements of Financial Accounting
Standards (SFAS) No. 30, "Accounting for Treasury Stock" on January 1,
2002. SFAS No. 30 requires a parent company to reclassify its capital stock
held by its subsidiaries from short/long-term investments to treasury
stock.
When the Company subscribes to additional investee shares at a percentage
different from its existing equity interest, the resulting carrying amount
of the investment in equity investee differs from the amount of Company's
proportionate share in the investee's net equity. The Company records such
difference as an adjustment to "capital surplus" as well as the "long-term
investments" accounts. In the event an investee uses its capital surplus
(excluding reserve for asset revaluation) to offset its accumulated
deficit, the Company will also record a corresponding entry equivalent to
its proportionate share of the investee's adjustment. If an investee's
functional currency is a foreign currency, "cumulative translation
adjustments" would result from the process of translating the investee's
financial statements into the functional currency of the Company.
Other stock investments are accounted for using the cost method. Cash
dividends are recognized as income in the year received but are accounted
for as reduction in the carrying values of the long-term investments if the
dividends are received in the same year that the related investments are
acquired. Stock dividends are recognized neither as investment income nor
increase of long-term investments but recorded only as an increase in the
number of shares held. An allowance is recognized for any decline in the
market value of investments using quoted market prices with the
corresponding amount debited to shareholders' equity. A reversal of the
allowance will result from a subsequent recovery of the market value of
such investments. The carrying values of investments with no quoted market
price are reduced to reflect an other than temporary decline in their
values with the related impairment loss charged to income.
-8-
Investments in foreign mutual funds are stated at the lower of aggregate
cost or net asset value. An allowance is recognized when the cost of the
funds is lower than their net asset values, with the corresponding amount
debited to shareholders' equity. A reversal of the allowance will result
from a subsequent recovery of the net asset value.
The costs of investments sold are determined using the weighted-average
method.
If an investee company has an unrealized loss on a long-term investment
evaluated using the lower-of-cost-or-market method, the Company recognizes
a corresponding unrealized loss in proportion to its equity interest and
records the amount as a component of its own shareholders' equity.
Gains or losses on transactions with investee companies wherein the Company
owns at least 20% of the outstanding common stock but less than a
controlling interest are deferred in proportion to the Company's ownership
percentage until realized through a transaction with a third party. The
entire amount of the gains or losses on sales to majority-owned
subsidiaries are deferred until such gains or losses are realized through
the subsequent sale of the related products to third parties. Gains or
losses from sales by investee companies to the Company are deferred in
proportion to the ownership percentage until realized through transactions
with third parties.
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 significant impairment loss
occurs, the related assets are stated at the lower of fair value or the
book value. Idle assets are stated at the lower of book value or net
realizable value. Significant additions, renewals, betterments, and
interest expense incurred during the construction period are capitalized.
Maintenance and repairs are expensed in the period incurred.
Depreciation is computed using the straight-line method over the following
estimated service lives: buildings--10 to 20 years; machinery and
equipment--5 years; and office equipment--3 to 5 years.
Upon sale or disposal of property, plant and equipment, the related cost
and accumulated depreciation are removed from the corresponding accounts,
and with any gain or loss is charged to income in the period of disposal.
Goodwill
Goodwill represents the excess of the consideration paid for acquisitions
over the fair market value of identifiable net assets acquired. Goodwill is
amortized using the straight-line method over the estimated life of 10
years.
Deferred Charges
Deferred charges consist of software and system design costs, technology
know-how, bond issuance costs and technology license fees. The amounts are
amortized as follows: Software and system design costs--3 years, technology
know-how--5 years, bond issuance costs--the term of the bonds, technology
license fee--the shorter of the estimated life of the technology or the
term of the technology transfer contract.
Pension Costs
Net periodic pension costs are recorded on the basis of actuarial
calculations. Unrecognized net transition obligation and unrecognized net
gain are amortized over 25 years.
-9-
Deferred Gain on Sale and Leaseback
The gain on the sale of property that is simultaneously leased back is
deferred by the Company. This deferred gain on sales and leaseback
transactions is amortized as follows: operating leases--adjustment of
rental expenses over the term of the leases.
Casualty Loss
Casualty losses mainly caused from the March 31, 2002 earthquake are
recorded when incurred and any insurance recoveries are recorded when
probable up to the amount of the loss. Recoveries in excess of the amount
of the loss are recorded when realized.
Income Tax
The Company uses an inter-period tax allocation method for income tax.
Deferred income tax assets and liabilities are recognized for the tax
effects of temporary differences, unused tax credits and net operating loss
carryforwards. 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, according to the
classification of its related asset or liability, classified as current or
non-current. However, if a deferred asset or liability does not relate to
an asset or liability in the financial statements, then it is classified as
either current or non-current based on the expected length of time before
it is realized.
Any tax credit arising from the purchase of machinery, equipment and
technology, research and development expenditures, personnel training,
marketing expenses for international branding, investments in important
technology-based enterprise are recognized using the current method.
Adjustments of prior years' tax liabilities are added to or deducted from
the current year's tax provision.
As of January 1, 1998, income taxes on unappropriated earnings of 10% are
expensed in the year of shareholder approval which is the year subsequent
to the year incurred.
Foreign Currency Transactions
Foreign currency transactions are recorded in New Taiwan dollars at the
current rate of exchange in effect when the transaction occurs. Exchange
gains or losses derived from foreign currency transactions or monetary
assets and liabilities denominated in a foreign currency are recognized in
current operations. At the end of each period, foreign-currency assets and
liabilities are revalued at the prevailing exchange rate with the resulting
gains or losses recognized in current operations.
Derivative Financial Instruments
The Company enters into foreign currency forward contracts to manage
currency exposures in cash flow and in foreign currency-denominated assets
and liabilities. The differences in the New Taiwan dollar amounts
translated using the spot rate and the amounts translated using the
contracted forward rates on the contract date are amortized over the terms
of the forward contracts using the straight-line method. At the balance
sheet dates, the receivables or payables arising from forward contracts are
restated using the prevailing spot rate and the resulting differences are
charged to income. Also, the receivables and payables related to the
forward contract are netted with the resulting amount presented as either
an asset or a liability. Any resulting gain or loss upon settlement is
charged to income in the period of settlement.
The Company enters into interest rate swap transactions to manage exposures
to changes in interest rates on existing liabilities. These transactions
are accounted for on an accrual basis, in which the cash settlement
receivable or payable is recorded as an adjustment to interest income or
expense.
-10-
The notional amount of foreign currency option contracts entered into for
hedging purposes are not recognized as an asset or liability on the
contract dates. The premiums paid or received for the call or put options
are amortized and charged to income on a straight-line basis over the term
of the related contract. Any resulting gain or loss upon settlement is
charged to income in the period of settlement.
Reclassification
Certain accounts in the financial statements as of and for the nine months
ended September 30, 2002 have been reclassified to conform to the financial
statements as of and for the nine months ended September 30, 2003.
3. NEW ACCOUNTING PRONOUNCEMENTS
In accordance with the SFAS No. 30, "Accounting for Treasury Stock" and
other relevant regulations from Securities and Futures Commission (SFC),
the Company is required to reclassify its common stock held by its
subsidiaries from long-term investments to treasury stock. The
reclassification is based on the carrying value recorded by the Company's
subsidiaries as of January 1, 2002. The adoption of SFAS No. 30 resulted in
the decrease of long-term investments and the increase of treasury stock by
NT$1,914,700 thousand as of September 30, 2002, and the decrease in net
income for the nine months ended September 30, 2002 by NT$43,036 thousand.
4. CASH AND CASH EQUIVALENTS September 30
-----------------------------
2003 2002
------------- -------------
Cash and bank deposits $ 79,403,491 $ 60,877,986
Government bonds acquired under repurchase
agreements 3,327,291 3,638,468
------------- -------------
$ 82,730,782 $ 64,516,454
============= =============
5. SHORT-TERM INVESTMENTS September 30,
2003
-------------
Government bonds $ 7,437,502
Money market funds 2,026,800
Government bonds acquired under repurchase agreements 1,200,000
Bond funds 1,000,000
-------------
$ 11,664,302
=============
Market value $ 11,664,302
=============
6. INVENTORIES--NET September 30
-------------------------------
2003 2002
-------------- --------------
Finished goods $ 2,535,207 $ 4,237,870
Work in process 9,891,487 9,394,591
Raw materials 373,404 365,558
Supplies and spare parts 712,492 809,486
-------------- --------------
13,512,590 14,807,505
Less--inventory reserve ( 1,699,135) ( 1,486,047)
-------------- --------------
$ 11,813,455 $ 13,321,458
============== ==============
-11-
7. LONG-TERM INVESTMENTS September 30
-----------------------------------------------------
2003 2002
-------------------------- -------------------------
% of % of
Carrying Owner- Carrying Owner-
Value ship Value ship
------------- ---------- -------------- --------
Shares of stock
---------------------------------------------------
Equity method:
TSMC International Investment Ltd. (TSMC
International) $ 21,646,213 100 $ 24,352,833 100
TSMC Partners Ltd. (TSMC Partners) 4,089,066 100 3,621,330 100
Vanguard International Semiconductor Corporation
(VIS) 3,968,395 28 2,803,855 25
Systems on Silicon Manufacturing Company Pte
Ltd. (SSMC) 2,616,143 32 3,308,020 32
Emerging Alliance Fund LLP (Emerging Alliance) 755,364 99 787,482 99
Global UniChip Corp. (GUC) 377,758 47 -- --
TSMC North America (TSMC--North America) 286,061 100 170,252 100
TSMC Japan K. K. (TSMC--Japan) 97,567 100 90,537 100
Chi Cherng Investment Ltd. (Chi Cherng) 43,028 36 62,379 25
Hsin Ruey Investment Ltd. (Hsin Ruey) 41,787 36 62,779 25
Taiwan Semiconductor Manufacturing Company
Europe B.V. (TSMC--Europe) 10,921 100 9,536 100
Chi Hsin Investment Ltd. (Chi Hsin) -- -- 23,164 25
------------- --------------
33,932,303 35,292,167
------------- --------------
Cost method:
Publicly traded stock
Taiwan Mask Corp. 32,129 2 32,129 2
Amkor Technology -- -- 280,748 --
Monolithic System Tech. -- -- 104,289 2
Non-publicly traded stock
United Gas Co., Ltd. 193,584 11 193,584 11
Shin-Etsu Handotai Taiwan Company Ltd. 105,000 7 105,000 7
Hon Tung Venture Capital 83,916 10 150,000 10
W.K. Technology Fund IV 50,000 2 50,000 2
------------- --------------
464,629 915,750
------------- --------------
Funds
---------------------------------------------------
Horizon Ventures 229,669 -- 160,599 --
Crimson Asia Capital 42,355 -- 39,000 --
------------- --------------
272,024 199,599
------------- --------------
34,668,956 36,407,516
Less--allowance for losses -- ( 58,588)
------------- --------------
$ 34,668,956 $ 36,348,928
============= ==============
Credit balances of long-term investments
---------------------------------------------------
Presented as part of other current liabilities:
Kung Cherng Investment Ltd. (Kung Cherng) $ -- -- $ 44,043 25
Cherng Huei Investment Ltd. (Cherng Huei) -- -- 15,008 25
Po Cherng Investment Ltd. (Po Cherng) -- -- 4,517 25
------------- --------------
$ -- $ 63,568
============= ==============
-12-
On January 8, 2003, the Company's investee company, VIS, issued 600,000
thousand shares of common stock at a price of NT$7 per share. In this round
of equity offering, the Company purchased a total of 230,882 thousand
shares. As a result, its ownership in VIS increased from 25% to 28%.
