e6vk
1934 Act Registration No. 1-14700
 
 
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of April 2010
Taiwan Semiconductor Manufacturing Company Ltd.
(Translation of Registrant’s Name Into English)
No. 8, Li-Hsin Rd. 6,
Hsinchu Science Park,
Taiwan
(Address of Principal Executive Offices)
     (Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)
     
Form 20-F þ
  Form 40-F o
     (Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)
     
Yes o
  No þ
(If “Yes” is marked, indicated below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82: __________.)
 
 


 

Taiwan Semiconductor Manufacturing
Company Limited
Financial Statements for the
Three Months Ended March 31, 2010 and 2009 and
Independent Accountants’ Review Report

 


 

INDEPENDENT ACCOUNTANTS’ REVIEW REPORT
The Board of Directors and Shareholders
Taiwan Semiconductor Manufacturing Company Limited
We have reviewed the accompanying balance sheets of Taiwan Semiconductor Manufacturing Company Limited as of March 31, 2010 and 2009, and the related statements of income and cash flows for the three 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 Auditing Standards No. 36, “Review of Financial Statements,” issued by the Auditing Standards 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 the 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 the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, requirements of the Business Accounting Law and Guidelines Governing Business Accounting with respect to financial accounting standards, and accounting principles generally accepted in the Republic of China.
As discussed in Note 3 to the financial statements, effective January 1, 2009, Taiwan Semiconductor Manufacturing Company Limited adopted the newly revised Statements of Financial Accounting Standards No. 10, “Accounting for Inventories.”

-1-


 

We have also reviewed, in accordance with the Statement on Auditing Standards No. 36, the consolidated financial statements of Taiwan Semiconductor Manufacturing Company Limited and subsidiaries as of and for the three months ended March 31, 2010 on which we have issued an unqualified review report and as of and for the three months ended March 31, 2009 on which we have issued an unqualified review report with an explanatory paragraph relating to the adoption of the newly revised Statement of Financial Accounting Standard, Accounting for Inventories.
April 20, 2010
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.
For the convenience of readers, the accountants’ review report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language accountants’ review report and financial statements shall prevail.

-2-


 

Taiwan Semiconductor Manufacturing Company Limited
BALANCE SHEETS
MARCH 31, 2010 and 2009
(In Thousands of New Taiwan Dollars, Except Par Value)
(Reviewed, Not Audited)
                                 
    2010     2009  
    Amount     %     Amount     %  
ASSETS
                               
 
                               
CURRENT ASSETS
                               
Cash and cash equivalents (Notes 2 and 4)
  $ 117,507,201       19     $ 153,276,031       29  
Financial assets at fair value through profit or loss (Notes 2, 5 and 22)
    81,703             229,415        
Held-to-maturity financial assets (Notes 2, 7 and 22)
    7,944,656       1       4,739,315       1  
Receivables from related parties (Note 23)
    22,260,749       4       10,181,965       2  
Notes and accounts receivable
    22,614,938       4       8,321,271       2  
Allowance for doubtful receivables (Notes 2 and 8)
    (453,000 )           (198,976 )      
Allowance for sales returns and others (Notes 2 and 8)
    (7,003,204 )     (1 )     (6,336,876 )     (1 )
Other receivables from related parties (Note 23)
    295,654             230,871        
Other financial assets (Note 24)
    1,129,976             1,348,616        
Inventories (Notes 2, 3 and 9)
    20,309,253       4       12,949,118       2  
Deferred income tax assets (Notes 2 and 17)
    6,072,089       1       5,849,563       1  
Prepaid expenses and other current assets
    1,387,580             1,047,211        
 
                       
 
                               
Total current assets
    192,147,595       32       191,637,524       36  
 
                       
 
                               
LONG-TERM INVESTMENTS (Notes 2, 6, 7, 10, 11 and 22)
                               
Investments accounted for using equity method
    110,955,652       18       109,601,554       21  
Available-for-sale financial assets
    1,043,306             1,038,443        
Held-to-maturity financial assets
    6,214,948       1       11,585,538       2  
Financial assets carried at cost
    497,835             519,502        
 
                       
 
                               
Total long-term investments
    118,711,741       19       122,745,037       23  
 
                       
 
                               
PROPERTY, PLANT AND EQUIPMENT (Notes 2, 12 and 23)
                               
Cost
                               
Buildings
    125,872,902       21       114,880,914       22  
Machinery and equipment
    757,039,382       124       636,909,351       119  
Office equipment
    11,275,851       2       9,856,423       2  
 
                       
 
    894,188,135       147       761,646,688       143  
Accumulated depreciation
    (646,763,515 )     (106 )     (574,998,401 )     (108 )
Advance payments and construction in progress
    34,006,978       5       16,434,915       3  
 
                       
 
                               
Net property, plant and equipment
    281,431,598       46       203,083,202       38  
 
                       
 
                               
INTANGIBLE ASSETS
                               
Goodwill (Note 2)
    1,567,756             1,567,756        
Deferred charges, net (Notes 2 and 13)
    5,779,842       1       5,980,431       1  
 
                       
 
                               
Total intangible assets
    7,347,598       1       7,548,187       1  
 
                       
 
                               
OTHER ASSETS
                               
Deferred income tax assets (Notes 2 and 17)
    6,555,961       1       5,549,630       1  
Refundable deposits
    2,525,862       1       2,636,845       1  
Others (Note 2)
    478,615             443,514        
 
                       
 
                               
Total other assets
    9,560,438       2       8,629,989       2  
 
                       
 
                               
TOTAL
  $ 609,198,970       100     $ 533,643,939       100  
 
                       
                                 
    2010     2009  
    Amount     %     Amount     %  
LIABILITIES AND SHAREHOLDERS’ EQUITY
                               
 
                               
CURRENT LIABILITIES
                               
Financial liabilities at fair value through profit or loss (Notes 2, 5 and 22)
  $ 11,410           $ 2,962        
Accounts payable
    8,945,670       1       4,447,744       1  
Payables to related parties (Note 23)
    2,758,431             1,102,214        
Income tax payable (Notes 2 and 17)
    10,990,083       2       9,663,927       2  
Accrued profit sharing to employees and bonus to directors (Notes 2
                               
and 19)
    9,046,820       1       15,404,117       3  
Payables to contractors and equipment suppliers
    28,369,183       5       4,829,314       1  
Accrued expenses and other current liabilities (Notes 15 and 22)
    11,281,871       2       6,007,869       1  
 
                       
 
                               
Total current liabilities
    71,403,468       11       41,458,147       8  
 
                       
 
                               
LONG-TERM LIABILITIES
                               
Bonds payable (Notes 14 and 22)
    4,500,000       1       4,500,000       1  
Other long-term payables (Notes 15 and 22)
    413,647             881,842        
 
                       
 
                               
Total long-term liabilities
    4,913,647       1       5,381,842       1  
 
                       
 
                               
OTHER LIABILITIES
                               
Accrued pension cost (Notes 2 and 16)
    3,808,052       1       3,727,225       1  
Guarantee deposits (Note 26)
    912,151             1,309,582        
Deferred credits (Notes 2 and 23)
    23,936             219,859        
 
                       
 
                               
Total other liabilities
    4,744,139       1       5,256,666       1  
 
                       
 
                               
Total liabilities
    81,061,254       13       52,096,655       10  
 
                       
 
                               
CAPITAL STOCK — NT$10 PAR VALUE (Note 19)
                               
Authorized: 28,050,000 thousand shares
                               
Issued: 25,903,769 thousand shares in 2010
                               
25,626,012 thousand shares in 2009
    259,037,692       43       256,260,122       48  
 
                       
 
                               
CAPITAL SURPLUS (Notes 2 and 19)
    55,530,845       9       49,965,450       9  
 
                       
 
                               
RETAINED EARNINGS (Note 19)
                               
Appropriated as legal capital reserve
    77,317,710       13       67,324,393       12  
Appropriated as special capital reserve
                391,857        
Unappropriated earnings
    138,228,089       22       103,896,290       20  
 
                       
 
                               
 
    215,545,799       35       171,612,540       32  
 
                       
 
                               
OTHERS (Notes 2 and 22)
                               
Cumulative translation adjustments
    (2,378,010 )           3,531,944       1  
Unrealized gain on financial instruments
    401,390             177,228        
 
                       
 
                               
 
    (1,976,620 )           3,709,172       1  
 
                       
 
                               
Total shareholders’ equity
    528,137,716       87       481,547,284       90  
 
                       
 
                               
TOTAL
  $ 609,198,970       100     $ 533,643,939       100  
 
                       
The accompanying notes are an integral part of the financial statements.
(With Deloitte & Touche review report dated April 20, 2010)

-3-


 

Taiwan Semiconductor Manufacturing Company Limited
STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2010 and 2009
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)
(Reviewed, Not Audited)
                                 
    2010     2009  
    Amount     %     Amount     %  
 
                               
GROSS SALES (Notes 2 and 23)
  $ 91,922,386             $ 39,214,322          
 
                               
SALES RETURNS AND ALLOWANCES (Notes 2 and 8)
    2,747,878               1,654,628          
 
                           
 
                               
NET SALES
    89,174,508       100       37,559,694       100  
 
                               
COST OF SALES (Notes 3, 9, 18 and 23)
    46,657,769       52       29,717,331       79  
 
                       
 
                               
GROSS PROFIT
    42,516,739       48       7,842,363       21  
 
                               
REALIZED GROSS PROFIT FROM AFFILIATES (Note 2)
    14,015             131,929        
 
                       
 
                               
REALIZED GROSS PROFIT
    42,530,754       48       7,974,292       21  
 
                       
 
                               
OPERATING EXPENSES (Notes 18 and 23)
                               
Research and development
    5,908,449       7       3,276,829       9  
General and administrative
    2,206,107       2       1,339,263       3  
Marketing
    630,103       1       263,567       1  
 
                       
 
                               
Total operating expenses
    8,744,659       10       4,879,659       13  
 
                       
 
                               
INCOME FROM OPERATIONS
    33,786,095       38       3,094,633       8  
 
                       
 
                               
NON-OPERATING INCOME AND GAINS
                               
Settlement income (Note 26)
    637,580       1              
Equity in earnings of equity method investees, net (Notes 2 and 10)
    559,908       1              
Valuation gain on financial instruments, net (Notes 2, 5 and 22)
    304,292                    
Interest income (Note 2)
    178,667             491,659       2  
Technical service income (Notes 23 and 26)
    118,394             41,348        
Foreign exchange gain, net (Note 2)
                428,117       1  
Gain on settlement and disposal of financial assets, net (Notes 2 and 22)
                53,461        
Others (Notes 2 and 23)
    57,942             102,681        
 
                       
 
                               
Total non-operating income and gains
    1,856,783       2       1,117,266       3  
 
                       
(Continued)

-4-


 

Taiwan Semiconductor Manufacturing Company Limited
STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2010 and 2009
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)
(Reviewed, Not Audited)
                                 
    2010     2009  
    Amount     %     Amount     %  
 
                               
NON-OPERATING EXPENSES AND LOSSES
                               
Foreign exchange loss, net (Note 2)
  $ 286,109       1     $        
Casualty loss (Note 9)
    194,137                    
Interest expense
    33,750             40,776        
Equity in losses of equity method investees, net (Notes 2 and 10)
                2,949,992       8  
Valuation loss on financial instruments, net (Notes 2, 5 and 22)
                442,382       1  
Others (Note 2)
    37,799             29,281        
 
                       
 
                               
Total non-operating expenses and losses
    551,795       1       3,462,431       9  
 
                       
 
                               
INCOME BEFORE INCOME TAX
    35,091,083       39       749,468       2  
 
                               
INCOME TAX BENEFIT (EXPENSE) (Notes 2 and 17)
    (1,427,966 )     (1 )     809,405       2  
 
                       
 
                               
NET INCOME
  $ 33,663,117       38     $ 1,558,873       4  
 
                       
                                 
    2010     2009  
    Before
Income
Tax
    After
Income
Tax
    Before
Income
Tax
    After
Income
Tax
 
 
                               
EARNINGS PER SHARE (NT$, Note 21)
                               
Basic earnings per share
  $ 1.35     $ 1.30     $ 0.03     $ 0.06  
 
                       
Diluted earnings per share
  $ 1.35     $ 1.30     $ 0.03     $ 0.06  
 
                       
The accompanying notes are an integral part of the financial statements.
     