The Company's investees, Hsin Ruey, Chi Hsin and Kung Cherng were merged on
October 30, 2002, with Hsin Ruey as the surviving company. In addition, The
Company's investees, Chi Cherng, Cherng Huei and Po Cherng were merged on
October 30, 2002 with Chi Cherng as the surviving company. The mergers were
accounted for as a pooling of interest. The Company's ownership is
approximately 36% in Hsin Ruey and approximately 36% in Chi Cherng
subsequent to the merger.
The Company established Ya Xin Technology (Ya Xin) in November 2002 and
subsequently signed a merger agreement with GUC in December 2002. The
merger was effective on January 4, 2003 and GUC is the surviving company.
The carrying value of investments accounted for using the equity method and
the related investment gains or losses were determined based on the
reviewed financial statements of the investees in the same periods. The
investment gains or (losses) of investee companies consisted of the
following:
Nine Months Ended
September 30
------------------------------
2003 2002
------------- -------------
SSMC ($ 442,182) ($ 995,619)
Emerging Alliance (162,985) ( 124,625)
TSMC Partners 194,235 832,608
TSMC-North America 113,249 124,116
TSMC International 21,128 ( 2,807,426)
Others ( 67,396) ( 583,227)
------------- -------------
($ 343,951) ($ 3,554,173)
============= =============
The market values of publicly traded stocks accounted for the cost method
were $157,995 thousand and $359,217 thousand as of September 30, 2003 and
2002, respectively.
8. PROPERTY, PLANT AND EQUIPMENT
Accumulated depreciation consisted of the following:
September 30
-------------------------------
2003 2002
-------------- --------------
Buildings $ 27,881,029 $ 20,544,762
Machinery and equipment 202,126,641 154,332,010
Office equipment 3,602,265 2,927,868
-------------- --------------
$ 233,609,935 $ 177,804,640
============== ==============
-13-
Information on the status of the expansion or construction plans of the
Company's manufacturing facilities as of September 30, 2003 is as follows:
Estimated Actual Date
Construction/ Complete Accumulated of Starting Expected Date of
Expansion Plan Cost Expenditures Operations Starting Operations
--------------- ------------- ------------- ----------- ----------------------------------
Fab 12--Phase 1 $ 80,318,400 $ 72,466,500 March 2002 --
Fab 14--Phase 1 30,411,000 10,586,900 -- 2/nd/ half of 2004 at the earliest
Interest expenses (before deducting capitalized amounts of NT$4,020
thousand and NT$112,245 thousand for the nine months ended September 30,
2003 and 2002, respectively) were NT$1,327,530 thousand and NT$1,746,062
thousand for the nine months ended September 30, 2003 and 2002,
respectively. The interest rate used for calculating the capitalized amount
was 5.283% for the nine months ended September 30, 2003 and 2002,
respectively.
9. DEFERRED CHARGES--NET September 30
---------------------------
2003 2002
------------ ------------
Technology license fees $ 5,396,897 $ 5,404,989
Software and system design costs 2,844,212 2,845,705
Others 174,248 127,967
------------ ------------
$ 8,415,357 $ 8,378,661
============ ============
10. BONDS September 30
-----------------------------
2003 2002
------------- -------------
Domestic unsecured bonds:
Issued in March 1998 and payable in March 2003 in one lump
sum payment, 7.71% annual interest payable semi-annually $ -- $ 4,000,000
Issued in October 1999 and payable in October 2002 and 2004 in two
equal payments, 5.67% and 5.95% annual interest payable annually,
respectively 5,000,000 10,000,000
Issued in December 2000 and payable in December 2005 and 2007 in
two installments, 5.25% and 5.36% annual interest payable annually,
respectively 15,000,000 15,000,000
Issued in January 2002 and payable in January 2007, 2009 and 2012 in
three installments, 2.60%, 2.75% and 3.00% annual interest payable
annually, respectively 15,000,000 15,000,000
------------- -------------
$ 35,000,000 $ 44,000,000
============= =============
As of September 30, 2003, future principal payments for the Company's bonds
are as follows:
Year of Repayment Amount
------------------- -------------
2004 $ 5,000,000
2005 10,500,000
2007 7,000,000
2008 and thereafter 12,500,000
-------------
$ 35,000,000
=============
-14-
11. OTHER LONG-TERM PAYABLES
The Company entered into several license arrangements for certain
semiconductor-related patents. Future payments under the agreements as of
September 30, 2003 are as follows:
Year Amount
------------------------- ------------
October to December, 2003 $ 631,594
2004 1,257,373
2005 990,184
2006 456,030
2007 472,920
2008 and thereafter 1,080,960
------------
$ 4,889,061
============
12. PENSION PLAN
The Company has a pension plan for all regular employees that provides
benefits based on length of service and average monthly salary for the
six-month period prior to retirement.
The Company contributes at an amount equal to 2% of salaries paid every
month to a pension fund (the Fund). The Fund is administered by a pension
fund monitoring committee (the Committee) and deposited in the Committee's
name in the Central Trust of China.
The changes in the plan assets and unfunded accrued pension cost for the
nine months ended September 30, 2003 and 2002 are summarized as follows:
Nine Months Ended
September 30
-------------------------------
2003 2002
-------------- --------------
Plan assets
Balance, beginning of the period $ 993,404 $ 804,437
Contribution 136,240 128,981
Interest 20,682 29,606
Payment ( 3,473) ( 5,360)
-------------- --------------
Balance, end of the period $ 1,146,853 $ 957,664
============== ==============
Unfunded accrued pension cost
Balance, beginning of the period $ 2,210,542 $ 1,854,853
Accruals 323,322 326,461
Payment -- ( 3,250)
-------------- --------------
Balance, end of the period $ 2,533,864 $ 2,178,064
============== ==============
-15-
13. INCOME TAX
a. A reconciliation of income tax expense on income before income tax at
the statutory rate and current income tax expense before income tax
credits is shown below:
Nine Months Ended
September 30
---------------------------
2003 2002
------------ ------------
Income tax expense based on income
before income tax at statutory rate (25%) $ 8,365,053 $ 6,008,686
Tax-exempt income ( 3,598,750) ( 1,818,250)
Temporary and permanent differences ( 334,828) 231,984
------------ ------------
Current income tax expense before income
tax credits $ 4,431,475 $ 4,422,420
============ ============
b. Income tax expense consists of:
Current income tax expense before income
tax credits $ 4,431,475 $ 4,422,420
Additional 10% tax on the unappropriated
earnings 1,271,759 162,938
Income tax credits ( 5,703,234) ( 4,585,358)
Other income tax 2,500 9,321
------------ ------------
Income tax expense 2,500 9,321
Net change in deferred income tax
liabilities (assets)
Investment tax credits ( 1,351,106) ( 2,643,301)
Temporary differences 340,310 315,247
Valuation allowance 3,212,157 7,295,958
------------ ------------
$ 2,203,861 $ 4,977,225
============ ============
c. Deferred income tax assets (liabilities) consist of the following:
September 30
-----------------------------
2003 2002
------------- -------------
Current:
Investment tax credits $ 2,117,000 $ 2,125,541
============= =============
Noncurrent:
Investment tax credits $ 25,801,759 $ 24,575,221
Temporary differences ( 3,906,151) ( 2,809,002)
Valuation allowances ( 13,054,298) ( 10,337,594)
------------- -------------
$ 8,841,310 $ 11,428,625
============= =============
d. Integrated income tax information:
The balances of the imputation credit account as of September 30, 2003
and 2002 were NT$14,748 thousand and NT$8,809 thousand, respectively.
The expected and actual creditable ratio for 2002 and 2001 were 0.08%
and 0.04%, respectively.
The imputation credits allocated to the shareholders are based on its
balance as of the date of dividend distribution. The expected
creditable ratio for 2002 may be adjusted when the distribution of the
imputation credits are made.