(With Deloitte & Touche review report dated April 20, 2010)   (Concluded)

-5-


 

Taiwan Semiconductor Manufacturing Company Limited
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2010 and 2009
(In Thousands of New Taiwan Dollars)
(Reviewed, Not Audited)
                 
    2010     2009  
 
               
CASH FLOWS FROM OPERATING ACTIVITIES
               
Net income
  $ 33,663,117     $ 1,558,873  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
    19,697,427       18,762,482  
Realized gross profit from affiliates
    (14,015 )     (131,929 )
Amortization of premium/discount of financial assets
    4,294       (10,448 )
Gain on disposal of available-for-sale financial assets, net
          (37,370 )
Gain on held-to-maturity financial assets redeemed by the issuer
          (16,091 )
Loss on disposal of financial assets carried at cost
    1,263        
Equity in losses (earnings) of equity method investees, net
    (559,908 )     2,949,992  
Dividends received from equity method investees
          988,201  
Gain on disposal of property, plant and equipment, net
    (17,461 )     (36,117 )
Deferred income tax
    (800,997 )     (1,250,521 )
Changes in operating assets and liabilities:
               
Decrease (increase) in:
               
Financial assets and liabilities at fair value through profit or loss
    111,450       (267,611 )
Receivables from related parties
    281,024       1,546,239  
Notes and accounts receivable
    (2,730,418 )     3,119,905  
Allowance for doubtful receivables
    22,000       (237,770 )
Allowance for sales returns and others
    (1,580,428 )     468,294  
Other receivables from related parties
    (49,651 )     317,321  
Other financial assets
    (25,904 )     (636,861 )
Inventories
    (1,479,037 )     (141,182 )
Prepaid expenses and other current assets
    (483,601 )     145,264  
Increase (decrease) in:
               
Accounts payable
    (1,064,746 )     133,479  
Payables to related parties
    719,089       (100,136 )
Income tax payable
    2,228,963       441,116  
Accrued profit sharing to employees and bonus to directors
    2,275,482       256,060  
Accrued expenses and other current liabilities
    (5,270,419 )     (1,463,087 )
Accrued pension cost
    876       17,216  
Deferred credits
    (23,937 )     (58,501 )
 
           
 
               
Net cash provided by operating activities
    44,904,463       26,316,818  
 
           
 
               
CASH FLOWS FROM INVESTING ACTIVITIES
               
Acquisitions of:
               
Property, plant and equipment
    (45,824,671 )     (5,444,584 )
Held-to-maturity financial assets
          (204,990 )
Investments accounted for using equity method
    (6,377,184 )     (78,472 )
Financial assets carried at cost
    (480 )      
(Continued)

-6-


 

Taiwan Semiconductor Manufacturing Company Limited
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2010 and 2009
(In Thousands of New Taiwan Dollars)
(Reviewed, Not Audited)
                 
    2010     2009  
 
               
Proceeds from disposal or redemption of:
               
Available-for-sale financial assets
  $     $ 1,037,370  
Held-to-maturity financial assets
    8,000,000       1,550,000  
Financial assets carried at cost
    3,370        
Property, plant and equipment
    11,224       120  
Increase in deferred charges
    (372,884 )     (37,331 )
Decrease in refundable deposits
    172,254       82,892  
 
           
 
               
Net cash used in investing activities
    (44,388,371 )     (3,094,995 )
 
           
 
               
CASH FLOWS FROM FINANCING ACTIVITIES
               
Repayment of bonds payable
          (8,000,000 )
Decrease in guarantee deposits
    (89,225 )     (169,570 )
Proceeds from exercise of employee stock options
    36,791       15,418  
 
           
 
               
Net cash used in financing activities
    (52,434 )     (8,154,152 )
 
           
 
               
NET INCREASE IN CASH AND CASH EQUIVALENTS
    463,658       15,067,671  
 
               
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    117,043,543       138,208,360  
 
           
 
               
CASH AND CASH EQUIVALENTS, END OF PERIOD
  $ 117,507,201     $ 153,276,031  
 
           
 
               
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
               
Interest paid
  $ 135,000     $ 351,803  
 
           
Income tax paid
  $ 8,891     $ 52,636  
 
           
 
               
INVESTING ACTIVITIES AFFECTING BOTH CASH AND NON-CASH ITEMS
               
Acquisition of property, plant and equipment
  $ 45,891,338     $ 2,699,007  
Decrease in payables to contractors and equipment suppliers
    56,134       2,745,577  
Nonmonetary exchange trade-out price
    (122,801 )      
 
           
Cash paid
  $ 45,824,671     $ 5,444,584  
 
           
 
               
Disposal of property, plant and equipment
  $ 134,025     $ 58,570  
Increase in other receivables from related parties
          (58,450 )
Nonmonetary exchange trade-out price
    (122,801 )      
 
           
Cash received
  $ 11,224     $ 120  
 
           
 
               
NON-CASH FINANCING ACTIVITIES
               
Current portion of other long-term payables (under accrued expenses and other current liabilities)
  $ 737,350     $ 1,106,985  
 
           
The accompanying notes are an integral part of the financial statements.
     
(With Deloitte & Touche review report dated April 20, 2010)   (Concluded)

-7-


 

Taiwan Semiconductor Manufacturing Company Limited
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2010 and 2009
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
(Reviewed, Not Audited)
1.   GENERAL
 
    Taiwan Semiconductor Manufacturing Company Limited (the “Company” or “TSMC”), a Republic of China (R.O.C.) corporation, was incorporated on February 21, 1987. The Company is a dedicated foundry in the semiconductor industry which engages mainly in the manufacturing, selling, packaging, testing and computer-aided designing of integrated circuits and other semiconductor devices and the manufacturing of masks. On September 5, 1994, its shares were listed on the Taiwan Stock Exchange (TSE). On October 8, 1997, TSMC listed some of its shares of stock on the New York Stock Exchange (NYSE) in the form of American Depositary Shares (ADSs).
 
    As of March 31, 2010 and 2009, the Company had 24,041 and 19,537 employees, respectively.
2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
    The financial statements are presented in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, Business Accounting Law, Guidelines Governing Business Accounting, and accounting principles generally accepted in the R.O.C.
 
    For the convenience of readers, the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the R.O.C. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language financial statements shall prevail.
 
    Significant accounting policies are summarized as follows:
 
    Use of Estimates
 
    The preparation of financial statements in conformity with the aforementioned guidelines, law and principles requires management to make reasonable assumptions and estimates of matters that are inherently uncertain. The actual results may differ from management’s estimates.
 
    Classification of Current and Noncurrent Assets and Liabilities
 
    Current assets are assets held for trading purposes and assets expected to be converted to cash, sold or consumed within one year from the balance sheet date. Current liabilities are obligations incurred for trading purposes and obligations expected to be settled within one year from the balance sheet date. Assets and liabilities that are not classified as current are noncurrent assets and liabilities, respectively.
 
    Cash Equivalents
 
    Repurchase agreements collateralized by government bonds acquired with maturities of less than three months from the date of purchase are classified as cash equivalents. The carrying amount approximates fair value.

-8-


 

    Financial Assets/Liabilities at Fair Value Through Profit or Loss
 
    Derivatives that do not meet the criteria for hedge accounting are initially recognized at fair value, with transaction costs expensed as incurred. The derivatives are remeasured at fair value subsequently with changes in fair value recognized in earnings. A regular way purchase or sale of financial assets is accounted for using settlement date accounting.
 
    Fair value is estimated using valuation techniques incorporating estimates and assumptions that are consistent with prevailing market conditions. When the fair value is positive, the derivative is recognized as a financial asset; when the fair value is negative, the derivative is recognized as a financial liability.
 
    Available-for-sale Financial Assets
 
    Available-for-sale financial assets are initially recognized at fair value plus transaction costs that are directly attributable to the acquisition. Changes in fair value from subsequent remeasurement are reported as a separate component of shareholders’ equity. The corresponding accumulated gains or losses are recognized in earnings when the financial asset is derecognized from the balance sheet. A regular way purchase or sale of financial assets is accounted for using settlement date accounting.
 
    The fair value of debt securities is determined using the average of bid and asked prices at the end of the period.
 
    Any difference between the initial carrying amount of a debt security and the amount due at maturity is amortized using the effective interest method, with the amortization recognized in earnings.
 
    If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. If, in a subsequent period, the amount of the impairment loss decreases, for equity securities, the previously recognized impairment loss is reversed to the extent of the decrease and recorded as an adjustment to shareholders’ equity; for debt securities, the amount of the decrease is recognized in earnings, provided that the decrease is clearly attributable to an event which occurred after the impairment loss was recognized.
 
    Held-to-maturity Financial Assets
 
    Debt securities for which the Company has a positive intention and ability to hold to maturity are categorized as held-to-maturity financial assets and are carried at amortized cost. Those financial assets are initially recognized at fair value plus transaction costs that are directly attributable to the acquisition. Gains or losses are recognized at the time of derecognition, impairment or amortization. A regular way purchase or sale of financial assets is accounted for using settlement date accounting.
 
    If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. If, in a subsequent period, the amount of the impairment loss decreases and the decrease is clearly attributable to an event which occurred after the impairment loss was recognized, the previously recognized impairment loss is reversed to the extent of the decrease. The reversal may not result in a carrying amount that exceeds the amortized cost that would have been determined as if no impairment loss had been recognized.
 
    Allowance for Doubtful Receivables
 
    An allowance for doubtful receivables is provided based on a review of the collectability of receivables. The Company determines the amount of the allowance for doubtful receivables with a charge of 1% of the amount of outstanding receivables considering the account aging analysis and current trends in the credit quality of its customers.

-9-


 

    Revenue Recognition and Allowance for Sales Returns and Others
 
    The Company recognizes revenue when evidence of an arrangement exists, the rewards of ownership and significant risk of the goods has been transferred to the buyer, price is fixed or determinable, and collectability is reasonably assured. Provisions for estimated sales returns and others are recorded in the period the related revenue is recognized, based on historical experience, management’s judgment, and any known factors that would significantly affect the allowance.
 
    Sales prices are determined using fair value taking into account related sales discounts agreed to by the Company and its customers. Sales agreements typically provide that payment is due 30 days from invoice date for a majority of the customers and 30 to 45 days after the end of the month in which sales occur for some customers. Since the receivables from sales are collectible within one year and such transactions are frequent, fair value of the receivables is equivalent to the nominal amount of the cash to be received.
 
    Inventories
 
    Inventories are recorded at standard cost and adjusted to approximate weighted-average cost on the balance sheet date.
 
    Prior to January 1, 2009, inventories were stated at the lower of cost or market value. Any write-down was made on a total-inventory basis. Market value represented replacement cost for raw materials, supplies and spare parts and net realizable value for work in process and finished goods.
 
    As stated in Note 3, effective January 1, 2009, inventories are stated at the lower of cost or net realizable value. Inventory write-downs are made on an item-by-item basis, except where it may be appropriate to group similar or related items. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and necessary selling costs.
 
    Investments Accounted for Using Equity Method
 
    Investments in companies wherein the Company exercises significant influence over the operating and financial policy decisions are accounted for using the equity method. The Company’s share of the net income or net loss of an investee is recognized in the “equity in earnings/losses of equity method investees, net” account. The cost of an investment shall be analyzed and the cost of investment in excess of the fair value of identifiable net assets acquired, representing goodwill, shall not be amortized. If the fair value of identifiable net assets acquired exceeds the cost of investment, the excess shall be proportionately allocated as reductions to fair values of non-current assets (except for financial assets other than investments accounted for using the equity method and deferred income tax assets). When an indication of impairment is identified, the carrying amount of the investment is reduced, with the related impairment loss recognized in earnings.
 
    When the Company subscribes for additional investee’s shares at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment in the investee differs from the amount of the Company’s share of the investee’s equity. The Company records such a difference as an adjustment to long-term investments with the corresponding amount charged or credited to capital surplus.
 
    Gains or losses on sales from the Company to equity method investees are deferred in proportion to the Company’s ownership percentages in the investees until such gains or losses are realized through transactions with third parties. The entire amount of the gains or losses on sales to investees over which the Company has a controlling interest is deferred until such gains or losses are realized through subsequent sales of the related products to third parties. Gains or losses on sales from equity method investees to the Company are deferred in proportion to the Company’s ownership percentages in the investees until they are realized through transactions with third parties. Gains or losses on sales between equity method investees over each of which the Company has control are deferred in proportion to the Company’s weighted-average ownership percentage in the investee which records gains or losses. In transactions between equity method investees over either or both of which the Company has no control, gains or losses on sales are

-10-


 

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

-11-


 

    Deferred charges consist of technology license fees, software and system design costs and other charges. The amounts are amortized over the following periods: Technology license fees — the shorter of the estimated life of the technology or the term of the technology transfer contract; software and system design costs and other charges — 3 years. When an indication of impairment is identified, any excess of the carrying amount of an asset over its recoverable amount is recognized as a loss. If the recoverable amount increases in a subsequent period, the previously recognized impairment loss would be reversed and recognized as a gain. However, the adjusted amount may not exceed the carrying amount that would have been determined, net of amortization, as if no impairment loss had been recognized.
 
    Expenditures related to research activities and those related to development activities that do not meet the criteria for capitalization are charged to expenses when incurred.
 
    Pension Costs
 
    For employees who participate in defined contribution pension plans, pension costs are recorded based on the actual contributions made to employees’ individual pension accounts during their service periods. For employees who participate in defined benefit pension plans, pension costs are recorded based on actuarial calculations.
 
    Income Tax
 
    The Company applies an inter-period allocation for its income tax whereby deferred income tax assets and liabilities are recognized for the tax effects of temporary differences and unused tax credits. Valuation allowances are provided to the extent, if any, that it is more likely than not that deferred income tax assets will not be realized. A deferred tax asset or liability is classified as current or noncurrent in accordance with the classification of its related asset or liability. However, if a deferred tax asset or liability does not relate to an asset or liability in the financial statements, then it is classified as either current or noncurrent based on the expected length of time before it is realized or settled.
 