-16-
e. All retained earnings generated prior to December 31, 1997 were
appropriated as of September 30, 2003 and 2002.
f. As of September 30, 2003, investment tax credits consisted of the
following:
Total Remaining
Creditable Creditable Expire
Regulation Items Amounts Amounts Year
--------------------- ----------------------------- ------------- ------------- ------
Statute for Upgrading Purchase of machinery and $ 4,754,787 $ 1,798,490 2003
Industries equipment 8,203,530 5,955,336 2004
3,806,346 3,806,346 2005
4,884,533 4,884,533 2006
975,381 975,381 2007
------------- -------------
$ 22,624,577 $ 17,420,086
============= =============
Statute for Upgrading Research and development $ 671,545 $ 190,359 2003
Industries expenditures 1,974,321 1,974,321 2004
3,111,472 3,111,472 2005
3,322,453 3,322,453 2006
1,454,138 1,454,138 2007
------------- -------------
$ 10,533,929 $ 10,052,743
============= =============
Statute for Upgrading Personnel training $ 16,104 $ 4,285 2003
Industries 43,265 43,265 2004
28,886 28,886 2005
27,311 27,311 2006
------------- -------------
$ 115,566 $ 103,747
============= =============
Statute for Upgrading Marketing expenses for
Industries international branding $ 318 $ -- 2003
============= =============
Statute for Upgrading Investments in important $ 5,420 $ -- 2003
Industries technology-based enterprise 203,319 203,319 2004
138,864 138,864 2005
------------- -------------
$ 347,603 $ 342,183
============= =============
g. The sales generated from the following expansion and construction of
the Company's manufacturing plants are exempt from income tax:
Tax-Exemption Period
--------------------
Construction of Fab 6 2001 to 2004
Construction of Fab 8--module B 2002 to 2005
Expansion of Fab 2--modules A and B, Fab 3,
Fab 4, Fab 5 and Fab 6 2003 to 2006
h. The tax authorities have examined income tax returns of the Company
through 1999. However, the Company is contesting the assessment by the
tax authority for 1992, 1993, 1997 and 1998.
-17-
14. LABOR COST, DEPRECIATION AND Nine Months Ended September 30, 2003
AMORTIZATION EXPENSE ---------------------------------------------
Classified as
Classified as Operating
Cost of Sales Expense Total
------------- ------------- -------------
Labor cost
Salary $ 5,437,931 $ 2,273,059 $ 7,710,990
Labor and health insurance 349,560 174,175 523,735
Pension 306,331 152,956 459,287
Other 160,399 84,203 244,602
Depreciation 41,815,245 1,735,170 43,550,415
Amortization 1,074,049 1,807,137 2,881,186
------------- ------------- -------------
$ 49,143,515 $ 6,226,700 $ 55,370,215
============= ============= =============
Nine Months Ended September 30, 2002
---------------------------------------------
Classified as
Classified as Operating
Cost of Sales Expense Total
------------- ------------- -------------
Labor cost
Salary $ 4,902,475 $ 2,274,317 $ 7,176,792
Labor and health insurance 307,148 155,196 462,344
Pension 303,724 153,427 457,151
Other 134,976 105,576 240,552
Depreciation 37,617,233 1,836,251 39,453,484
Amortization 574,379 1,472,699 2,047,078
------------- ------------- -------------
$ 43,839,935 $ 5,997,466 $ 49,837,401
============= ============= =============
15. SHAREHOLDERS' EQUITY
Capital, Capital Surplus and Retained Earnings
The Company has issued a total of 485,898 thousand ADSs which were traded
on the NYSE as of September 30, 2003. The total number of common shares
represented by all issued ADSs is 2,429,491 thousand shares (one ADS
represents five common shares).
On October 8, 2003, the Board of Director approved the Company's
sponsorship of the offering by certain existing shareholders of up to
500,000 thousand common shares in the form of ADSs. As of October 16, 2003,
the offering was not effective as of SFC's approval.
Capital surplus can only be used to offset a deficit under the ROC Company
Law. However, the components of capital surplus generated from donated
capital and the excess of the issue price over the par value of capital
stock (including the stock issued for new capital, mergers, and the
purchase of treasury stock) can be transferred to capital stock as stock
dividends.
The Company's Articles of Incorporation provide that the following shall be
appropriated from annual earnings if in excess of any cumulative deficit:
a. 10% legal reserve; until the accumulated legal reserve has equaled the
total paid-in capital of the Company;
b. Special reserve in accordance with relevant laws or regulations;
-18-
c. Remuneration to directors and supervisors and bonus to employees equals
to 0.3% and at least 1% of the remainder, respectively. Individuals
eligible for the employee bonus may include employees of affiliated
companies as approved by the board of directors or a representative of
the board of directors;
d. Dividends to holders of preferred shares at a 3.5% annual rate, based
on the period which the preferred shares have been outstanding.
Following the redemption of all of its issued and outstanding preferred
shares in May 2003, the Company amended its Articles of Incorporation
on June 3, 2003, to remove the provision for issuance of any future
dividends to preferred shareholders as of that date;
e. The appropriation of any remaining balance shall be approved by the
shareholders.
Dividends are distributed in shares of common stock or a combination of
cash and common stock. Since the Company is in a capital-intensive industry
and is currently in the growth stage of its operation, distributions of
profits is made preferably in the form of stock dividend. The total of cash
dividends paid in any given year may not exceed 50% of total dividends
distributed in that year.
Any appropriations of net income are recorded in the financial statement in
the year of shareholder approval.
The appropriation for legal reserve is made until the reserve equals the
aggregate par value of the Company's outstanding capital stock. The reserve
can only be used to offset a deficit or be distributed to capital stock as
a stock dividend up to half of the reserve balance when the reserve balance
has reached 50% of the aggregate par value of the outstanding capital stock
of the Company.
A special reserve equivalent to the debit balance of any account shown in
the shareholder's equity section of the balance sheet (except for the
recorded cost of treasury stock held by subsidiaries), other than the
deficit, shall be made from unappropriated retained earnings pursuant to
existing regulations promulgated by the SFC. The special reserve is allowed
to be appropriated when the debit balance of such accounts is reversed.
The appropriations of the earnings of 2002 and 2001 were approved in the
shareholders' meeting on June 3, 2003 and May 7, 2002, respectively. The
appropriations and dividend per share are as follows:
Appropriation of Earnings Dividend Per Share (NT$)
------------------------------- -------------------------------
For Fiscal For Fiscal For Fiscal For Fiscal
Year 2002 Year 2001 Year 2002 Year 2001
-------------- -------------- -------------- --------------
Legal reserve $ 2,161,029 $ 1,448,317 $ -- $ --
Special reserve 68,945 ( 349,941) -- --
Bonus paid to employees--in stock 1,539,013 1,070,783 -- --
Preferred stock dividend--in cash 455,000 455,000 0.35 0.35
Common stock dividend--in stock 14,898,309 16,832,553 0.80 1.00
Remuneration to directors and supervisors--
in cash 58,485 133,848 -- --
-------------- --------------
$ 19,180,781 $ 19,590,560
============== ==============
The above appropriation of the earnings in fiscal year 2002 and 2001 is
consistent with the resolution of the meetings of board of directors on
March 4, 2003 and March 26, 2002, respectively. If the above employee bonus
and remuneration to directors and supervisors were paid in cash and charged
against income for 2002 and 2001, the basic earnings per share for the
years ended December 31, 2002 and 2001 would decrease from NT$1.14 to
NT$1.05 and NT$0.83 to NT$0.76, respectively. The shares distributed as a
bonus to employees represented 0.83% and 0.64% of the Company's total
outstanding common shares as of December 31, 2002 and 2001, respectively.
-19-
The above information associated with the appropriations of bonus to
employees and remuneration to directors and supervisors is available at
Market Observation System website.
Under the Integrated Income Tax System that became effective on January 1,
1998, ROC resident shareholders are allowed a tax credit for their
proportionate share of the income tax paid by the Company on earnings
generated as of January 1, 1998. An imputation credit account is maintained
by the Company for such income tax and the tax credit allocated to each
shareholder.
Employee Stock Option Plans
On June 25, 2002, the SFC approved the Company's Employee Stock Option Plan
(the Plan). The Plan provides qualified employees with 100,000 thousand
units of option rights with each unit representing one common share of
stock. The option rights are valid for ten years and exercisable at certain
percentages subsequent to the second anniversary of issuance. Under the
terms of the Plan, stock options are granted at an exercise price equal to
the closing price of the Company's common shares listed on the TSE on the
date of grant. Under the Plan, there were 50,378 thousand option rights
that had never been granted, or had been granted but cancelled. These
un-granted or cancelled option rights expired on September 30, 2003.
Information as of September 30, 2003 with respect to stock option rights
activities under the Plan is as follows:
Outstanding Option Rights
-----------------------------
Number of Range of
Option Rights Exercise
(in Thousand) Price (NT$)
------------- -------------
Balance, January 1, 2003 19,369 46.86-48.70
Options granted 32,031 38.23-53.76
Options cancelled ( 1,778) 38.23-53.76
-------------
Balance, September 30, 2003 49,622
=============
The aforementioned number of outstanding option rights and exercise prices
have been adjusted, taken stock dividends into consideration, in accordance
with the Plan.
On September 2, 2003, the Board of Directors approved the 2003 employee
stock option plan (the 2003 Plan). The maximum number of shares authorized
to be granted is 120,000 thousand option rights. As of October 16, 2003,
the 2003 Plan is in the process of SFC's approval.
Preferred Stock
The Company issued 1,300,000 thousand shares of unlisted Series
A--preferred stock to certain investors on November 29, 2000. All of the
preferred stock was redeemed at par value and retired on May 29, 2003.
Under the Company's Articles of Incorporation, as amended on June 3, 2003,
the Company is no longer authorized to issue preferred stock.
The following are the rights of the preferred shareholders and the related
terms and conditions prior to redemption:
Preferred shareholders
a. are entitled to receive cumulative cash dividends at an annual rate of
3.5%.
b. are not entitled to receive any common stock dividends (whether
declared out of unappropriated earnings or capital surplus).
-20-
c. have priority over the holders of common shares to the assets of the
Company available for distribution to shareholders upon liquidation or
dissolution; however, the pre-emptive rights to the assets shall not
exceed the issue value of the shares.
d. have voting rights similar to that of the holders of common shares.
e. have no right to convert their shares into common shares. The preferred
shares are to be redeemed within thirty months from their issuance. The
preferred shareholders have the aforementioned rights and the Company's
related obligations remain the same until the preferred shares are
redeemed by the Company.