    Any tax credits arising from purchases of machinery, equipment and technology, research and development expenditures, personnel training expenditures, and investments in important technology-based enterprises are recognized using the flow-through method.
 
    Adjustments of prior years’ tax liabilities are added to or deducted from the current period’s tax provision.
 
    Income tax on unappropriated earnings at a rate of 10% is expensed in the year of shareholder approval which is the year subsequent to the year the earnings are generated.
 
    Stock-based Compensation
 
    Employee stock options that were granted or modified in the period from January 1, 2004 to December 31, 2007 are accounted for by the interpretations issued by the Accounting Research and Development Foundation of the Republic of China. The Company adopted the intrinsic value method and any compensation cost determined using this method is recognized in earnings over the employee vesting period. Employee stock option plans that were granted or modified after December 31, 2007 are accounted for using fair value method in accordance with Statement of Financial Accounting Standards No. 39, “Accounting for Share-based Payment.” The Company did not grant or modify any employee stock options since January 1, 2008.
 
    Profit Sharing to Employees and Bonus to Directors
 
    Effective January 1, 2008, the Company adopted Interpretation 2007-052, “Accounting for Bonuses to Employees, Directors and Supervisors,” which requires companies to record profit sharing to employees and bonus to directors as an expense rather than as an appropriation of earnings.

-12-


 

    Foreign-currency Transactions
 
    Foreign-currency transactions other than derivative contracts are recorded in New Taiwan dollars at the rates of exchange in effect when the transactions occur. Exchange gains or losses derived from foreign-currency transactions or monetary assets and liabilities denominated in foreign currencies are recognized in earnings.
 
    At the balance sheet date, monetary assets and liabilities denominated in foreign currencies are revalued at prevailing exchange rates with the resulting gains or losses recognized in earnings.
3.   ACCOUNTING CHANGES
 
    Effective January 1, 2009, the Company adopted the newly revised Statement of Financial Accounting Standards (SFAS) No. 10, “Accounting for Inventories.” The main revisions are (1) inventories are stated at the lower of cost or net realizable value, and inventories are written down to net realizable value on an item-by-item basis except when the grouping of similar or related items is appropriate; (2) unallocated overheads are recognized as expenses in the period in which they are incurred; and (3) abnormal cost, write-downs of inventories and any reversal of write-downs are recorded as cost of sales for the period. Such changes in accounting principle did not have significant effect on the Company’s financial statements for the three months ended March 31, 2009.
4.   CASH AND CASH EQUIVALENTS
                 
    March 31  
    2010     2009  
 
Cash and deposits in banks
  $ 116,704,752     $ 142,453,439  
Repurchase agreements collateralized by government bonds
    802,449       10,822,592  
 
           
 
               
 
  $ 117,507,201     $ 153,276,031  
 
           
5.   FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
                 
    March 31  
    2010     2009  
 
Trading financial assets
               
 
               
Forward exchange contracts
  $ 2,397     $ 201,358  
Cross currency swap contracts
    79,306       28,057  
 
           
 
               
 
  $ 81,703     $ 229,415  
 
           
 
               
Trading financial liabilities
               
 
               
Forward exchange contracts
  $ 1,640     $ 206  
Cross currency swap contracts
    9,770       2,756  
 
           
 
               
 
  $ 11,410     $ 2,962  
 
           

-13-


 

    The Company entered into derivative contracts during the three months ended March 31, 2010 and 2009 to manage exposures due to fluctuations of foreign exchange rates. The derivative contracts entered into by the Company did not meet the criteria for hedge accounting. Therefore, the Company did not apply hedge accounting treatment for its derivative contracts.
 
    Outstanding forward exchange contracts consisted of the following:
         
        Contract Amount
    Maturity Date   (In Thousands)
 
       
March 31, 2010
       
 
       
Sell EUR/Buy NT$
  April 2010   EUR7,500/NT$323,205
Sell EUR/Buy US$
  April 2010   EUR4,500/US$5,998
 
       
March 31, 2009
       
 
       
Sell US$/Buy NT$
  April 2009   US$200,000/NT$6,979,725
Sell EUR/Buy US$
  April 2009   EUR6,140/US$8,266
    Outstanding cross currency swap contracts consisted of the following:
             
            Range of
    Contract Amount   Range of   Interest Rates
Maturity Date   (In Thousands)   Interest Rates Paid   Received
 
           
March 31, 2010
           
 
           
April 2010 to May 2010
  US$930,000/NT$29,662,580   0.21%-0.45%   0.00%-0.09%
 
           
March 31, 2009
           
 
           
April 2009 to May 2009
  US$130,000/NT$4,434,625   0.66%-6.79%   0.00%-0.61%
    For the three months ended March 31, 2010 and 2009, changes in fair value related to derivative financial instruments recognized in earnings was a net gain of NT$304,292 thousand and a net loss of NT$442,382 thousand, respectively.
6.   AVAILABLE-FOR-SALE FINANCIAL ASSETS
                 
    March 31  
    2010     2009  
 
               
Corporate bonds
  $ 1,043,306     $ 1,038,443  
 
           

-14-


 

7.   HELD-TO-MATURITY FINANCIAL ASSETS
                 
    March 31  
    2010     2009  
 
               
Corporate bonds
  $ 12,260,803     $ 15,446,490  
Structured time deposits
    1,000,000        
Government bonds
    898,801       878,363  
 
           
 
    14,159,604       16,324,853  
Current portion
    (7,944,656 )     (4,739,315 )
 
           
 
               
 
  $ 6,214,948     $ 11,585,538  
 
           
    Structured time deposits categorized as held-to-maturity financial assets consisted of the following:
                                 
    Principal     Interest     Range of        
    Amount     Receivable     Interest Rates     Maturity Date  
March 31, 2010
                               
 
                               
Callable domestic deposits
  $ 1,000,000     $ 809       0.36 %   July 2010
 
                           
8.   ALLOWANCES FOR DOUBTFUL RECEIVABLES, SALES RETURNS AND OTHERS
 
    Movements of the allowance for doubtful receivables were as follows:
                 
    Three Months Ended March 31  
    2010     2009  
 
               
Balance, beginning of period
  $ 431,000     $ 436,746  
Provision
    22,000        
Write-off
          (237,770 )
 
           
 
               
Balance, end of period
  $ 453,000     $ 198,976  
 
           
    Movements of the allowance for sales returns and others were as follows:
                 
    Three Months Ended March 31  
    2010     2009  
 
               
Balance, beginning of period
  $ 8,583,632     $ 5,868,582  
Provision
    2,747,878       1,654,628  
Write-off
    (4,328,306 )     (1,186,334 )
 
           
 
               
Balance, end of period
  $ 7,003,204     $ 6,336,876  
 
           

-15-


 

9.   INVENTORIES
                 
    March 31  
    2010     2009  
 
               
Finished goods
  $ 1,975,182     $ 2,313,609  
Work in process
    15,914,041       9,462,462  
Raw materials
    1,484,633       558,422  
Supplies and spare parts
    935,397       614,625  
 
           
 
               
 
  $ 20,309,253     $ 12,949,118  
 
           
    Write-down of inventories to net realizable value in the amount of NT$228,550 thousand and NT$171,264 thousand, respectively, were included in the cost of sales for the three months ended March 31, 2010 and 2009. And inventories losses related to earthquake in the amount of NT$194,137 thousand were classified under non-operating expenses and losses for the three months ended March 31, 2010.
10.   INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD
                                 
    March 31  
    2010     2009  
            % of             % of  
    Carrying     Owner-     Carrying     Owner-  
    Amount     ship     Amount     ship  
 
                               
TSMC Global Ltd. (TSMC Global)
  $ 45,245,474       100     $ 47,526,422       100  
TSMC Partners, Ltd. (TSMC Partners)
    32,637,828       100       3,719,188       100  
Vanguard International Semiconductor Corporation (VIS)
    9,359,350       37       9,491,037       37  
Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)
    6,308,810       39       5,720,868       39  
Motech Industries Inc. (Motech)
    6,210,916       20              
TSMC China Company Limited (TSMC China)
    2,787,558       100       5,220,310       100  
TSMC North America
    2,726,868       100       2,613,897       100  
Xintec Inc. (Xintec)
    1,532,384       41       1,397,538       42  
VentureTech Alliance Fund III, L.P. (VTAF III)
    1,351,399       98       1,403,469       98  
VentureTech Alliance Fund II, L.P. (VTAF II)
    1,140,879       98       841,597       98  
Global UniChip Corporation (GUC)
    1,039,348       35       991,305       36  
Emerging Alliance Fund, L.P. (Emerging Alliance)
    303,768       99       371,095       99  
TSMC Europe B.V. (TSMC Europe)
    158,190       100       129,083       100  
TSMC Japan Limited (TSMC Japan)
    133,420       100       132,714       100  
TSMC Korea Limited (TSMC Korea)
    19,460       100       14,996       100  
TSMC International Investment Ltd. (TSMC International)
                30,028,035       100  
 
                           
 
                               
 
  $ 110,955,652             $ 109,601,554          
 
                           
    In February 2010, the Company subscribed 75,316 thousand shares in Motech through a private placement for NT$6,228,661 thousand; after the subscription, the Company’s percentage of ownership in Motech was 20%. Transfer of the aforementioned common shares within three years is prohibited according to the related regulations.

-16-


 

    TSMC Partners and TSMC International were both 100% owned subsidiaries of the Company. To simplify the organization structure of investment, TSMC Partners merged TSMC International in June 2009.
 
    For the three months ended March 31, 2010 and 2009, equity in earnings/losses of equity method investees was a net gain of NT$559,908 thousand and a net loss of NT$2,949,992 thousand, respectively. Related equity in earnings/losses of equity method investees were determined based on the reviewed financial statements, except those of VTAF II, Emerging Alliance, TSMC Europe, TSMC Japan and TSMC Korea for the three months ended March 31, 2010 and those of Emerging Alliance, TSMC Europe, TSMC Japan and TSMC Korea for the three months ended March 31, 2009. The Company believes that, had VTAF II, Emerging Alliance, TSMC Japan, TSMC Europe and TSMC Korea’s financial statements been reviewed, any adjustments arising would have no material effect on the Company’s financial statements.
 
    Fair values of listed equity-method investments calculated at their closing prices as of March 31, 2010 and 2009 were as follows:
                 
    March 31  
    2010     2009  
 
               
VIS
  $ 10,240,043     $ 7,350,215  
Motech
    10,167,705        
GUC
    6,723,052       6,690,668  
 
           
 
               
 
  $ 27,130,800     $ 14,040,883  
 
           
    Movements of the difference between the cost of investments and the Company’s share in investees’ net assets allocated to depreciable assets were as follows:
                 
    Three Months Ended March 31  
    2010     2009  
 
               
Balance, beginning of period
  $ 1,429,118     $ 2,053,253  
Additions
    2,055,660        
Deductions
    (218,611 )     (156,034 )
 
           
 
               
Balance, end of period
  $ 3,266,167     $ 1,897,219  
 
           
    Movements of the difference allocated to goodwill were as follows:
                 
    Three Months Ended March 31  
    2010     2009  
 
               
Balance, beginning of period
  $ 1,061,885     $ 1,061,885  
Additions
    353,680        
 
           
 
               
Balance, end of period
  $ 1,415,565     $ 1,061,885  
 
           

-17-


 

11.   FINANCIAL ASSETS CARRIED AT COST
                 
    March 31  
    2010     2009  
 
               
Non-publicly traded stocks
  $ 338,584     $ 357,509  
Mutual funds
    159,251       161,993  
 
           
 
               
 
  $ 497,835     $ 519,502  
 
           
12.   PROPERTY, PLANT AND EQUIPMENT
                                         
    Three Months Ended March 31, 2010  
    Balance,                                
    Beginning                             Balance,  
    of Period     Additions     Disposals     Reclassification     End of Period  
 
                                       
Cost
                                       
Buildings
  $ 124,522,047     $ 1,350,855     $     $     $ 125,872,902  
Machinery and equipment
    713,426,126       43,804,758       (191,945 )     443       757,039,382  
Office equipment
    10,781,099       515,324       (20,129 )     (443 )     11,275,851  
 
                             
 
    848,729,272     $ 45,670,937     $ (212,074 )   $       894,188,135  
 
                             
Accumulated depreciation
                                       
Buildings
    73,525,160     $ 2,077,831     $     $       75,602,991  
Machinery and equipment
    545,693,910       16,918,504       (191,945 )     443       562,420,912  
Office equipment
    8,545,253       214,931       (20,129 )     (443 )     8,739,612  
 
                             
 
    627,764,323     $ 19,211,266     $ (212,074 )   $       646,763,515  
 
                             
Advance payments and construction in progress
    33,786,577     $ 220,401     $     $       34,006,978  
 
                             
 
                                       
 
  $ 254,751,526                             $ 281,431,598  
 
                                   
                                         
    Three Months Ended March 31, 2009  
    Balance,                              
    Beginning     Additions                     Balance,  
    of Period     (Deductions)     Disposals     Reclassification     End of Period  
Cost
                                       
Buildings
  $ 114,014,588     $ 866,326     $     $     $ 114,880,914  
Machinery and equipment
    635,008,261       2,945,926       (1,044,836 )           636,909,351  
Office equipment
    9,748,869       209,878       (102,324 )           9,856,423  
 
                             
 
    758,771,718     $ 4,022,130     $ (1,147,160 )   $       761,646,688  
 
                             
Accumulated depreciation
                                       
Buildings
    65,351,514     $ 2,042,457     $     $       67,393,971  
Machinery and equipment
    484,046,160       16,025,834       (449,252 )           499,622,742  
Office equipment
    7,849,580       234,397       (102,289 )           7,981,688  
 
                             
 
    557,247,254     $ 18,302,688     $ (551,541 )   $       574,998,401  
 
                             
Advance payments and construction in progress
    17,758,038     $ (1,323,123 )   $     $       16,434,915  
 
                             
 
                                       
 
  $ 219,282,502                             $ 203,083,202  
 
                                   
    No interest was capitalized during the three months ended March 31, 2010 and 2009.
13.   DEFERRED CHARGES, NET
                                 
    Three Months Ended March 31, 2010  
    Balance,                        
    Beginning of                     Balance,  
    Period     Addition     Amortization     End of Period  
 
                               
Technology license fees
  $ 2,979,801     $     $ (191,491 )   $ 2,788,310  
Software and system design costs
    1,646,973       372,884       (203,007 )     1,816,850  
Patent and others
    1,264,911             (90,229 )     1,174,682  
 
                       
 
                               
 
  $ 5,891,685     $ 372,884     $ (484,727 )   $ 5,779,842  
 
                       

-18-


 

                                 
    Three Months Ended March 31, 2009  
    Balance,                        
    Beginning of                     Balance,  
    Period     Addition     Amortization     End of Period  
 
                               
Technology license fees
  $ 3,786,251     $     $ (211,735 )   $ 3,574,516  
Software and system design costs
    1,559,857       37,331       (178,774 )     1,418,414  
Patent and others
    1,055,353             (67,852 )     987,501  
 
                       
 
                               
 
  $ 6,401,461     $ 37,331     $ (458,361 )   $ 5,980,431  
 
                       
14.   BONDS PAYABLE
                 
    March 31  
    2010     2009  
Domestic unsecured bonds:
               
Issued in January 2002 and repayable in January 2012, 3.00% interest payable annually
  $ 4,500,000     $ 4,500,000  
 
           
15.   OTHER LONG-TERM PAYABLES
 
    The Company’s long-term payables mainly resulted from license agreements for certain semiconductor-related patents. As of March 31, 2010, future payments for other long-term payables were as follows:
         
Year of Payment   Amount  
 
       
2010 (2nd to 4th quarter)
  $ 737,350  
2011
    413,647  
 
     
 
    1,150,997  
Current portion (classified under accrued expenses and other current liabilities)
    (737,350 )
 
     
 
       
 
  $ 413,647  
 
     
16.   PENSION PLANS
 
    The pension mechanism under the Labor Pension Act is deemed a defined contribution plan. Pursuant to the Act, the Company has made monthly contributions equal to 6% of each employee’s monthly salary to employees’ pension accounts and recognized pension cost of NT$191,296 thousand and NT$152,354 thousand for the three months ended March 31, 2010 and 2009, respectively.
 
    The Company has a defined benefit plan under the Labor Standards Law that provides benefits based on an employee’s length of service and average monthly salary for the six-month period prior to retirement. The Company contributes an amount equal to 2% of salaries paid each month to a pension fund (the Fund), which is administered by the Labor Pension Fund Supervisory Committee (the Committee) and deposited in the Committee’s name in the Bank of Taiwan. The Company recognized pension cost of NT$59,245 thousand and NT$72,171 thousand for the three months ended March 31, 2010 and 2009, respectively.

-19-


 

    Movements of the Fund and accrued pension cost under the defined benefit plan were summarized as follows:
                 
    Three Months Ended March 31  
    2010     2009  
The Fund
               
Balance, beginning of period
  $ 2,595,717     $ 2,389,519  
Contributions
    68,265       60,334  
Interest
    41,105       52,445  
Payments
          (19,355 )
 
           
 
               
Balance, end of period
  $ 2,705,087     $ 2,482,943  
 
           
 
               
Accrued pension cost
               
Balance, beginning of period
  $ 3,807,176     $ 3,710,009  
Accruals
    876       17,216  
 
           
 
               
Balance, end of period
  $ 3,808,052     $ 3,727,225  
 
           
17.   INCOME TAX
  a.   A reconciliation of income tax expense based on “income before income tax” at statutory rate and income tax currently payable was as follows:
                 
    Three Months Ended March 31  
    2010     2009  
 
               
Income tax expense based on “income before income tax” at statutory rate (20% and 25% for 2010 and 2009, respectively)
  $ 7,018,217     $ 187,357  
Tax effect of the following:
               
Tax-exempt income
    (3,881,271 )     (587,186 )
Temporary and permanent differences
    26,692       1,212,887  
Others
          69,174  
Income tax credits used
    (1,581,819 )     (441,116 )
 
           
 
               
Income tax currently payable
  $ 1,581,819     $ 441,116  
 
           
  b.   Income tax expense (benefit) consisted of the following:
                 
    Three Months Ended March 31  
    2010     2009  
 
               
Income tax currently payable
  $ 1,581,819     $ 441,116  
Income tax adjustments on prior years
    647,144        
Net change in deferred income tax assets
               
Investment tax credits
    (1,056,341 )     (393,267 )
Temporary differences
    (601,364 )     313,793  
Valuation allowance
    856,708       (1,171,047 )
 
           
 
               
Income tax expense (benefit)
  $ 1,427,966     $ (809,405 )
 
           

-20-


 

  c.   Net deferred income tax assets consisted of the following:
                 
    March 31  
    2010     2009  
 
               
Current deferred income tax assets
               
Investment tax credits
  $ 5,172,000     $ 5,136,000  
Temporary differences
               
Allowance for sales returns and others
    717,828       608,340  
Others
    182,261       105,223  
 
           
 
               
 
  $ 6,072,089     $ 5,849,563  
 
           
 
               
Noncurrent deferred income tax assets
               
Investment tax credits
  $ 10,616,082     $ 8,869,485  
Temporary differences
               
Depreciation
    2,412,634       1,508,014  
Others
    183,285       400,730  
Valuation allowance
    (6,656,040 )     (5,228,599 )
 
           
 
               
 
  $ 6,555,961     $ 5,549,630  
 
           
      In May 2009, the amendment of Article 5 of the Income Tax Law of the Republic of China announced that the income tax rate of profit-seeking enterprises would be reduced from 25% to 20%, and would be effective starting in 2010. The Company recalculated its deferred tax assets in accordance with the amended Article and adjusted the resulting difference as an income tax expense in 2009.
 
      Under Article 10 of the Statute for Industrial Innovation (SII) passed by the Legislative Yuan on April 16, 2010, a profit-seeking enterprise may deduct up to 15% of its research and development expenditures from its income tax payable for the fiscal year in which these expenditures are incurred, but this deduction should not exceed 30% of the income tax payable for that fiscal year. This incentive is retroactive to January 1, 2010 and effective till December 31, 2019. Thus, the Company estimated that its income tax credits arising from the SII was NT$486,047 thousand as of March 31, 2010, which will be recognized in the six months ended June 30, 2010.
 
  d.   Integrated income tax information:
 
      The balance of the imputation credit account as of March 31, 2010 and 2009 was NT$369,265 thousand and NT$521,634 thousand, respectively.
 
      The estimated and actual creditable ratios for distribution of earnings of 2009 and 2008 were 0.35% and 9.10%, respectively.
 
      The imputation credit allocated to shareholders is based on its balance as of the date of dividend distribution. The estimated creditable ratio may change when the actual distribution of the imputation credit is made.
 
  e.   All earnings generated prior to December 31, 1997 have been appropriated.

-21-


 

  f.   As of March 31, 2010, investment tax credits consisted of the following:
                             
        Total     Remaining        
        Creditable     Creditable     Expiry  
Law/Statute   Item   Amount     Amount     Year  
 
                           
Statute for Upgrading Industries
 
Purchase of machinery and equipment
  $ 3,457,388     $ 2,979,024       2012  
 
    6,683,346       6,683,346       2013  
 
        153,306       153,306       2014  
 
                       
 
                           
 
      $ 10,294,040     $ 9,815,676          
 
                       
 
                           
Statute for Upgrading Industries
 
Research and development expenditures
  $ 1,084,162     $       2011  
 
    2,691,517       2,691,517       2012  
 
        3,250,265       3,250,265       2013  
 
                       
 
                           
 
      $ 7,025,944     $ 5,941,782          
 
                       
 
                           
Statute for Upgrading Industries
  Personnel training expenditures   $ 19,293     $       2011  
        30,624       30,624       2012  
 
                       
 
                           
 
      $ 49,917     $ 30,624          
 
                       
  g.   The profits generated from the following projects are exempt from income tax for a five-year period:
     
    Tax-exemption Period
 
   
Construction of Fab 14 — Module A
  2006 to 2010
Construction of Fab 12 — Module B and expansion of Fab 14 — Module A
  2007 to 2011
Construction of Fab 14 — Module B and expansion of Fab 12 and others
  2008 to 2012
Construction of Fab 14 — Module B and expansion of Fab 12 and others
  2010 to 2014 (proposed)
  h.   The tax authorities have examined income tax returns of the Company through 2007. All investment tax credit adjustments assessed by the tax authorities have been recognized accordingly.
18.   LABOR COST, DEPRECIATION AND AMORTIZATION
                         
    Three Months Ended March 31, 2010  
            Classified as        
    Classified as     Operating        
    Cost of Sales     Expenses     Total  
 
                       
Labor cost
                       
Salary and bonus
  $ 5,083,162     $ 3,791,508     $ 8,874,670  
Labor and health insurance
    182,508       107,582       290,090  
Pension
    157,629       92,912       250,541  
Meal
    122,966       52,290       175,256  
Welfare
    47,194       29,069       76,263  
Others
    13,360       3,502       16,862  
 
                 
 
                       
 
  $ 5,606,819     $ 4,076,863     $ 9,683,682  
 
                 
 
                       
Depreciation
  $ 18,051,574     $ 1,155,626     $ 19,207,200  
 
                 
Amortization
  $ 318,383     $ 166,344     $ 484,727  
 
                 

-22-


 

                         
    Three Months Ended March 31, 2009  
            Classified as        
    Classified as     Operating        
    Cost of Sales     Expenses     Total  
Labor cost
                       
Salary and bonus
  $ 2,077,798     $ 1,191,042     $ 3,268,840  
Labor and health insurance
    169,346       99,493       268,839  
Pension
    141,518       83,007       224,525  
Meal
    94,845       38,426       133,271  
Welfare
    23,159       13,596       36,755  
Others
    17,187       4,661       21,848  
 
                 
 
                       
 
  $ 2,523,853     $ 1,430,225     $ 3,954,078  
 
                 
 
                       
Depreciation
  $ 17,408,696     $ 889,926     $ 18,298,622  
 
                 
Amortization
  $ 302,212     $ 156,149     $ 458,361  
 
                 
19.   SHAREHOLDERS’ EQUITY
    As of March 31, 2010, 1,097,513 thousand ADSs of the Company were traded on the NYSE. The number of common shares represented by the ADSs was 5,487,565 thousand (one ADS represents five common shares).
    Capital surplus can only be used to offset a deficit under the Company Law. However, the capital surplus generated from donations and the excess of the issuance price over the par value of capital stock (including the stock issued for new capital, mergers, convertible bonds and the surplus from treasury stock transactions) may be appropriated as stock dividends, which are limited to a certain percentage of the Company’s paid-in capital. In addition, the capital surplus from long-term investments may not be used for any purpose.
    Capital surplus consisted of the following:
                 
    March 31  
    2010     2009  
 
               
Additional paid-in capital
  $ 23,483,970     $ 17,972,138  
From merger
    22,805,390       22,805,390  
From convertible bonds
    8,893,190       8,893,190  
From long-term investments
    348,240       294,677  
Donations
    55       55  
 
           
 
               
 
  $ 55,530,845     $ 49,965,450  
 
           
    The Company’s Articles of Incorporation provide that, when allocating the net profits for each fiscal year, the Company shall first offset its losses in previous years and then set aside the following items accordingly:
  a.   Legal capital reserve at 10% of the profits left over, until the accumulated legal capital reserve equals the Company’s paid-in capital;
 
  b.   Special capital reserve in accordance with relevant laws or regulations or as requested by the authorities in charge;