16. TREASURY STOCK (COMMON STOCK)
(Shares in Thousand)
Beginning Ending
Purpose Shares Dividend Sell Shares
------------------------------------------------ --------- -------- -------- ---------
Nine months ended September 30, 2003
------------------------------------
Reclassification of parent company stock held by
subsidiaries from long-term investment 42,001 3,357 4,574 40,784
========= ======== ======== =========
Nine months ended September 30, 2002
------------------------------------
Reclassification of parent company stock held by
subsidiaries from long-term investment 39,270 3,818 1,087 42,001
========= ======== ======== =========
Proceeds from the sale of treasury stock for the nine months ended
September 30, 2003 and 2002 were NT$318,850 thousand and NT$96,501
thousand, respectively. As of September 30, 2003 and 2002, the book value
of the treasury stock was NT$1,643,404 thousand and NT$1,914,700 thousand,
respectively; the market value was NT$2,776,198 thousand and NT$1,956,454
thousand, respectively. Capital stock held by a subsidiary as an investment
is recorded as treasury stock, with the holder having the same rights as
other common shareholders.
17. EARNINGS PER SHARE
Earnings per share (EPS) is computed as follows:
EPS (NT$)
Amounts (Numerator) -------------------------------
------------------------------- Shares Before After
Before After (Denominator) Income Income
Income Tax Income Tax (Thousand) Tax Tax
-------------- -------------- -------------- -------------- --------------
Nine months ended September 30, 2003
------------------------------------
Net income $ 33,460,210 $ 31,256,349
Less--preferred stock dividends ( 184,493) ( 184,493)
-------------- --------------
Basic earnings per share
Income available to common shareholders $ 33,275,717 $ 31,071,856 20,222,602 $ 1.65 $ 1.54
============== ==============
Effect of diluted securities--stock
options -- -- 4,246
-------------- -------------- --------------
Diluted earnings per share
Income available to common shareholders $ 33,275,717 $ 31,071,856 20,226,848 $ 1.65 $ 1.54
============== ============== ============== ============== ==============
Nine months ended September 30, 2002
------------------------------------
Net income $ 24,034,742 $ 19,057,517
Less--preferred stock dividends ( 340,315) ( 340,315)
-------------- --------------
Basic and diluted earnings per share
Income available to common shareholders $ 23,694,427 $ 18,717,202 20,220,989 $ 1.17 $ 0.93
============== ============== ============== ============== ==============
-21-
The potential common shares issuable under the employee stock option plan
(see Note 15) are included in the denominator of the diluted EPS
computation by using the treasury stock method under the SFAS No. 24,
"Earnings Per Share", but such shares resulted in a non-dilutive per share
amount for the nine months ended September 30, 2002. The average number of
shares outstanding for the EPS calculation has been adjusted retroactively
for issuance of stock dividends and stock bonuses. The retroactive
adjustment caused the basic EPS before income tax and after income tax for
the nine months ended September 30, 2002 to decrease from NT$1.28 to
NT$1.17 and NT$1.01 to NT$0.93, respectively.
18. RELATED PARTY TRANSACTIONS
The Company engages in business transactions with the following related
parties:
a. Industrial Technology Research Institute (ITRI); one of whose directors
is the Chairman of the Company
b. Koninklijke Philips Electronics N.V. (Philips); a major shareholder of
the Company
c. Subsidiaries
TSMC--North America
TSMC--Europe
TSMC--Japan
d. Investees
VIS
SSMC
GUC
e. Indirect subsidiaries
WaferTech, LLC (WaferTech)
TSMC Technology
-22-
The transactions with the aforementioned parties in addition to those
disclosed in other notes, are summarized as follows:
Nine Months Ended September 30
--------------------------------------------
2003 2002
--------------------- --------------------
During the period Amount % Amount %
--------------------------------- ------------ ------ ------------ -----
Sales
TSMC--North America $ 84,777,377 58 $ 69,807,307 57
Philips and its affiliates 2,370,142 2 2,005,606 2
GUC 465,626 -- 334,171 --
ITRI 29,856 -- 55,854 --
SSMC 1,151 -- 7,018 --
VIS 19 -- 92,119 --
WaferTech -- -- 1,152 --
------------ ------ ------------ -----
$ 87,644,171 60 $ 72,303,227 59
============ ====== ============ =====
Purchases
WaferTech $ 7,815,373 35 $ 7,782,809 42
SSMC 3,805,999 17 1,832,217 10
VIS 3,454,704 16 2,500,777 13
------------ ------ ------------ -----
$ 15,076,076 68 $ 12,115,803 65
============ ====== ============ =====
Operating expense--rental
ITRI $ -- -- $ 40,401 4
============ ====== ============ =====
Manufacturing expenses--technical
assistance fee Philips $ 2,250,285 3 $ 2,174,810 3
============ ====== ============ =====
Marketing expenses--commission
TSMC--Japan $ 158,717 17 $ 158,855 18
TSMC--Europe 111,780 12 89,396 10
------------ ------ ------------ -----
$ 270,497 29 $ 248,251 28
============ ====== ============ =====
Sale of property, plant, and
equipment VIS $ 8,098 5 $ -- --
============ ====== ============ =====
Non-operating income and gain
SSMC (technical service income
mainly) $ 119,041 8 $ 85,159 6
WaferTech 1,528 -- 1,226 --
VIS 271 -- -- --
------------ ------ ------------ -----
$ 120,840 8 $ 86,385 6
============ ====== ============ =====
(Continued)
-23-
September 30
--------------------------------------------
2003 2002
--------------------- --------------------
At end of the period Amount % Amount %
----------------------------- ------------ ------ ------------ -----
Receivables
TSMC--North America $ 14,337,121 94 $ 10,780,498 97
Philips and its affiliates 752,568 5 278,788 2
VIS 95,111 1 41,848 --
GUC 86,093 -- 85,722 1
TSMC Technology 12,103 -- 10,517 --
SSMC 11,176 -- 7,176 --
ITRI 893 -- 16,636 --
WaferTech -- -- 196 --
------------ ------ ------------ -----
$ 15,295,065 100 $ 11,221,381 100
============ ====== ============ =====
Payables
Philips and its affiliates $ 1,481,653 39 $ 1,370,101 49
WaferTech 964,659 26 569,778 20
VIS 796,865 21 648,203 23
SSMC 501,281 14 168,729 6
TSMC--Japan 16,860 -- 24,636 1
TSMC--Europe 16,076 -- 27,519 1
TSMC Technology 7,027 -- 10,821 --
TSMC--North America 5,978 -- 10,477 --
------------ ------ ------------ -----
$ 3,790,399 100 $ 2,830,264 100
============ ====== ============ =====
Refundable deposits--VIS $ 260,992 91 $ 550,660 95
============ ====== ============ =====
Except for WaferTech and TSMC--North America, sales to related parties are
based on normal selling prices and collection terms. The payables to
WaferTech represent the purchase of finished goods. The purchase prices of
finished goods were determined in accordance with the related contractual
agreements. The selling prices to TSMC--North America are approximately 99%
of the comparable selling prices to third parties and the payment terms are
thirty days from the date of invoice, which is not significantly different
from payment terms with third parties.
19. SIGNIFICANT LONG-TERM OPERATING LEASES
The Company leases land from the Science-Based Industrial Park (SBIP)
Administration where its Fab 2 through Fab 14 manufacturing facilities
reside. These agreements expire on various dates from March 2008 to
December 2020 and have annual rent payments aggregating NT$230,449
thousand. The agreements can be renewed upon their expiration.
-24-
Future remaining lease payments are as follows:
Year Amount
------------------------- ------------
October to December, 2003 $ 57,612
2004 230,449
2005 230,449
2006 230,449
2007 230,449
2008 206,406
2009 and thereafter 1,586,359
------------
$ 2,772,173
============
20. SIGNIFICANT COMMITMENTS AND CONTINGENCIES
The significant commitments and contingencies as of September 30, 2003 are
as follows:
a. Under a Technical Cooperation Agreement with Philips, as amended on
May 12, 1997, the Company shall pay technical assistance fees at a
percentage of net sales (as defined in the agreement) with respect to
certain products. The agreement shall remain in force through July 8,
2007 and may be automatically renewed for successive periods of three
years thereafter. Under the amended agreement, starting from the fifth
anniversary date of the amended agreement, the fees are subject to
reduction by the amounts the Company pays to any third party for
settling any licensing/infringement disputes, provided that the fees
to be paid after reduction will not be below a certain percentage of
the net sales.
b. Subject to certain equity ownership and notification requirements,
Philips and its affiliates can avail themselves each year of up to 30%
of the Company's production capacity.
c. Under a technical cooperation agreement with ITRI, the Company shall
reserve and allocate up to 35% of certain of its production capacity
for use by the Ministry of Economic Affairs (MOEA) or any other party
designated by the MOEA.
d. Under several foundry agreements, the Company shall reserve a portion
of its production capacity for certain major customers who have made
guarantee deposits to the Company. As of September 30, 2003, the
Company has a total of US$24,929 thousand of guarantee deposits.
e. Under a Shareholders Agreement entered into with Philips and EDB
Investments Pte Ltd. on March 30, 1999, the parties formed a joint
venture company, SSMC, for the purpose of constructing an integrated
circuit foundry in Singapore, and allowed the Company to invest in 32%
of SSMC's capital. The Company and Philips committed to buy a specific
percentage of the production capacity of SSMC. If any party defaults
on the commitment and the capacity utilization of SSMC falls below a
specific percentage of its total capacity, the defaulting party is
required to compensate SSMC for all related unavoidable costs.
f. The Company provides technical services to SSMC under a Technical
Cooperation Agreement (the Agreement) entered into on May 12, 1999.
The Company receives compensation for such services computed at a
specific percentage of net selling prices of certain products sold by
SSMC. The Agreement shall remain in force for ten years and may be
automatically renewed for successive periods of five years unless
pre-terminated by either party under certain conditions.
g. The Company provided guarantees on loans amounting to US$200,000
thousand, US$40,000 thousand and US$440,000 thousand for TSMC
Development, Inc. (TSMC Development), TSMC--North America and
WaferTech, respectively.
-25-
h. Under a Technology Transfer Agreement (TTA) with National
Semiconductor Corporation (National) entered into on June 27, 2000,
the Company shall receive payments for license of certain technology
to National. The agreement will remain in force for ten years and will
be automatically renewed for successive periods of two years
thereafter unless either party gives notice for early termination
under certain conditions. In January 2003, the Company and National
entered into a Termination Agreement whereby the TTA was terminated
for convenience. Under the termination agreement, the Company will be
relieved of any further obligation to transfer any additional
technology. In addition, the Company granted National an option to
request additional technology transfers under the same terms and
conditions as the terminated TTA through January 2008.
i. The Company entered into a Manufacturing Agreement with VIS. VIS
agrees to reserve certain production capacity for the Company to
manufacture certain logic devices or other technologies required by
the Company's customers at selling prices agreed upon by the parties.
The Company paid NT$1,200,000 thousand to VIS as a guarantee deposit.
VIS shall return portions of the guarantee deposit without any
interest to the Company upon reaching certain levels of purchase
commitment by the Company. The contract will remain in force for five
years. As of September 30, 2003, the refundable deposit was NT$260,992
thousand.
j. Starting from 2001, the Company entered into several license
arrangements for certain semiconductor patents. The terms of the
contracts range from five to ten years with payments to be paid in the
form of royalties over the term of the related contracts. The Company
has recorded the related amounts as a liability and deferred charges
which is amortized and charged to cost of sales on a straight-line
basis over the estimated life of the technology or the term of the
contract, whichever is shorter.
k. In November 2002, the Company entered into an Amended and Restated
Joint Technology Cooperation Agreement with Philips, Motorola, Inc.
and STMicroelectronics to jointly develop 90-nanometer to 65-nanometer
advanced CMOS Logic and e-DRAM technologies. The Company also agreed
to align 0.12 micron CMOS Logic technology to enhance its foundry
business opportunities. The Company will contribute process
technologies and share a portion of the costs associated with this
joint development project.
l. Amounts available under unused letter of credits as of September 30,
2003 were NT$6,480 thousand, EUR36 thousand and Singapore dollar $85
thousand.
m. As of September 30, 2003, unused credit lines for short-term loans
were NT$8,730,000 thousand and US$327,000 thousand.
n. As of September 30, 2003, unused credit lines for long-term loans were
NT$27,500 thousand.
21. ADDITIONAL DISCLOSURES
Following are the additional disclosures required by the SFC for TSMC and
investees:
a. Financing provided: Please see Table 1 attached;
b. Endorsement/guarantee provided: Please see Table 2 attached;
c. Marketable securities held: Please see Table 3 attached;
d. Marketable securities acquired and disposed of at costs or prices of
at least NT$100 million or 20% of the paid-in capital: Please see
Table 4 attached;
e. Acquisition of individual real estate at costs of at least NT$100
million or 20% of the paid-in capital: Please see Table 5 attached;
-26-
f. Disposal of individual real estate at prices of at least NT$100
million or 20% of the paid-in capital: None;
g. Total purchase from or sale to related parties amounting to at least
NT$100 million or 20% of the capital: Please see Table 6 attached;
h. Receivables from related parties amounting to at least NT$100 million
or 20% of the capital: Please see Table 7 attached;
i. Names, locations, and related information of investees on which the
Company exercises significant influence: Please see Table 8 attached;
j. Financial instrument transactions:
1) Derivative financial instruments
The Company entered into derivative financial instrument
transactions for the nine months ended September 30, 2003 to
manage exposures related to foreign-currency denominated
receivables or payables, and interest rate fluctuations. Certain
information on these contracts is as follows:
a) Outstanding forward exchange contracts as of September 30,
2003:
Financial Contract Amount (Nominal)
Instruments Maturity Period Amount) (in Thousand)
----------- ----------------------------- ----------------------------
Sell October 2003 to March 2004 US$ 1,430,000(US$/NT$)
Buy October 2003 to November 2003 EUR 38,000(EUR/US$)
As of September 30, 2003, receivables from forward exchange
contracts (included in the "other financial assets" account)
aggregate approximately NT$458,902 thousand, and payables
from forward exchange contracts (included in the "other
current liabilities" account) aggregate approximately
NT$79,306 thousand. Net exchange gain for the nine months
ended September 30, 2003 was NT$902,549 thousand.
The assets and liabilities related to the above forward
exchange contracts are as follows:
As of September 30,
Assets and liabilities 2003 (in Thousand)
----------------------------- -------------------
Time Deposit US$ 845,544
Notes and accounts receivable US$ 731,587
Accounts payable EUR 87,261
b) Interest rate swaps
The Company has entered into interest rate swap contracts to
manage exposures to rising interest rates on its floating
rate long-term loans. Interest expense on these transactions
for the nine months ended September 30, 2003 was NT$141,097
thousand.
Outstanding contracts as of September 30, 2003 were as
follows:
Contract Amount
Contract Date Period (in Thousand)
------------------ --------------------------------------- -----------------
July 1, 1999 July 1, 1999 to June 28, 2004 US$ 5,714
September 19, 2003 September 19, 2003 to December 15, 2005 NT$ 500,000
-27-
c) Option contracts
The Company entered into foreign currency option contracts
to manage exchange rate fluctuations arising from its
anticipated US dollar cash receipts on export sales or its
Yen currency obligations for purchases of machinery and
equipment.
As of September 30, 2003, there were no outstanding option
contracts.
For the nine months ended September 30, 2003, the Company
realized premium income of NT$50,273 thousand and premium
expense of NT$204,056 thousand.
d) Transaction risk
i) Credit risk. Credit risk represents the positive net
settlement amount of those contracts with positive fair
values at the balance sheet date. The positive net
settlement amount represents the loss incurred by the
Company if the counter-parties breached the contracts.
The banks, which are the counter-parties to the
foregoing derivative financial instruments, are
reputable financial institutions. Management believes
its exposures related to the potential default by those
counter-parties are low.
ii) Market price risk. All derivative financial instruments
are intended as hedges for fluctuations in currency
exchange rates on the Company's foreign currency
denominated receivables or payables and interest rate
fluctuations on its floating rate long-term loans.
Gains or losses from forward exchange contracts are
likely to be offset by gains or losses from the hedged
receivables and payables. Interest rate risks are also
controlled as the expected cost of capital is fixed.
Thus, market price risks are believed to be minimal.
iii) Liquidity and cash flow risk and uncertainty of amount
and term of future cash demand.
As of September 30, 2003, the Company's future cash
demand for outstanding forward exchange contracts,
interest rate swaps and option contracts are as
follows:
Forward Exchange Contracts
-----------------------------------------
Term Inflow Outflow
--------------- -------------------- ------------------
(In Thousand) (In Thousand)
Within one year NT$ 48,639,807 US$ 1,472,647
EUR 38,000
The Company has sufficient operating capital to meet
the above cash demand. The interest rate of the
interest rate swaps has taken the Company's cost of
capital into account. In addition, the exchange rates
of forward foreign exchange contracts and option
contracts are fixed. Therefore, there is no material
fund raising risk and cash flow risk.
2) Fair value of financial instruments:
September 30, 2003 September 30, 2002
--------------------------- ----------------------------
Carrying Carrying
Non-derivative financial instruments Amount Fair Value Amount Fair Value
------------------------------------ ------------ ------------ ------------ ------------
Assets
Cash and cash equivalents $ 82,730,782 $ 82,730,782 $ 64,516,454 $ 64,516,454
Short-term investments 11,664,302 11,664,302 -- --
Receivables from related parties 15,295,065 15,295,065 11,221,381 11, 221,381
Notes and accounts receivable 12,748,652 12,748,652 10,570,082 10,570,082
(Continued)
-28-
September 30, 2003 September 30, 2002
---------------------------- -----------------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
------------ ------------- ------------- -------------
Other financial assets $ 1,192,351 $ 1,192,351 $ 1,069,861 $ 1,069,861
Long-term investments (including credit
balances of long-term investments) 34,668,956 39,200,246 36,285,360 41,579,910
Refundable deposits 287,403 287,403 579,147 579,147
Liabilities
Payables to related parties 3,790,399 3,790,399 2,830,264 2,830,264
Accounts payable 5,596,631 5,596,631 4,645,596 4,645,596
Payables to contractors and equipment suppliers 9,480,795 9,480,795 17,451,662 17,451,662
Bonds payable (includes current portion) 35,000,000 35,641,304 44,000,000 44,168,116
Other long-term payable (including current
portion) 4,889,061 4,889,061 4,184,705 4,184,705
Guarantee deposits 838,864 838,864 1,507,971 1,507,971
Derivative financial instruments
--------------------------------
Forward exchange contracts (buy) 45,189 52,376 ( 7,314) ( 19,182)
Forward exchange contracts (sell) 334,407 540,975 ( 251,607) ( 109,275)
Interest rate swaps -- ( 5,812) 25,425 ( 230,675)
Option -- -- -- ( 493,758)
Fair values of financial instruments were determined as follows:
a) The carrying amounts reported in the balance sheets for cash
and cash equivalents, notes and accounts receivable, other
financial assets, accounts payable, payables to contractors
and equipment suppliers are approximate to their fair
values.
b) Fair value of short-term and long-term investments is based
on quoted market prices. If quoted market prices are
unavailable, fair value is based on net asset value or book
value of investment.
c) Fair value of refundable deposits and guarantee deposits is
based on carrying values.
d) The fair value of bonds payable is the quoted market value.
Fair value of other long-term payable is approximate to its
carrying value.
e) Fair value of derivative financial instruments is the
estimated net receivable or (payable) if the contracts are
terminated on the relevant balance sheet date.
The fair values of some financial and non-financial instruments
were not included in the fair values disclosed above.
Accordingly, the sum of the fair values of the financial
instruments listed above does not represent the fair value of the
Company as a whole.
3) Investment in Mainland China:
The Company filed an investment project with the Investment
Commission of MOEA to establish a foundry in Mainland China. On
February 27, 2003, the authority approved phase one of the
foregoing project and permitted direct investment in establishing
TSMC-Shanghai. The Company entered into an investment related
agreement with Shanghai Songjiang District People's Government on
June 8, 2003. On August 4, 2003, TSMC-Shanghai has been
established and is 100% held by the Company. TSMC-Shanghai is
engaged mainly in the manufacturing and selling of integrated
circuits. The Company invested US$56,000 thousand on October 8,
2003.