-23-


 

  c.   Bonus to directors and profit sharing to employees of the Company of not more than 0.3% and not less than 1% of the remainder, respectively. Directors who also serve as executive officers of the Company are not entitled to receive the bonus to directors. The Company may issue profit sharing to employees in stock of an affiliated company meeting the conditions set by the Board of Directors or, by the person duly authorized by the Board of Directors;
 
  d.   Any balance left over shall be allocated according to the resolution of the shareholders’ meeting.
    The Company’s Articles of Incorporation also provide that profits of the Company may be distributed by way of cash dividend and/or stock dividend. However, distribution of profits shall be made preferably by way of cash dividend. Distribution of profits may also be made by way of stock dividend; provided that the ratio for stock dividend shall not exceed 50% of the total distribution.
    Any appropriations of the profits are subject to shareholders’ approval in the following year.
    The Company accrued profit sharing to employees as a charge to earnings of certain percentage of net income during the period amounted to NT$2,272,790 thousand and NT$236,060 thousand for the three months ended March 2010 and 2009, respectively; bonuses to directors were accrued with an estimate based on historical experience. If the actual amounts subsequently resolved by the shareholders differ from the estimated amounts, the differences are recorded in the year of shareholders’ resolution as a change in accounting estimate. If profit sharing is resolved to be distributed to employees in stock, the number of shares is determined by dividing the amount of profit sharing by the closing price (after considering the effect of dividends) of the shares on the day preceding the shareholders’ meeting.
    The Company no longer has supervisors since January 1, 2007. The required duties of supervisors are being fulfilled by the Audit Committee.
    The appropriation for legal capital reserve shall be made until the reserve equals the Company’s paid-in capital. The reserve may be used to offset a deficit, or be distributed as dividends and bonuses for the portion in excess of 50% of the paid-in capital if the Company has no unappropriated earnings and the reserve balance has exceeded 50% of the Company’s paid-in capital. The Company Law also prescribes that, when the reserve has reached 50% of the Company’s paid-in capital, up to 50% of the reserve may be transferred to capital.
    A special capital reserve equivalent to the net debit balance of the other components of shareholders’ equity (for example, cumulative translation adjustments and unrealized loss on financial instruments, but excluding treasury stock) shall be made from unappropriated earnings pursuant to existing regulations promulgated by the Securities and Futures Bureau (SFB). Any special reserve appropriated may be reversed to the extent that the net debit balance reverses.
    The appropriations of earnings for 2009 and 2008 had been approved in a Board of Directors’ meeting held on February 9, 2010 and a shareholders’ meeting held on June 10, 2009, respectively. The appropriations and dividends per share were as follows:
                                 
                    Dividends Per Share  
    Appropriation of Earnings     (NT$)  
    For Fiscal     For Fiscal     For Fiscal     For Fiscal  
    Year 2009     Year 2008     Year 2009     Year 2008  
 
Legal capital reserve
  $ 8,921,784     $ 9,993,317                  
Special capital reserve
    1,313,047       (391,857 )                
Cash dividends to shareholders
    77,708,120       76,876,312     $ 3.00     $ 3.00  
Stock dividends to shareholders
          512,509             0.02  
 
                           
 
                               
 
  $ 87,942,951     $ 86,990,281                  
 
                           

-24-


 

    TSMC’s profit sharing to employees and bonus to directors that will be paid in cash in the amounts of NT$6,691,338 thousand and NT$67,692 thousand for the year ended December 31, 2009, respectively, were resolved in the meeting of the Board of Directors held on February 9, 2010. Such amounts were not materially different from the amounts that have been charged against earnings for the year ended December 31, 2009.
 
    The 2009 earnings appropriations related to profit sharing to employees and bonus to directors will be resolved by the shareholders. TSMC’s annual shareholders’ meeting is scheduled for June 15, 2010.
 
    Profit sharing to employees that have been paid in cash and in stock as well as bonus to directors in the amounts of NT$7,494,988 thousand, NT$7,494,988 thousand and NT$158,080 thousand for 2008, respectively, had been approved in the shareholders’ meeting held on June 10, 2009. The profit sharing to employee in stock of 141,870 thousand shares was determined by the closing price of the Company’s common shares (after considering the effect of dividends) of the day immediately preceding the shareholders’ meeting, which was NT$52.83. The resolved amounts of the profit sharing to employees and bonus to directors were consistent with the resolutions of meeting of the Board of Directors held on February 10, 2009 and same amount had been charged against earnings of 2008.
 
    The shareholders’ meeting held on June 10, 2009 also resolved to distribute stock dividends out of capital surplus, and stock dividends to shareholders as well as profit sharing to employees to be paid in stock in the amount of NT$768,763 thousand, NT$512,509 thousand and NT$7,494,988 thousand, respectively. The aforementioned capital increase had taken effect on July 21, 2009.
 
    The information about the appropriations of profit sharing to employees and bonus to directors is available at the Market Observation Post System website.
 
    Under the Integrated Income Tax System that became effective on January 1, 1998, R.O.C. resident shareholders are allowed a tax credit for their proportionate share of the income tax paid by the Company on earnings generated since January 1, 1998.
20.   STOCK-BASED COMPENSATION PLANS
    The Company’s Employee Stock Option Plans, consisting of the 2004 Plan, 2003 Plan and 2002 Plan were approved by the SFB on January 6, 2005, October 29, 2003 and June 25, 2002, respectively. The maximum number of options authorized to be granted under the 2004 Plan, 2003 Plan and 2002 Plan was 11,000 thousand, 120,000 thousand and 100,000 thousand, respectively, with each option eligible to subscribe for one common share when exercisable. The options may be granted to qualified employees of the Company or any of its domestic or foreign subsidiaries, in which the Company’s shareholding with voting rights, directly or indirectly, is more than fifty percent (50%). The options of all the plans are valid for ten years and exercisable at certain percentages subsequent to the second anniversary of the grant date. Under the terms of the plans, the options are granted at an exercise price equal to the closing price of the Company’s common shares listed on the TSE on the grant date.
 
    Options of the plans that had never been granted or had been granted but subsequently canceled had expired as of March 31, 2010.

-25-


 

    Information about outstanding options for the three months ended March 31, 2010 and 2009 was as follows:
                 
            Weighted-
    Number of   average
    Options   Exercise Price
    (In Thousands)   (NT$)
Three months ended March 31, 2010
               
 
               
Balance, beginning of period
    28,810     $ 33.5  
Options exercised
    (1,063 )     34.6  
 
               
 
               
Balance, end of period
    27,747       33.4  
 
               
 
               
Three months ended March 31, 2009
               
 
               
Balance, beginning of period
    36,234       35.3  
Options exercised
    (575 )     26.8  
Options canceled
    (127 )     45.4  
 
               
 
               
Balance, end of period
    35,532       35.4  
 
               
    The numbers of outstanding options and exercise prices have been adjusted to reflect the distribution of earnings in accordance with the plans.
 
    As of March 31, 2010, information about outstanding was as follows:
                             
        Options Outstanding
                Weighted-average    
                Remaining   Weighted-average
Range of Exercise   Number of Options   Contractual Life   Exercise Price
Price (NT$)   (In Thousands)   (Years)   (NT$)
                             
$ 22.8-$32.0       20,484       2.93     $ 29.1  
  38.0- 50.1        7,263       4.65       45.6  
                             
     
          27,747       3.38       33.4  
                             
    As of March 31, 2010, all of the above outstanding options were exercisable.
 
    No compensation cost was recognized under the intrinsic value method for the three months ended March 31, 2010 and 2009. Had the Company used the fair value based method to evaluate the options using the Black-Scholes model, the assumptions and pro forma results of the Company for the three months ended March 31, 2010 and 2009 would have been as follows:
                 
    Three Months Ended March 31
    2010   2009
Assumptions:
               
Expected dividend yield
    1.00%-3.44 %     1.00%-3.44 %
Expected volatility
    43.77%-46.15 %     43.77%-46.15 %
Risk free interest rate
    3.07%-3.85 %     3.07%-3.85 %
Expected life
  5 years     5 years  
 
               
Net income:
               
Net income as reported
  $ 33,663,117     $ 1,558,873  
Pro forma net income
    33,700,273       1,445,013  
 
          (Continued)

-26-


 

                 
    Three Months Ended March 31
    2010   2009
Earnings per share (EPS) — after income tax (NT$):
               
Basic EPS as reported
  $ 1.30     $ 0.06  
Pro forma basic EPS
    1.30       0.06  
Diluted EPS as reported
    1.30       0.06  
Pro forma diluted EPS
    1.30       0.06  
 
          (Concluded)
21.   EARNINGS PER SHARE
    EPS is computed as follows:
                                         
          Number of     EPS (NT$)  
    Amounts (Numerator)     Shares     Before     After  
    Before     After     (Denominator)     Income     Income  
    Income Tax     Income Tax     (In Thousands)     Tax     Tax  
Three months ended March 31, 2010
                                       
 
                                       
Basic EPS
                                       
Earnings available to common shareholders
  $ 35,091,083     $ 33,663,117       25,903,465     $ 1.35     $ 1.30  
 
                                   
Effect of dilutive potential common shares
                12,822                  
 
                                 
 
                                       
Diluted EPS
                                       
Earnings available to common shareholders (including effect of dilutive potential common shares)
  $ 35,091,083     $ 33,663,117       25,916,287     $ 1.35     $ 1.30  
 
                             
 
                                       
Three months ended March 31, 2009
                                       
 
                                       
Basic EPS
                                       
Earnings available to common shareholders
  $ 749,468     $ 1,558,873       25,753,921     $ 0.03     $ 0.06  
 
                                   
Effect of dilutive potential common shares
                165,978                  
 
                                 
 
                                       
Diluted EPS
                                       
Earnings available to common shareholders (including effect of dilutive potential common shares)
  $ 749,468     $ 1,558,873       25,919,899     $ 0.03     $ 0.06  
 
                             
    Effective January 1, 2008, the Company adopted Interpretation 2007-052 that requires companies to record profit sharing to employees as an expense rather than as an appropriation of earnings. If the Company may settle the obligation by cash, by issuing shares, or in combination of both cash and shares, profit sharing to employees which will be settled in shares should be included in the weighted average number of shares outstanding in calculation of diluted EPS, if the shares have a dilutive effect. The number of shares is estimated by dividing the amount of profit sharing to employees in stock by the closing price (after considering the dilutive effect of dividends) of the common shares on the balance sheet date. Such dilutive effect of the potential shares needs to be included in the calculation of diluted EPS until the shares of profit sharing to employees are resolved in the shareholders’ meeting in the following year.
 
    The average number of shares outstanding for EPS calculation has been retroactively adjusted for the issuance of stock dividends. This adjustment caused each of the basic and diluted after income tax EPS for the three months ended March 31, 2009 to remain at NT$0.06.

-27-


 

22.   DISCLOSURES FOR FINANCIAL INSTRUMENTS
  a.   Fair values of financial instruments were as follows:
                                 
    March 31
    2010   2009
    Carrying           Carrying    
    Amount   Fair Value   Amount   Fair Value
 
                               
Assets
                               
 
                               
Financial assets at fair value through profit or loss
  $ 81,703     $ 81,703     $ 229,415     $ 229,415  
Available-for-sale financial assets
    1,043,306       1,043,306       1,038,443       1,038,443  
Held-to-maturity financial assets
    14,159,604       14,238,897       16,324,853       16,412,672  
Financial assets carried at cost
    497,835             519,502        
 
                               
Liabilities
                               
 
                               
Financial liabilities at fair value through profit or loss
    11,410       11,410       2,962       2,962  
Bonds payable
    4,500,000       4,565,957       4,500,000       4,601,709  
Other long-term payables (including current portion)
    1,150,997       1,150,997       1,988,827       1,988,827  
  b.   Methods and assumptions used in the estimation of fair values of financial instruments
  1)   The aforementioned financial instruments do not include cash and cash equivalents, receivables, other financial assets, refundable deposits, payables and guarantee deposits. The carrying amounts of these financial instruments approximate their fair values due to their short maturities.
 
  2)   Except for derivatives and structured time deposits, fair values of financial assets at fair value through profit or loss, available-for-sale and held-to-maturity financial assets were based on their quoted market prices.
 
  3)   The fair values of those derivatives and structured time deposits are determined using valuation techniques incorporating estimates and assumptions that were consistent with prevailing market conditions.
 
  4)   Financial assets carried at cost have no quoted prices in an active market and entail an unreasonably high cost to obtain verifiable fair values. Therefore, no fair value is presented.
 
  5)   Fair value of bonds payable was based on their quoted market price.
 
  6)   Fair value of other long-term payables was based on the present value of expected cash flows, which approximates their carrying amount.
  c.   The changes in fair value of derivatives contracts which were outstanding as of March 31, 2010 and 2009 estimated using valuation techniques were recognized as net gains of NT$70,293 thousand and NT$226,453 thousand, respectively.
 
  d.   As of March 31, 2010 and 2009, financial assets exposed to fair value interest rate risk were NT$15,284,613 thousand and NT$17,592,711 thousand, respectively, financial liabilities exposed to fair value interest rate risk were NT$4,511,410 thousand and NT$4,502,962 thousand, respectively.