-29-
TABLE 1
-------
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD.
FINANCING PROVIDED
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003
(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)
================================================================================
--------------------------------------------------------------------------------------------------------------
Maximum
Balance
for the Ending
Period Balance Financing
Financial (US$ in (US$ in Interest Reasons
No. Financing Name Counter-party Statement Account Thousand) Thousand) Rate (Note 1)
--------------------------------------------------------------------------------------------------------------
1 TSMC International TSMC Technology Other receivables $ 542,278 $ 542,278 4.25% 2
(US$ 16,049) (US$ 16,049)
--------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------
Collateral Financing
---------------- Financing Company's
Limit Financing
Reasons For for Each Amount Limits
Transaction Short-term Allowance for Borrowing (US$ in
Amounts Financing Bad Debt Item Value Company Thousand)
-----------------------------------------------------------------------------------------
$ -- Operating capital $ -- $ -- $ -- N/A $ 33,384,427
(US$ 987,968)
(Note 2)
-----------------------------------------------------------------------------------------
Note 1: The No. 2 represents that the short-term financing is necessary for the
business.
Note 2: Not exceeding the issued capital of the Company.
-30-
TABLE 2
-------
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD.
ENDORSEMENT/GUARANTEE PROVIDED
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003
(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)
================================================================================
-----------------------------------------------------------------------------------------------------------------------------------
Counter-party Ratio of
----------------------------- Accumulated
Amount of Maximum
Maximum Value of Collateral to Collateral/
Endors- Nature of Limits on Each Balance for Ending Collateral Net Equity of Guarantee
ement/ Relati- Counter-party's the Period Balance Property, the Latest Amounts
Guarantee onship Endorsement/ (US$ in (US$ in Plant and Financial Allowable
No. Provider Name (Note 2) Guarantee Amounts Thousand) Thousand) Equipment Statement (Note 1)
-----------------------------------------------------------------------------------------------------------------------------------
0 TSMC TSMC Development 3 Not exceed 10% $ 6,758,200 $ 6,758,200 $ -- 2.16% $ 78,242,856
of the net worth (US$ 200,000) (US$ 200,000)
of TSMC, and
also limiting to
TSMC--North America 2 the total paid- 1,351,640 1,351,640 -- 0.43%
in-capital of (US$ 40,000) (US$ 40,000)
the endorsement/
WaferTech 3 guarantee 14,868,040 14,868,040 -- 4.75%
company, unless (US$ 440,000) (US$ 440,000)
otherwise
approved by
Board of
Directors.
-----------------------------------------------------------------------------------------------------------------------------------
Note 1: 25% of the net worth of TSMC as of September 30, 2003.
Note 2: The No. 2 represents a subsidiary in which TSMC holds directly over 50%
of the equity interest. The No. 3 represents an investee in which TSMC
holds directly and indirectly over 50% of the equity interest.
-31-
TABLE 3
-------
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD.
MARKETABLE SECURITIES HELD
SEPTEMBER 30, 2003
(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)
================================================================================
------------------------------------------------------------------------------------------------------------------------------------
September 30, 2003
---------------------------------------------
Relati- Shares/ Carrying Market Value
Marketable onship Units Value Percentage or Net Asset
Held Company Securities with the Financial Statement (Thou- (US$ in of Value (US$
Name Type and Name Company Account sand) Thousand) Ownership in Thousand) Note
------------------------------------------------------------------------------------------------------------------------------------
TSMC Liquidity fund
--------------
BOA Funds -- Short-term investment 40,000 $ 1,351,200 N/A $ 1,351,200
(US$ 40,000) (US$ 40,000)
GS Funds -- Short-term investment 20,000 675,600 N/A 675,600
(US$ 20,000) (US$ 20,000)
Bond fund
---------
JF Taiwan Bond Fund -- Short-term investment 34,343 500,000 N/A 501,494
ABN AMRO Bond Fund -- Short-term investment 34,794 500,000 N/A 501,597
Bond
----
2002 Government Bond
Series A -- Short-term investment -- 2,902,238 N/A 2,909,857
2002 Government Bond
Series E -- Short-term investment -- 3,113,067 N/A 3,122,577
1994 Government Bond
Series C -- Short-term investment -- 1,422,197 N/A 1,401,949
Chung Shing Bond with
Repurchase Agreement -- Short-term investment -- 1,200,000 N/A 1,200,028
Stock
-----
TSMC--North America Subsidiary Long-term investment 11,000 286,061 100 1,011,390 The treasury
stocks in
amounts of
NT$725,329
thousand are
deducted
from the
carrying
value.
TSMC--Europe Subsidiary Long-term investment -- 10,921 100 10,921
TSMC--Japan Subsidiary Long-term investment 6 97,567 100 97,567
VIS Investee Long-term investment 787,016 3,968,395 28 6,582,824
TSMC International Subsidiary Long-term investment 987,968 21,646,213 100 21,646,213
TSMC Partners Subsidiary Long-term investment 300 4,089,066 100 4,089,066
SSMC Investee Long-term investment 382 2,616,143 32 2,616,143
Emerging Alliance Subsidiary Long-term investment -- 755,364 99 755,364
GUC Investee Long-term investment 39,040 377,758 47 415,507
Taiwan Mask Corp. -- Long-term investment 8,794 32,129 2 157,995
United Gas Co., Ltd. -- Long-term investment 16,783 193,584 11 274,697
Shin-Etsu Handotai
Taiwan Co., Ltd. -- Long-term investment 10,500 105,000 7 140,845
W.K. Technology
Fund IV -- Long-term investment 5,000 50,000 2 56,904
Hon Tung Ventures
Capital -- Long-term investment 8,392 83,916 10 69,896
------------------------------------------------------------------------------------------------------------------------------------
(Continued)
-32-
------------------------------------------------------------------------------------------------------------------------------------
September 30, 2003
---------------------------------------------
Relati- Shares/ Carrying Market Value
Marketable onship Units Value Percentage or Net Asset
Held Company Securities with the Financial Statement (Thou- (US$ in of Value (US$
Name Type and Name Company Account sand) Thousand) Ownership in Thousand) Note
------------------------------------------------------------------------------------------------------------------------------------
Certificate
-----------
Chi Cherng Investment Investee Long-term investment -- $ 43,028 36 $ 501,592 The treasury
stocks in
amounts of
NT$458,564
thousand are
deducted from
the carrying
value.
Hsin Ruey Investment Investee Long-term investment -- 41,787 36 501,298 The treasury
stocks in
amounts of
NT$459,511
thousand are
deducted from
the carrying
value.
Equity
------
Crimson Asia Capital -- Long-term investment N/A 42,355 N/A 42,355
Horizon Ventures -- Long-term investment N/A 229,669 N/A 229,669
TSMC--North Stock
America -----
TSMC Parent Long-term investment 13,287 725,329 -- 904,471
company
Chi Cherng
Investment Stock
-----
TSMC Parent Short-term investment 13,735 458,564 -- 934,987
company
Certificate
-----------
Hsin Ruey Investment Major Long-term investment -- 902,017 64 902,017
shareholder
Hsin Ruey Stock
Investment -----
TSMC Parent Short-term investment 13,761 459,511 -- 936,740
company
Certificate
-----------
Chi Cherng Investment Major Long-term investment -- 902,888 64 902,888
shareholder
TSMC Inter-
national Stock
----- Subsidiary Long-term investment 45,000 US$ 42,233 97 US$ 42,233
InveStar Subsidiary Long-term investment 51,300 US$ 38,432 97 US$ 38,432
InveStar II Subsidiary Long-term investment 1 US$ 537,248 100 US$ 537,248
TSMC Development Subsidiary Long-term investment 1 (US$ 7,886) 100 (US$ 7,886)
TSMC Technology -- Long-term investment 68 -- -- -
3DFX Interactive Inc. -- Short-term investment 558 US$ 547 -- US$ 22,175
Marvell
Liquidity fund
--------------
BOA Fund -- Short-term investment 67,100 US$ 67,100 N/A US$ 67,100
VIS Stock
-----
VIS Associates Inc. Subsidiary Long-term investment 41,070 1,248,569 100 1,248,569 The book value
is net of
allowance for
valuation
loss of
long-term
investments,
$8,684
thousand.
PowerChip
Semiconductor, Inc. Investee Long-term investment 121,005 1,586,946 4 1,950,603
Etron Technology,
Inc. Investee Long-term investment 4,859 216,852 2 106,650
Walsin Technology,
Inc. Investee Long-term investment 34,551 302,559 8 267,235
MEGIC Corporation Investee Long-term investment 16,500 177,000 8 143,013
FormFactor, Inc. Investee Long-term investment 267 64,360 1 193,712
United Gas Co., Ltd. Investee Long-term investment 3,357 38,716 2 55,044
------------------------------------------------------------------------------------------------------------------------------------
(Continued)
-33-
------------------------------------------------------------------------------------------------------------------------------------
September 30, 2003
----------------------------------------------
Relati- Shares/ Carrying Market Value
Marketable onship Units Value Percentage or Net Asset
Held Company Securities with the Financial Statement (Thou- (US$ in of Value (US$
Name Type and Name Company Account sand) Thousand) Ownership in Thousand) Note
------------------------------------------------------------------------------------------------------------------------------------
Bond fund
---------
Yuan Da Duo Li #2 -- Short-term investment 58,069 $ 800,703 -- $ 811,835
Jihsun -- Short-term investment 61,365 790,000 -- 799,659
Fu Hua -- Short-term investment 4,015 50,000 -- 50,817
Well Pool Bond Fund -- Short-term investment 106,372 1,268,000 -- 1,275,881
VIS Assoc-
iates Inc. Stock
-----
VIS Investment
Holding, Inc. Subsidiary Long-term investment 63 US$ 418 100 US$ 418
Equity
------
Silicon Valley
Equity Fund -- Long-term investment -- US$ 4,360 34 US$ 4,360
Silicon Valley
Equity Fund II -- Long-term investment -- US$ 5,333 14 US$ 5,333
Equity certificate
------------------
ABN AMRO Bank -- Long-term investment 38,648 US$ 17,604 -- US$ 17,604
Fund
----
Grand Palace Trust -- Long-term investment -- US$ 3,584 100 US$ 3,584
VIS
Investment
Holding,
Inc. Stock
-----
VIS Micro, Inc. Subsidiary Long-term investment 200 US$ 294 100 US$ 294
TSMC
Development Stock
-----
WaferTech Subsidiary Long-term investment -- US$ 321,076 99 US$ 321,076
InveStar Stock
-----
PLX Technology, Inc. -- Short-term investment 357 US$ 693 -- US$ 2,269
Formfactor, Inc. -- Short-term investment 267 US$ 2,000 -- US$ 5,742
WGRD -- Short-term investment 86 US$ 514 -- US$ 437
Programmable
Microelectronics
(Taiwan), Inc. -- Long-term investment 575 US$ 204 4 US$ 204
Global Testing Corp. -- Long-term investment 13,268 US$ 5,329 12 US$ 5,329
Chipstrate
Technologies, Inc. -- Long-term investment 1,332 US$ 310 1 US$ 310
Richtek Technology
Corp. -- Long-term investment 1,800 US$ 356 1 US$ 356
Advanced Power
Electronics, Corp. -- Long-term investment 2,750 US$ 1,385 3 US$ 1,385
Capella Microsystems,
Inc. -- Long-term investment 530 US$ 157 -- US$ 157
Preferred stock
---------------
Integrated Memory
Logic, Inc. -- Long-term investment 1,831 US$ 1,221 -- US$ 1,221
SiRF Technology
Holdings, Inc. -- Long-term investment 306 US$ 1,333 -- US$ 1,333
Sensory, Inc. -- Long-term investment 1,404 US$ 312 -- US$ 312
LightSpeed
Semiconductor
Corporation -- Long-term investment 2,252 US$ 329 -- US$ 329
Tropian, Inc. -- Long-term investment 1,758 US$ 2,334 -- US$ 2,334
Sonics, Inc. -- Long-term investment 2,686 US$ 3,530 -- US$ 3,530
Atheros, Inc. -- Long-term investment 1,607 US$ 3,593 -- US$ 3,593
NanoAmp Solutions,
Inc. -- Long-term investment 541 US$ 853 -- US$ 853
Monolithic Power
Systems, Inc. -- Long-term investment 2,521 US$ 2,000 -- US$ 2,000
------------------------------------------------------------------------------------------------------------------------------------
(Continued)
-34-
------------------------------------------------------------------------------------------------------------------------------------
September 30, 2003
----------------------------------------------
Relati- Shares/ Carrying Market Value
Marketable onship Units Value Percentage or Net Asset
Held Company Securities with the Financial Statement (Thou- (US$ in of Value (US$
Name Type and Name Company Account sand) Thousand) Ownership in Thousand) Note
------------------------------------------------------------------------------------------------------------------------------------
Memsic, Inc. -- Long-term investment 2,727 US$ 1,500 -- US$ 1,500
Reflectivity, Inc. -- Long-term investment 1,064 US$ 1,192 -- US$ 1,192
Signia Technologies,
Inc. -- Long-term investment 3,000 US$ 208 -- US$ 208
Match Lab, Inc. -- Long-term investment 1,875 US$ 375 -- US$ 375
Oridus, Inc.
(Creosys, Inc.) -- Long-term investment 1,500 US$ 300 -- US$ 300
Incentia Design
Systems, Inc. -- Long-term investment 286 US$ 180 -- US$ 180
IP Unity -- Long-term investment 1,008 US$ 494 -- US$ 494
InveStar II Stock
-----
WGRD -- Short-term investment 87 US$ 520 -- US$ 443
eChannel Option
Holding, Inc. -- Long-term investment 358 US$ 251 -- US$ 251
Elcos Microdisplay
Technology, Ltd. -- Long-term investment 270 US$ 27 -- US$ 27
Signia Technologies,
Inc. -- Long-term investment 351 US$ 104 -- US$ 104
Procoat Technology -- Long-term investment 4,165 US$ 2,000 4 US$ 2,000
Richtek Technology
Corp. -- Long-term investment 845 US$ 1,036 2 US$ 1,036
Programmable
Microelectronics
(Taiwan), Inc. -- Long-term investment 177 US$ 52 -- US$ 52
Auden Technology
MFG Co., Ltd. -- Long-term investment 953 US$ 1,151 2 US$ 1,151
GeoVision, Inc. -- Long-term investment 180 US$ 133 -- US$ 133
EoNex Technologies,
Inc. -- Long-term investment 55 US$ 3,096 -- US$ 3,096
Conwise Technology
Co., Ltd. -- Long-term investment 2,800 US$ 996 -- US$ 996
Eon Technology, Inc. -- Long-term investment 2,800 US$ 996 -- US$ 996
Goyatek Technology,
Inc. -- Long-term investment 2,088 US$ 1,380 -- US$ 1,380
TrendChip
Technologies Corp. -- Long-term investment 2,000 US$ 889 -- US$ 889
Capella Microsystems,
Inc. -- Long-term investment 419 US$ 124 -- US$ 124
Preferred stock
---------------
Memsic, Inc. -- Long-term investment 2,289 US$ 1,560 -- US$ 1,560
Oepic, Inc. -- Long-term investment 4,997 US$ 1,317 -- US$ 1,317
NanoAmp Solutions,
Inc. -- Long-term investment 250 US$ 1,000 -- US$ 1,000
Advanced Analogic
Technology, Inc. -- Long-term investment 948 US$ 1,261 -- US$ 1,261
Monolithic Power
Systems, Inc. -- Long-term investment 804 US$ 1,946 -- US$ 1,946
Ralink Technologies,
Inc. -- Long-term investment 1,833 US$ 815 -- US$ 815
Sonics, Inc. -- Long-term investment 3,082 US$ 3,082 -- US$ 3,082
Newport Opticom, Inc. -- Long-term investment 1,157 US$ 402 -- US$ 402
Silicon Data, Inc. -- Long-term investment 2,000 US$ 750 -- US$ 750
Reflectivity, Inc. -- Long-term investment 1,596 US$ 1,500 -- US$ 1,500
Angstron Systems,
Inc. -- Long-term investment 1,567 US$ 500 -- US$ 500
Tropian, Inc. -- Long-term investment 1,464 US$ 2,000 -- US$ 2,000
SiRF Technology
Holdings, Inc. -- Long-term investment 20 US$ 131 -- US$ 131
LeadTONE Wireless,
Inc. -- Long-term investment 680 US$ 131 -- US$ 131
Match Lab, Inc. -- Long-term investment 313 US$ 63 -- US$ 63
eBest!, Inc. -- Long-term investment 201 US$ 41 -- US$ 41
Kilopass Technology,
Inc. -- Long-term investment 3,887 US$ 2,000 -- US$ 2,000
Elcos Microdisplay
Technology, Ltd. -- Long-term investment 2,667 US$ 3,500 -- US$ 3,500
Fang Tek, Inc. -- Long-term investment 5,556 US$ 2,000 -- US$ 2,000
Alchip Technologies
Ltd. -- Long-term investment 2,125 US$ 1,700 -- US$ 1,700
------------------------------------------------------------------------------------------------------------------------------------
(Continued)
-35-
------------------------------------------------------------------------------------------------------------------------------------
September 30, 2003
----------------------------------------------
Relati- Shares/ Carrying Market Value
Marketable onship Units Value Percentage or Net Asset
Held Company Securities with the Financial Statement (Thou- (US$ in of Value (US$
Name Type and Name Company Account sand) Thousand) Ownership in Thousand) Note
------------------------------------------------------------------------------------------------------------------------------------
Emerging
Alliance Stock
-----
Global Investment
Holding, Inc. Investee Long-term investment 10,000 $ 100,000 6 $ 100,000
Preferred stock
---------------
Quake Technologies,
Inc. -- Long-term investment 467 US$ 617 1 US$ 617
Pixim, Inc. -- Long-term investment 1,924 US$ 2,382 3 US$ 2,382
Newport Opticom, Inc. -- Long-term investment 962 US$ 250 6 US$ 250
NetLogic
Microsystems, Inc. -- Long-term investment 602 US$ 1,850 1 US$ 1,850
Ikanos Communication,
Inc. -- Long-term investment 5,116 US$ 2,572 3 US$ 2,572
Quicksilver
Technology, Inc. -- Long-term investment 902 US$ 2,488 4 US$ 2,488
Litchfield
Communications -- Long-term investment 3,799 US$ 57 6 US$ 57
Mosaic Systems, Inc. -- Long-term investment 2,481 US$ 12 6 US$ 12
Accelerant Networks,
Inc. -- Long-term investment 440 US$ 640 1 US$ 640
Zenesis Technologies,
Inc. -- Long-term investment 861 US$ 500 4 US$ 500
Reflectivity, Inc. -- Long-term investment 1,596 US$ 1,500 5 US$ 1,500
Iridigm Display, Co. -- Long-term investment 254 US$ 502 2 US$ 502
XHP Microsystems,
Inc. -- Long-term investment 2,280 US$ 750 6 US$ 750
Axiom Microdevices,
Inc. -- Long-term investment 1,000 US$ 1,000 5 US$ 1,000
Optichron, Inc. -- Long-term investment 714 US$ 1,000 6 US$ 1,000
------------------------------------------------------------------------------------------------------------------------------------
-36-
TABLE 4
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD.
MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST
NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003
(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)
================================================================================
-------------------------------------------------------------------------------------------------------------------
Company Name Marketable Financial Statement Counter-Party Nature of Beginning Balance
Securities Account Relationship ---------------------
Type and Name Shares/ Amount
Units (US$ in
(Thousand) Thousand)
-------------------------------------------------------------------------------------------------------------------
TSMC Liquidity fund
--------------
BOA Funds Short-term investment BOA - - $ -
GS Funds Short-term investment Goldman Sachs - - -
Bond fund
---------
JF Taiwan Bond Fund Short-term investment JF Asset Management - - -
(Taiwan) Ltd.