-28-


 

  e.   Movements of the unrealized gains or losses on financial instruments for the three months ended March 31, 2010 and 2009 were as follows:
                         
    Three Months Ended March 31, 2010  
    From              
    Available-     Equity-        
    for-sale     method        
    Financial Assets     Investments     Total  
 
                       
Balance, beginning of period
  $ 46,672     $ 406,949     $ 453,621  
Recognized directly in shareholders’ equity
    (3,366 )     (48,865 )     (52,231 )
 
                 
 
                       
Balance, end of period
  $ 43,306     $ 358,084     $ 401,390  
 
                 
 
                       
    Three Months Ended March 31, 2009  
    From              
    Available-     Equity-        
    for-sale     method        
    Financial Assets     Investments     Total  
 
                       
Balance, beginning of period
  $ 32,658     $ (320,000 )   $ (287,342 )
Recognized directly in shareholders’ equity
    43,155       458,785       501,940  
Removed from shareholders’ equity and recognized in earnings
    (37,370 )           (37,370 )
 
                 
 
                       
Balance, end of period
  $ 38,443     $ 138,785     $ 177,228  
 
                 
  f.   Information about financial risks
  1)   Market risk. The derivative financial instruments categorized as financial assets/liabilities at fair value through profit or loss are mainly used to hedge the exchange rate fluctuations of foreign-currency assets and liabilities; therefore, the market risk of derivatives will be offset by the foreign exchange risk of these hedged items. Available-for-sale financial assets and held-to maturity financial assets held by the Company are mainly fixed-interest-rate debt securities; therefore, the fluctuations in market interest rates will result in changes in fair value of these debt securities.
 
  2)   Credit risk. Credit risk represents the potential loss that would be incurred by the Company if the counter-parties or third-parties breached contracts. Financial instruments with positive fair values at the balance sheet date are evaluated for credit risk. The Company evaluated whether the financial instruments for any possible counter-party or third-parties are reputable financial institutions, business enterprises, and government agencies and accordingly, the Company believed that the Company’s exposure to credit risk was not significant.
 
  3)   Liquidity risk. The Company has sufficient operating capital to meet cash needs upon settlement of derivative financial instruments and bonds payable. Therefore, the liquidity risk is low.
 
  4)   Cash flow interest rate risk. The Company mainly invests in fixed-interest-rate debt securities. Therefore, cash flows are not expected to fluctuate significantly due to changes in market interest rates.

-29-


 

23.   RELATED PARTY TRANSACTIONS
    The Company engages in business transactions with the following related parties:
  a.   Subsidiaries
 
      TSMC North America
TSMC China
TSMC Europe
TSMC Japan
TSMC Korea
 
  b.   Investees
 
      GUC (with a controlling financial interest)
Xintec (with a controlling financial interest)
SSMC (accounted for using equity method)
VIS (accounted for using equity method)
 
  c.   Indirect subsidiaries
 
      WaferTech, LLC (WaferTech)
TSMC Technology, Inc. (TSMC Technology)
TSMC Design Technology Canada Inc. (TSMC Canada)
 
  d.   Indirect investee
 
      VisEra Technology Company, Ltd. (VisEra), an indirect investee accounted for using equity method.
 
  e.   Others
 
      Related parties over which the Company has control or exercises significant influence but with which the Company had no material transactions.
    Transactions with the aforementioned parties, other than those disclosed in other notes, are summarized as follows:
                                 
    2010     2009  
    Amount     %     Amount     %  
 
                               
For the three months ended March 31
                               
 
                               
Sales
                               
TSMC North America
  $ 48,676,679       53     $ 22,964,954       58  
Others
    373,853             296,134       1  
 
                       
 
                               
 
  $ 49,050,532       53     $ 23,261,088       59  
 
                       
 
                               
Purchases
                               
WaferTech
  $ 1,636,493       17     $ 739,712       17  
TSMC China
    1,577,962       16       447,631       10  
SSMC
    1,041,954       10       514,174       11  
VIS
    960,978       10       393,296       9  
 
                       
 
                               
 
  $ 5,217,387       53     $ 2,094,813       47  
 
                       

-30-


 

                                 
    2010     2009  
    Amount     %     Amount     %  
 
                               
Manufacturing expenses
                               
Xintec (rent and outsourcing)
  $ 45,546           $        
VisEra (outsourcing)
    4,460             8,359        
 
                       
 
                               
 
  $ 50,006           $ 8,359        
 
                       
 
                               
Marketing expenses — commission
                               
TSMC Europe
  $ 98,913       16     $ 71,736       27  
TSMC Japan
    59,644       9       49,114       19  
TSMC China
    11,446       2              
TSMC Korea
    4,285       1       3,375       1  
 
                       
 
                               
 
  $ 174,288       28     $ 124,225       47  
 
                       
 
                               
Research and development expenses
                               
TSMC Technology (primarily consulting fee)
  $ 131,169       2     $ 85,917       3  
TSMC Canada (primarily consulting fee)
    45,209       1       37,632       1  
VIS (rent)
    2,274                    
Others
    7,989             19,882        
 
                       
 
                               
 
  $ 186,641       3     $ 143,431       4  
 
                       
 
                               
Sales of property, plant and equipment
                               
VIS
  $ 15,940       12     $        
TSMC China
    11,224       8              
Xintec
                58,450       100  
 
                       
 
                               
 
  $ 27,164       20     $ 58,450       100  
 
                       
 
                               
Purchase of property, plant and equipment
                               
VIS
  $ 15,865           $        
TSMC China
    14,498                    
WaferTech
    9,624                    
 
                       
 
                               
 
  $ 39,987           $        
 
                       
 
                               
Non-operating income and gains
                               
VIS (primarily technical service income, see Note 26e)
  $ 86,868       5     $ 24,108       2  
SSMC (primarily technical service income, see Note 26d)
    44,503       2       17,289       2  
TSMC China
    25,426       1       47,799       4  
 
                       
 
                               
 
  $ 156,797       8     $ 89,196       8  
 
                       

-31-


 

                                 
    2010     2009  
    Amount     %     Amount     %  
 
                               
As of March 31
                               
 
                               
Receivables
                               
TSMC North America
  $ 22,055,122       99     $ 10,033,427       99  
Others
    205,627       1       148,538       1  
 
                       
 
                               
 
  $ 22,260,749       100     $ 10,181,965       100  
 
                       
 
                               
Other receivables
                               
TSMC China
  $ 123,354       42     $ 107,608       47  
VIS
    113,100       38       35,615       15  
SSMC
    45,687       15       17,211       7  
Xintec
                59,862       26  
Others
    13,513       5       10,575       5  
 
                       
 
                               
 
  $ 295,654       100     $ 230,871       100  
 
                       
 
                               
Payables
                               
TSMC China
  $ 762,578       28     $ 193,560       18  
VIS
    695,640       25       298,360       27  
WaferTech
    647,205       23       237,033       21  
SSMC
    408,809       15       202,534       18  
TSMC Technology
    129,058       5       97,970       9  
Others
    115,141       4       72,757       7  
 
                       
 
                               
 
  $ 2,758,431       100     $ 1,102,214       100  
 
                       
 
                               
Deferred debits (credits)
                               
TSMC China
  $ 4,672           $ (137,174 )     (62 )
 
                       
    The sales prices and payment terms to related parties were not significantly different from those of sales to third parties. For other related party transactions, prices and terms were determined in accordance with mutual agreements.
 
    The Company leased certain buildings, facilities, and machinery and equipment from Xintec. The lease terms and prices were determined in accordance with mutual agreements. The rental expense was paid monthly and the related expenses were classified under manufacturing expenses.
 
    The Company leased certain office space and building from VIS. The lease terms and prices were determined in accordance with mutual agreements. The rental expense was prepaid by the Company and the related expenses were classified under research and development expenses.
 
    The Company deferred the gains and losses (classified under deferred debits and deferred credits) derived from sales of property, plant and equipment to TSMC China, and then recognized such gains and losses (classified under non-operating income and gains and non-operating expenses and losses) over the depreciable lives of the disposed assets.

-32-


 

24.   PLEDGED OR MORTGAGED ASSETS
    As of March 31, 2010 and 2009, the Company had pledged time deposits of NT$737,109 thousand and NT$454,112 thousand (classified as other financial assets) as collateral for land lease agreements and customs duty guarantee, respectively.
25.   SIGNIFICANT LONG-TERM LEASES
    The Company leases several parcels of land from the Science Park Administration. These operating leases expire on various dates from December 2010 to December 2029 and can be renewed upon expiration.
 
    As of March 31, 2010, future lease payments were as follows:
         
Year   Amount  
 
       
2010 (2nd to 4th quarter)
  $ 304,209  
2011
    398,009  
2012
    398,009  
2013
    376,364  
2014
    363,378  
2015 and thereafter
    3,269,059  
 
     
 
       
 
  $ 5,109,028  
 
     
26.   SIGNIFICANT COMMITMENTS AND CONTINGENCIES
    Significant commitments and contingencies of the Company as of March 31, 2010, excluding those disclosed in other notes, were as follows:
  a.   Under a technical cooperation agreement with ITRI, the R.O.C. Government or its designee approved by the Company can use up to 35% of the Company’s capacity if the Company’s outstanding commitments to its customers are not prejudiced. The term of this agreement is for five years beginning from January 1, 1987 and is automatically renewed for successive periods of five years unless otherwise terminated by either party with one year prior notice.
 
  b.   Under several foundry agreements, the Company shall reserve a portion of its production capacity for certain major customers that have guarantee deposits with the Company. As of March 31, 2010 the Company had a total of US$26,937 thousand of guarantee deposits.
 
  c.   Under a Shareholders Agreement entered into with Philips and EDB Investments Pte Ltd. on March 30, 1999, the parties formed a joint venture company, SSMC, which is an integrated circuit foundry in Singapore. The Company’s equity interest in SSMC was 32%. Nevertheless, Philips parted with its semiconductor company which was renamed as NXP B.V. in September 2006. The Company and NXP B.V. purchased all the SSMC shares owned by EDB Investments Pte Ltd. pro rata according to the Shareholders Agreement on November 15, 2006. After the purchase, the Company and NXP B.V. currently own approximately 39% and 61% of the SSMC shares respectively. The Company and Philips (now NXP B.V.) are required, in the aggregate, to purchase at least 70% of SSMC’s capacity, but the Company alone is not required to purchase more than 28% of the capacity. If any party defaults on the commitment and the capacity utilization of SSMC fall below a specific percentage of its capacity, the defaulting party is required to compensate SSMC for all related unavoidable costs.

-33-


 

  d.   The Company provides technical services to SSMC under a Technical Cooperation Agreement (the Agreement) effective March 30, 1999. The Company receives compensation for such services computed at a specific percentage of net selling price of all products sold by SSMC. The Agreement shall remain in force for ten years and will be automatically renewed for successive periods of five years each unless pre-terminated by either party under certain conditions.
 
  e.   The Company provides a technology transfer to VIS under a Manufacturing License and Technology Transfer Agreement entered into on April 1, 2004. The Company receives compensation for such technology transfer in the form of royalty payments from VIS computed at specific percentages of net selling price of certain products sold by VIS. VIS agreed to reserve its certain capacity to manufacture for the Company certain products at prices as agreed by the parties.
 
  f.   TSMC, TSMC North America and WaferTech filed a series of lawsuits in late 2003 and 2004 against Semiconductor Manufacturing International Corporation, SMIC (Shanghai) and SMIC Americas (aggregately referring to as “SMIC”). The lawsuits alleged that SMIC infringed multiple TSMC, TSMC North America and WaferTech patents and misappropriated TSMC, TSMC North America and WaferTech’s trade secrets. These suits were settled out of court on January 30, 2005. As part of the settlement, Semiconductor Manufacturing International Corporation shall pay US$175 million over six years to resolve TSMC, TSMC North America and WaferTech’s claims. As of March 31, 2010, SMIC had paid US$135 million in accordance with the terms of this settlement agreement. In August 2006, TSMC, TSMC North America and WaferTech filed a lawsuit against SMIC in Alameda County Superior Court in California for breach of aforementioned settlement agreement, breach of promissory notes and trade secret misappropriation, seeking injunctive relief and monetary damages. In September 2006, SMIC filed a cross-complaint against TSMC, TSMC North America and WaferTech in the same court, alleging TSMC, TSMC North America and WaferTech of breach of the settlement agreement and implied covenant of good faith and fair dealing, in response to TSMC, TSMC North America and WaferTech’s August complaint. In November 2006, SMIC filed a complaint with Beijing People’s High Court against TSMC, TSMC North America and WaferTech alleging defamation and breach of good faith. The California State Superior Court of Alameda County issued an Order on TSMC, TSMC North America and WaferTech’s pre-trial motion for a preliminary injunction against SMIC on September 7, 2007. In the Order, the Court found “TSMC has demonstrated a significant likelihood that it will ultimately prevail on the merits of its claim for breach of certain paragraphs of the (2005) Settlement Agreement” with SMIC. The Court also found “TSMC has demonstrated a significant probability of establishing that SMIC retains and is using TSMC Information in SMIC’s 0.13um and smaller technologies, and there is significant threat of serious irreparable harm to TSMC if SMIC were to disclose or transfer that information before final resolution of the case.” Therefore, the Court ordered that, effective immediately, SMIC must provide advance notice and an opportunity for TSMC, TSMC North America and WaferTech to object before disclosing items enumerated in the Court Order to SMIC’s third party partners. The Court, however, did not grant a preliminary injunction as requested by TSMC, TSMC North America and WaferTech. In January 2009, the court in the California action held a four-day bench trial to determine whether a Settlement Agreement existed between the parties, and if there were an agreement, the interpretation of certain terms. SMIC contended that there was no binding Settlement Agreement, and TSMC, TSMC North America and WaferTech contended that the Settlement Agreement signed on January 30, 2005 and finalized shortly thereafter and repeatedly ratified bound the parties. On March 10, 2009, the Court issued its Statement of Decision. The Court rejected SMIC’s contention, and found that the parties were bound by the Settlement Agreement identified by TSMC, TSMC North America and WaferTech. The Court also interpreted the meaning of certain provisions within the Settlement Agreement. Regarding the claims raised by SMIC in the Beijing lawsuit, the Beijing People’s High Court has on June 10, 2009 rejected those claims and dismissed the lawsuit. On November 4, 2009, after a two-month trial, a jury in the California action found SMIC to have both breached the 2005 settlement agreement and misappropriated TSMC, TSMC North America and WaferTech’s trade secrets. TSMC, TSMC North America and WaferTech have subsequently settled both lawsuits with SMIC. Pursuant to the new settlement agreement, the parties have agreed to the entry of a stipulated judgment in favor of TSMC, TSMC North America and WaferTech in the California action, and to the dismissal of SMIC’s appeal against the Beijing High Court’s finding in favor of TSMC, TSMC North America and WaferTech.