ABN AMRO Bond Fund Short-term investment ABN AMRO - - -
ABN AMRO Select
Bond Fund Short-term investment ABN AMRO - - -
Bond
----
Chung Shing Bond
with Repurchase Chung Shing Bills - - -
Agreement Short-term investment Finance Corp.
2002 Government BNP and several - - -
Bond Series A Short-term investment financial
institutions
2002 Government BNP and several - - -
Bond Series E Short-term investment financial
institutions
1994 Government Chung Shing Bills - - -
Bond Series C Short-term investment Finance Corp. and
several financial
institutions
Stock
-----
Emerging Alliance Long-term investment Emerging Alliance Subsidiary - 767,239
VIS Long-term investment VIS Investee 677,471 3,264,657
Amkor Technology Long-term investment - - 505 280,748
Monolithic System
Tech. Long-term investment - - 470 104,289
TSMC Partners ADR
---
TSMC Short-term investment - - 762 US$ 7,357
InveStar II Preferred stock
---------------
Elcos Microdisplay Elcos Microdisplay - - -
Technology,Ltd. Long-term investment Technology,Ltd.
TSMC Liquidity fund
International --------------
BOA Fund Short-term investment BOA - - -
VIS Bond fund
---------
Kai Chi Kai Xuan Short-term investment - - - -
NITC Short-term investment - - - -
NT$ High Yield Fund Short-term investment - - - -
Ta-Hua Short-term investment - - - -
Jihsun Short-term investment - - - -
Yuan Da Duo Li #2 Short-term investment - - - -
Stock
-----
Powerchip
Semiconductor
Corporation Long-term investment - - 191,671 2,513,378
-------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
Acquisition Disposal Ending Balance
-----------------------------------------------------------------------------------------------------------
Amount (US$ in
Shares/Units (US$ in Shares/Units Carrying Gain (Loss) Shares/Units Thousand)
(Thousand) Thousand) (Thousand) Amount Value on Disposal (Thousand) (Note 1)
-----------------------------------------------------------------------------------------------------------
120,000 $ 4,161,760 80,000 $ 2,785,760 $ 2,785,760 $ - 40,000 $ 1,376,000
(US$ 120,000) (US$ 80,000) (US$ 40,000)
140,000 4,852,300 120,000 4,165,140 4,165,140 - 20,000 687,160
(US$140,000) (US$120,000) (US$ 20,000)
34,343 500,000 - - - - 34,343 500,000
97,782 1,400,000 62,988 902,881 900,000 2,881 34,794 500,000
81,744 879,000 81,744 881,719 879,000 2,719 - -
- 1,200,000 - - - - - 1,200,000
- 2,902,238 - - - - - 2,902,238
- 3,113,067 - - - - - 3,113,067
- 1,422,197 - - - - - 1,422,197
- 174,030 - - - - - 755,364
109,545 766,815 - - - - 787,016 3,968,395
- - 505 301,209 280,748 20,461 - -
- - 470 152,681 104,289 48,392 - -
- - 823 US$ 8,407 US$ 7,357 US$ 1,050 - -
(Note 2)
2,667 US$ 3,500 - - - - 2,667 US$ 3,500
67,100 US$ 67,100 - - - - 67,100 US$ 67,100
64,113 650,000 64,113 654,231 650,000 4,231 - -
3,225 500,000 3,225 500,164 500,000 164 - -
15,871 250,000 15,871 250,202 250,000 202 - -
40,946 500,000 40,946 500,586 500,000 586 - -
61,365 790,000 - - - - 61,365 790,000
65,271 900,000 7,202 100,011 99,297 714 58,069 800,703
- - 70,666 1,217,382 926,432 290,950 121,005 1,586,946
------------------------------------------------------------------------------------------------------------
Note 1: The ending balance included the recognition of the investment income
(loss) by the equity method, the cumulative translation adjustments and
unrealized loss on long-term investments recognized in proportion to the
Company's ownership percentage in investees.
Note 2: Including stock dividend of 61 thousand units.
-37-
TABLE 5
-------
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD.
ACQUISITION OF INDIVIDUAL REAL ESTATE AT COSTS OF AT LEAST NT$100 MILLION OR
20% OF THE PAID-IN CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003
(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)
================================================================================
--------------------------------------------------------------------------------------------------------------------------
Company Types of Transaction Nature of
Name Property Transaction Date Amount Payment Term Counter-party Relationship
--------------------------------------------------------------------------------------------------------------------------
TSMC Fab 14 January 20, 2003 $ 180,665 By the construction progress United Integrated Services --
Fab 12 May 6, 2003 119,000 By the construction progress United Integrated Services --
Fab 12 June 17, 2003 134,500 By the construction progress United Integrated Services --
Fab 12 June 18, 2003 110,055 By the construction progress Liquid Air Far East Co. Ltd. --
--------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------
Prior Transaction of Related Counter-party
------------------------------------------
Transfer Price Purpose of Other
Owner Relationship Date Amount Reference Acquisition Terms
-----------------------------------------------------------------------------
N/A N/A N/A N/A Public Manufacturing None
bidding purpose
N/A N/A N/A N/A Public Manufacturing None
bidding purpose
N/A N/A N/A N/A Public Manufacturing None
bidding purpose
N/A N/A N/A N/A Public Manufacturing None
bidding purpose
-----------------------------------------------------------------------------
-38-
TABLE 6
-------
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD.
TOTAL PURCHASE FROM OR SALE TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100
MILLION OR 20% OF THE CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003
(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)
================================================================================
---------------------------------------------------------------------------------------------------------------------
Transaction Details
--------------------------------------------------------------
Company Nature of Purchase/ % to
Name Related Party Relationship Sale Amount Total Payment Terms
---------------------------------------------------------------------------------------------------------------------
TSMC TSMC--North America Subsidiary Sales $ 84,777,377 58 Net 30 days from invoice date
Philips and its affiliates Major shareholder Sales 2,370,142 2 Net 30 days from invoice date
GUC Investee Sales 465,626 -- Net 30 days from invoice date
WaferTech Subsidiary Purchases 7,815,373 35 Net 30 days from invoice date
SSMC Investee Purchases 3,805,999 17 Net 30 days from invoice date
VIS Investee Purchases 3,454,704 16 Net 30 days from invoice date
---------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------
Note/Accounts Payable or
Abnormal Transaction Receivable
------------------------------------------------------ Note
Unit Price Payment Terms Ending Balance % to Total
--------------------------------------------------------------
Note 1 Note 1 $ 14,337,121 94 --
None None 752,568 5 --
None None 86,093 -- --
Note 1 Note 1 964,659 26 --
None None 501,281 14 --
None None 796,865 21 --
--------------------------------------------------------------
Note 1: Please refer to footnote 18 in the financial statements.
-39-
TABLE 7
-------
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD.
RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF
THE CAPITAL
SEPTEMBER 30, 2003
(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)
================================================================================
----------------------------------------------------------------------------------------------------------------------------------
Amounts Received Allowance
Company Nature of Ending Turnover in Subsequent for
Name Related Party Relationship Balance Rate Overdue Period Bad Debts
----------------------------------------------------------------------------------------------------------------------------------
Amount Action Taken
----------------------------------------------------------------------------------------------------------------------------------
TSMC TSMC--North America Subsidiary $ 14,337,121 39 days $ 3,548,863 Accelerate demand $ 2,855,719 $ --
on account
receivables
Philips and its Major Accelerate demand on
affiliates shareholder 752,568 64 days 82,648 account receivables 21,204 --
----------------------------------------------------------------------------------------------------------------------------------
-40-
TABLE 8
-------
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD.
NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES ON WHICH THE COMPANY
EXERCISES SIGNIFICANT INFLUENCE
SEPTEMBER 30, 2003
(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)
================================================================================
-----------------------------------------------------------------------------------------------------------------------
Investor Company Investee Company Location Main Businesses and Products
-----------------------------------------------------------------------------------------------------------------------
TSMC TSMC--North America San Jose, California, U.S.A. Marketing and engineering support
TSMC--Europe Amsterdam, The Netherlands Marketing and engineering support
TSMC--Japan Yokohama, Japan Marketing and engineering support
VIS Hsin-Chu, Taiwan IC design and manufacturing
TSMC International Tortola, British Virgin Islands Investment
Chi Cherng Investment Taipei, Taiwan Investment
Hsin Ruey Investment Taipei, Taiwan Investment
TSMC Partners Tortola, British Virgin Islands Investment
SSMC Singapore Manufacturing wafer
Emerging Alliance Cayman Islands Investment
GUC Hsin-Chu, Taiwan IC research, development, manufacturing,
testing and marketing
-----------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
Original Investment Amount Balance as of September 30, 2003
----------------------------- ---------------------------------------------- Net Income Investment
September 30, December 31, Shares Percentage Carrying (Loss) of Gain (Loss) Note
2003 2002 (Thousand) of Ownership Value (Note 1) the Investee (Note 2)
-----------------------------------------------------------------------------------------------------------------------------
$ 333,178 $ 333,178 11,000 100 $ 286,061 $ 117,908 $ 113,249 Subsidiary
2,960 2,960 -- 100 10,921 54 54 Subsidiary
83,760 83,760 6 100 97,567 3,473 3,473 Subsidiary
8,119,816 6,503,640 787,016 28 3,968,395 ( 172,445) ( 48,470) Investee
31,445,780 31,445,780 987,968 100 21,646,213 21,128 21,128 Subsidiary
300,000 300,000 -- 36 43,028 ( 598) 195 Investee
300,000 300,000 -- 36 41,787 ( 1,903) 1,033 Investee
10,350 10,350 300 100 4,089,066 196,242 194,235 Subsidiary
6,408,190 6,408,190 382 32 2,616,143 ( 1,381,819) ( 442,182) Investee
1,179,690 1,005,660 -- 99 755,364 ( 163,804) ( 162,985) Subsidiary
409,920 341,250 39,040 47 377,758 ( 64,120) ( 23,681) Investee
(Note 3)
Note 1: The treasury stock is deducted from the carrying value.
Note 2: The unrealized gain or loss and the gain or loss on disposal of the
stocks held by subsidiaries are excluded.
Note 3: TSMC's investee, Ya Xin, merged with GUC in January 2003. GUC is the
surviving company.
-41-