-34-


 

      Under the new settlement agreement and the related stipulated judgment, SMIC has agreed to make cash payments by installments to TSMC totaling US$200 million, which are in addition to the US$135 million previously paid to TSMC under the 2005 settlement agreement, and, conditional upon relevant government regulatory approvals, to issue to TSMC a total of 1,789,493,218 common shares of Semiconductor Manufacturing International Corporation (representing about 8% of Semiconductor Manufacturing International Corporation’s total shares outstanding as of December 31, 2009) and a three-year warrant to purchase 695,914,030 common shares (subject to adjustment) of Semiconductor Manufacturing International Corporation at HK$1.30 per share (subject to adjustment).
27.   ADDITIONAL DISCLOSURES
    Following are the additional disclosures required by the SFB for the Company and its investees:
  a.   Financing provided: None;
 
  b.   Endorsement/guarantee provided: None;
 
  c.   Marketable securities held: Please see Table 1 attached;
 
  d.   Marketable securities acquired or disposed of at costs or prices of at least NT$100 million or 20% of the paid-in capital: Please see Table 2 attached;
 
  e.   Acquisition of individual real estate properties at costs of at least NT$100 million or 20% of the paid-in capital: Please see Table 3 attached;
 
  f.   Disposal of individual real estate properties at prices of at least NT$100 million or 20% of the paid-in capital: None;
 
  g.   Total purchases from or sales to related parties of at least NT$100 million or 20% of the paid-in capital: Please see Table 4 attached;
 
  h.   Receivable from related parties amounting to at least NT$100 million or 20% of the paid-in capital: Please see Table 5 attached;
 
  i.   Names, locations, and related information of investees on which the Company exercises significant influence: Please see Table 6 attached;
 
  j.   Information about derivatives of investees over which the Company has a controlling interest:
 
      TSMC China entered into forward exchange contracts during the three months ended March 31, 2010 to manage exposures due to foreign exchange rate fluctuations. Outstanding forward exchange contract as of March 31, 2010:
         
        Contract Amount
    Maturity Date   (In Thousands)
 
       
Sell US$/Buy RMB
  April 2010   US$1,000/RMB6,827
      For the three months ended March 31, 2010, net losses arising from forward exchange contracts of TSMC China were NT$417 thousand.

-35-


 

      Xintec entered into forward exchange contracts during the three months ended March 31, 2010 to manage exposures due to foreign exchange rate fluctuations. Outstanding forward exchange contract as of March 31, 2010:
         
        Contract Amount
    Maturity Date   (In Thousands)
 
       
Sell US$/Buy NT$
  April 2010 to May 2010   US$13,750/NT$438,590
      For the three months ended March 31, 2010, net gains arising from forward exchange contracts of Xintec were NT$954 thousand.
 
      Xintec monitors and manages the financial risk through the analysis of business environment and evaluation of entity’s financial risks. Further, Xintec seeks to reduce the effects of future cash flow related interest rate exposures by primarily using derivative financial instruments.
 
      Xintec is exposed to interest rate risk because its long-term bank loans bear floating interest rates. Accordingly, Xintec enters into interest rate swap contract to hedge such a cash flow interest rate risk. As of March 31, 2010, the outstanding interest rate swap contract of Xintec consisted of the following:
                                 
                    Expected   Expected Timing for the
    Hedging Financial   Fair Value   Cash Flow   Recognition of Gains
Hedged Item   Instrument   March 31, 2010   Generated Period   or Losses from Hedge
 
                               
Long-term bank loans
  Interest rate swap contract   $ (238 )     2010 to 2012       2010 to 2012  
      The adjustment to shareholders’ equity of Xintec as a result of the above interest rate swap contract was NT$238 thousand for the three months period ended March 31, 2010.
  k.   Information on investment in Mainland China
  1)   The name of the investee in mainland China, the main businesses and products, its issued capital, method of investment, information on inflow or outflow of capital, percentage of ownership, equity in the net gain or net loss, ending balance, amount received as dividends from the investee, and the limitation on investee: Please see Table 7 attached.
 
  2)   Significant direct or indirect transactions with the investee, its prices and terms of payment, unrealized gain or loss, and other related information which is helpful to understand the impact of investment in mainland China on financial reports: Please see Note 23.

-36-


 

TABLE 1
Taiwan Semiconductor Manufacturing Company Limited and Investees
MARKETABLE SECURITIES HELD
MARCH 31, 2010
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
                                                                         
                                                     
                          March 31, 2010        
                                                        Market Value or Net        
                          Shares/Units     Carrying Value     Percentage of     Asset Value        
  Held Company Name     Marketable Securities Type and Name     Relationship with the Company     Financial Statement Account     (In Thousands)     (US$ in Thousands)     Ownership (%)     (US$ in Thousands)     Note  
                                                     
 
 
                                                                     
 
TSMC
    Corporate bond                                                                
 
 
    Taiwan Mobile Co., Ltd.         Available-for-sale financial assets             $ 1,043,306         N/A       $ 1,043,306              
 
 
    Formosa Petrochemical Corporation         Held-to-maturity financial assets               3,178,032         N/A         3,204,143              
 
 
    Taiwan Power Company                       3,000,247         N/A         3,005,673              
 
 
    Nan Ya Plastics Corporation                       2,000,539         N/A         2,044,833              
 
 
    Formosa Plastics Corporation                       1,671,753         N/A         1,686,870              
 
 
    China Steel Corporation                       1,510,969         N/A         1,524,294              
 
 
    CPC Corporation, Taiwan                       500,016         N/A         499,921              
 
 
    Taipei Fubon Commercial Bank Co., Ltd.                       299,297         N/A         299,215              
 
 
    First Commercial Bank Co., Ltd.                       99,950         N/A         99,952              
 
 
                                                                     
 
 
    Government bond                                                                
 
 
    2003 Asian Development Bank Govt. Bond         Held-to-maturity financial assets               898,801         N/A         875,103              
 
 
                                                                     
 
 
    Stock                                                                
 
 
    TSMC Global     Subsidiary     Investments accounted for using equity method       1         45,245,474         100         45,245,474              
 
 
    TSMC Partners     Subsidiary           988,268         32,637,828         100         32,637,828              
 
 
    VIS     Investee accounted for using equity method           628,223         9,359,350         37         10,240,043              
 
 
    SSMC     Investee accounted for using equity method           314         6,308,810         39         5,782,912              
 
 
    Motech     Investee accounted for using equity method           75,316         6,210,916         20         10,167,705              
 
 
    TSMC North America     Subsidiary           11,000         2,726,868         100         2,726,868              
 
 
    Xintec     Investee with a controlling financial interest           93,081         1,532,384         41         1,501,019              
 
 
    GUC     Investee with a controlling financial interest           46,688         1,039,348         35         6,723,052              
 
 
    TSMC Europe     Subsidiary                   158,190         100         158,190              
 
 
    TSMC Japan     Subsidiary           6         133,420         100         133,420              
 
 
    TSMC Korea     Subsidiary           80         19,460         100         19,460              
 
 
    United Industrial Gases Co., Ltd.         Financial assets carried at cost       16,783         193,584         10         315,767              
 
 
    Shin-Etsu Handotai Taiwan Co., Ltd.               10,500         105,000         7         339,223              
 
 
    W.K. Technology Fund IV               4,000         40,000         2         43,606              
 
 
                                                                     
 
 
    Fund                                                                
 
 
    Horizon Ventures Fund         Financial assets carried at cost               103,992         12         103,992              
 
 
    Crimson Asia Capital                       55,259         1         55,259              
 
 
                                                                     
 
 
    Capital                                                                
 
 
    TSMC China     Subsidiary     Investments accounted for using equity method               2,787,558         100         2,792,627              
 
 
    VTAF III     Subsidiary                   1,351,399         98         1,333,492              
 
 
    VTAF II     Subsidiary                   1,140,879         98         1,135,109              
 
 
    Emerging Alliance     Subsidiary                   303,768         99         303,768              
                                                     
(Continued)

-37-


 

                                                                         
                                                     
                          March 31, 2010        
                                                        Market Value or Net        
                          Shares/Units     Carrying Value     Percentage of     Asset Value        
  Held Company Name     Marketable Securities Type and Name     Relationship with the Company     Financial Statement Account     (In Thousands)     (US$ in Thousands)     Ownership (%)     (US$ in Thousands)     Note  
                                                     
 
 
                                                                     
 
TSMC Partners
    Corporate bond                                                                
 
 
    General Elec Cap Corp. Mtn         Held-to-maturity financial assets             US$ 20,480         N/A       US$ 21,443              
 
 
    General Elec Cap Corp. Mtn                     US$ 20,200         N/A       US$ 21,582              
 
 
                                                                     
 
 
    Common stock                                                                
 
 
    TSMC Development, Inc. (TSMC Development)     Subsidiary     Investments accounted for using equity method       1       US$ 350,118         100       US$ 350,118              
 
 
    VisEra Holding Company     Investee accounted for using equity method           43,000       US$ 72,445         49       US$ 72,445              
 
 
    InveStar Semiconductor Development Fund, Inc. (II) LDC. (ISDF II)     Subsidiary           21,415       US$ 13,670         97       US$ 13,670              
 
 
    TSMC Technology     Subsidiary           1       US$ 9,431         100       US$ 9,431              
 
 
    InveStar Semiconductor Development Fund, Inc. (ISDF)     Subsidiary           7,680       US$ 7,188         97       US$ 7,188              
 
 
    TSMC Canada     Subsidiary           2,300       US$ 3,555         100       US$ 3,555              
 
 
    Mcube Inc.     Investee accounted for using equity method           5,333       US$ 529         70       US$ 529              
 
 
                                                                     
 
 
    Preferred stock                                                                
 
 
    Mcube Inc.     Investee accounted for using equity method     Investments accounted for using equity method       1,000       US$ 949         10       US$ 949              
 
 
                                                                     
 
TSMC Development
    Corporate bond                                                                
 
 
    GE Capital Corp.         Held-to-maturity financial assets             US$ 20,305         N/A       US$ 21,582              
 
 
    JP Morgan Chase & Co.                     US$ 15,000         N/A       US$ 15,103              
 
 
                                                                     
 
 
    Stock                                                                
 
 
    WaferTech     Subsidiary     Investments accounted for using equity method       293,637       US$ 164,246         100       US$ 164,246              
 
 
                                                                     
 
Emerging Alliance
    Common stock                                                                
 
 
    RichWave Technology Corp.         Financial assets carried at cost       4,247       US$ 1,648         10       US$ 1,648              
 
 
    Global Investment Holding Inc.               11,124       US$ 3,065         6       US$ 3,065              
 
 
                                                                     
 
 
    Preferred stock                                                                
 
 
    Audience, Inc.         Financial assets carried at cost       1,654       US$ 250               US$ 250              
 
 
    Axiom Microdevices, Inc.               1,000       US$ 24         1       US$ 24              
 
 
    Mosaic Systems, Inc.               2,481       US$ 12         6       US$ 12              
 
 
    Next IO, Inc.               800       US$ 500         1       US$ 500              
 
 
    Optichron, Inc.               710       US$ 1,072         2       US$ 1,072              
 
 
    Pixim, Inc.               4,641       US$ 1,137         2       US$ 1,137              
 
 
    QST Holdings, LLC                     US$ 131         4       US$ 131              
 
 
    Teknovus, Inc.               6,977       US$ 1,327         2       US$ 1,327              
 
 
                                                                     
 
 
    Capital                                                                
 
 
    VentureTech Alliance Holdings, LLC (VTA Holdings)     Subsidiary     Investments accounted for using equity method                       7                      
 
VTAF II
    Common stock                                                                
 
 
    Leadtrend         Available-for-sale financial assets       1,272       US$ 554         3       US$ 554              
 
 
    Aether Systems, Inc.         Financial assets carried at cost       1,600       US$ 1,503         25       US$ 1,503              
 
 
    RichWave Technology Corp.               1,043       US$ 730         1       US$ 730              
 
 
    Sentelic               1,200       US$ 2,040         15       US$ 2,040              
 
 
                                                                     
 
 
    Preferred stock                                                                
 
 
    5V Technologies, Inc.         Financial assets carried at cost       2,890       US$ 2,168         4       US$ 2,168              
 
 
    Aquantia               3,974       US$ 3,816         3       US$ 3,816              
 
 
    Audience, Inc.               12,378       US$ 2,378         3       US$ 2,378              
 
 
    Axiom Microdevices, Inc.               759       US$ 517         13       US$ 517              
                                                     
(Continued)

-38-


 

                                                                         
                                                     
                        March 31, 2010        
                                                        Market Value or Net        
                          Shares/Units     Carrying Value     Percentage of     Asset Value        
  Held Company Name     Marketable Securities Type and Name     Relationship with the Company     Financial Statement Account     (In Thousands)     (US$ in Thousands)     Ownership (%)     (US$ in Thousands)     Note  
                                                     
 
 
                                                                     
 
VTAF II
    Beceem Communications         Financial assets carried at cost       797       US$ 1,701         1       US$ 1,701              
 
 
    Impinj, Inc.               475       US$ 1,000               US$ 1,000              
 
 
    Next IO, Inc.               3,795       US$ 953         2       US$ 953              
 
 
    Optichron, Inc.               1,583       US$ 2,664         4       US$ 2,664              
 
 
    Pixim, Inc.               33,347       US$ 1,878         2       US$ 1,878              
 
 
    Power Analog Microelectronics               7,027       US$ 3,383         19       US$ 3,383              
 
 
    QST Holdings, LLC                     US$ 593         13       US$ 593              
 
 
    Teknovus, Inc.               1,599       US$ 454               US$ 454              
 
 
    Xceive               4,210       US$ 1,554         3       US$ 1,554              
 
 
                                                                     
 
 
    Capital                                                                
 
 
    VTA Holdings     Subsidiary     Investments accounted for using equity method                       31                      
 
 
                                                                     
 
VTAF III
    Common stock                                                                
 
 
    Mutual-Pak Technology Co., Ltd.     Subsidiary     Investments accounted for using equity method       9,180       US$ 1,962         59       US$ 1,962              
 
 
    Aiconn Technology Corporation     Investee accounted for using equity method           4,500       US$ 487         42       US$ 487              
 
 
                                                                     
 
 
    Preferred stock                                                                
 
 
    Auramicro, Inc.         Financial assets carried at cost       4,694       US$ 1,408         20       US$ 1,408              
 
 
    BridgeLux, Inc.               6,113       US$ 7,781         4       US$ 7,781              
 
 
    Exclara, Inc.               21,708       US$ 4,568         18       US$ 4,568              
 
 
    GTBF, Inc.               1,154       US$ 1,500         N/A       US$ 1,500              
 
 
    InvenSense, Inc.               816       US$ 1,000         1       US$ 1,000              
 
 
    LiquidLeds Lighting Corp.               1,600       US$ 800         11       US$ 800              
 
 
    M2000, Inc.               3,000       US$ 3,000         5       US$ 3,000              
 
 
    Neoconix, Inc.               3,283       US$ 4,608         6       US$ 4,608              
 
 
    Powervation, Ltd.               310       US$ 4,678         16       US$ 4,678              
 
 
    Quellan, Inc.               3,106       US$ 457         6       US$ 457              
 
 
    Silicon Technical Services, LLC               1,055       US$ 1,208               US$ 1,208              
 
 
    Tilera, Inc.               3,222       US$ 2,781         2       US$ 2,781              
 
 
    Validity Sensors, Inc.               8,070       US$ 3,089         4       US$ 3,089              
 
 
                                                                     
 
 
    Capital                                                                
 
 
    Growth Fund Limited (Growth Fund)     Subsidiary     Investments accounted for using equity method             US$ 892         100       US$ 892              
 
 
    VTA Holdings     Subsidiary                           62                      
 
 
                                                                     
 
Growth Fund
    Common stock                                                                
 
 
    SiliconBlue Technologies, Inc.         Financial assets carried at cost       5,107       US$ 762         2       US$ 762              
 
 
    Staccato               10       US$ 25               US$ 25              
 
 
                                                                     
 
ISDF
    Common stock                                                                
 
 
    Memsic, Inc.         Available-for-sale financial assets       1,364       US$ 4,350         6       US$ 4,350              
 
 
    Capella Microsystems (Taiwan), Inc.         Financial assets carried at cost       557       US$ 154         2       US$ 154              
 
 
                                                                     
 
 
    Preferred stock                                                                
 
 
    Integrated Memory Logic, Inc.         Financial assets carried at cost       5,226       US$ 1,221         9       US$ 1,221              
 
 
    IP Unity, Inc.               1,008       US$ 290         1       US$ 290              
 
 
    Sonics, Inc.               230       US$ 497         2       US$ 497              
 
 
                                                                     
 
ISDF II
    Common stock                                                                
 
 
    Memsic, Inc.         Available-for-sale financial assets       1,145       US$ 3,651         5       US$ 3,651              
 
 
    Sonics, Inc.         Financial assets carried at cost       278       US$ 10         3       US$ 10              
 
 
    EON Technology, Corp.               1,804       US$ 500         2       US$ 500              
                                                     
(Continued)

-39-


 

                                                                         
                                                     
                        March 31, 2010        
                                                        Market Value or Net        
                          Shares/Units     Carrying Value     Percentage of     Asset Value        
  Held Company Name     Marketable Securities Type and Name     Relationship with the Company     Financial Statement Account     (In Thousands)     (US$ in Thousands)     Ownership (%)     (US$ in Thousands)     Note  
                                                     
 
 
                                                                     
 
ISDF II
    Goyatek Technology, Corp.         Financial assets carried at cost       932       US$ 545         6       US$ 545              
 
 
    Capella Microsystems (Taiwan), Inc.               561       US$ 210         2       US$ 210              
 
 
    Auden Technology MFG. Co., Ltd.               1,049       US$ 223         3       US$ 223              
 
 
                                                                     
 
 
    Preferred stock                                                                
 
 
    Alchip Technologies Limited         Financial assets carried at cost       6,979       US$ 3,664         18       US$ 3,664              
 
 
    FangTek, Inc.               1,032       US$ 686         6       US$ 686              
 
 
    Kilopass Technology, Inc.               3,887       US$ 250         5       US$ 250              
 
 
    Sonics, Inc.               264       US$ 456         3       US$ 456              
 
 
                                                                     
 
GUC
    Open-end mutual fund                                                                
 
 
    Jih Sun Bond Fund         Available-for-sale financial assets       5,668       US$ 80,059               US$ 80,059              
 
 
    Cathay Bond Fund               2,509         30,014                 30,014              
 
 
    Hua Nan Phoenix Bond Fund               1,926         30,009                 30,009              
 
 
    Prudential Financial Bond Fund               1,982         30,008                 30,008              
 
 
                                                                     
 
 
    Common stock                                                                
 
 
    GUC-NA     Subsidiary     Investments accounted for using equity method       800         39,313         100         39,313              
 
 
    GUC-BVI     Subsidiary           550         17,351         100         17,351              
 
 
    GUC-Japan     Subsidiary           1         13,160         100         13,160              
 
 
    GUC-Europe     Subsidiary                   4,860         100         4,860              
 
 
                                                                     
 
GUC-BVI
    Capital                                                                
 
 
    Global Unichip (Shanghai) Company, Limited (GUC-Shanghai)     Subsidiary     Investments accounted for using equity method               15,902         100         15,902              
 
 
                                                                     
 
Xintec
    Capital                                                                
 
 
    Compositech Ltd.         Financial assets carried at cost       587                 3                      
 
 
                                                                     
 
TSMC Global
    Corporate bond                                                                
 
 
    Ab Svensk Exportkredit Swedish         Available-for-sale financial assets       5,000       US$ 5,095         N/A       US$ 5,095              
 
 
    African Development Bank               2,600       US$ 2,620         N/A       US$ 2,620              
 
 
    Alltel Corp.               100       US$ 111         N/A       US$ 111              
 
 
    American Honda Fin Corp. Mtn               4,000       US$ 3,974         N/A       US$ 3,974              
 
 
    Anz National Intl Ltd.               3,500       US$ 3,507         N/A       US$ 3,507              
 
 
    Asian Development Bank               2,500       US$ 2,498         N/A       US$ 2,498              
 
 
    Astrazeneca Plc               3,150       US$ 3,440         N/A       US$ 3,440              
 
 
    AT+T Wireless               3,500       US$ 3,950         N/A       US$ 3,950              
 
 
    Australia + New Zealand Bkg               2,000       US$ 2,066         N/A       US$ 2,066              
 
 
    Banco Bilbao Vizcaya P R               3,250       US$ 3,248         N/A       US$ 3,248              
 
 
    Bank New York Inc.               1,615       US$ 1,602         N/A       US$ 1,602              
 
 
    Bank New York Inc. Medium               2,100       US$ 2,277         N/A       US$ 2,277              
 
 
    Bank of America               2,900       US$ 3,121         N/A       US$ 3,121              
 
 
    Bank of America Corp. Fdic Gtd               3,400       US$ 3,533         N/A       US$ 3,533              
 
 
    Bank of New York Mellon               2,200       US$ 2,208         N/A       US$ 2,208              
 
 
    Bank of Nova Scotia               5,000       US$ 4,998         N/A       US$ 4,998              
 
 
    Bank of Scotland Plc               4,000       US$ 3,991         N/A       US$ 3,991              
 
 
    Barclays Bank Plc               12,000       US$ 11,995         N/A       US$ 11,995              
 
 
    Bbva US Senior SA Uniper               4,745       US$ 4,743         N/A       US$ 4,743              
 
 
    Bear Stearns Cos Inc.               5,000       US$ 4,982         N/A       US$ 4,982              
 
 
    Bear Stearns Cos Inc.               3,500       US$ 3,442         N/A       US$ 3,442              
 
 
    Berkshire Hathaway Inc. Del               3,500       US$ 3,513         N/A       US$ 3,513              
 
 
    Bhp Billiton Fin USA Ltd.               2,000       US$ 2,141         N/A       US$ 2,141              
 
 
    Bk Tokyo Mitsubishi Ufj               2,000       US$ 2,015         N/A       US$ 2,015              
 
 
    Bmw US Capital LLC               1,600       US$ 1,602         N/A       US$ 1,602              
                                                     
(Continued)

-40-


 

                                                                                     
                                                     
                                      March 31, 2010        
                                                                    Market Value or Net        
                              Shares/Units     Carrying Value     Percentage of     Asset Value        
  Held Company Name     Marketable Securities Type and Name     Relationship with the Company     Financial Statement Account     (In Thousands)     (US$ in Thousands)     Ownership (%)     (US$ in Thousands)     Note  
                                                     
           
 
                                                                       
  TSMC Global    
Bnp Paribas SA
            Available-for-sale financial assets       2,310       US$ 2,343         N/A       US$ 2,343              
           
Boeing Cap Corp.
                      2,925       US$ 3,219         N/A       US$ 3,219              
           
Boeing Co.
                      450       US$ 452         N/A       US$ 452              
           
Bsch Issuances Ltd.
                      2,250       US$ 2,313         N/A       US$ 2,313              
           
Caterpillar Financial SE
                      300       US$ 303         N/A       US$ 303              
           
Cello Part/Veri Wirelss
                      3,000       US$ 3,087         N/A       US$ 3,087              
           
Citibank NA
                      4,020       US$ 4,017         N/A       US$ 4,017              
           
Citigroup Funding Inc.
                      6,000       US$ 6,043         N/A       US$ 6,043              
           
Citigroup Funding Inc.
                      2,000       US$ 2,029         N/A       US$ 2,029              
           
Citigroup Inc.
                      1,000       US$ 1,030         N/A       US$ 1,030              
           
Citigroup Inc.
                      400       US$ 420         N/A       US$ 420              
           
Commonwealth Bank Aust
                      2,800       US$ 2,805         N/A       US$ 2,805              
           
Countrywide Finl Corp.
                      4,000       US$ 4,252         N/A       US$ 4,252              
           
Credit Suisse First Boston USA
                      2,150       US$ 2,310         N/A       US$ 2,310              
           
Credit Suisse New York
                      3,945       US$ 4,084         N/A       US$ 4,084              
           
Dexia Credit Local
                      6,000       US$ 5,998         N/A       US$ 5,998              
           
Dexia Credit Local SA NY
                      5,000       US$ 5,004         N/A       US$ 5,004              
           
Finance for Danish Ind
                      1,900       US$ 1,899         N/A       US$ 1,899              
           
General Elec Cap Corp.
                      1,000       US$ 985         N/A       US$ 985              
           
General Elec Cap Corp.
                      300       US$ 299         N/A       US$ 299              
           
General Elec Cap Corp.
                      7,000       US$ 7,005         N/A       US$ 7,005              
           
General Elec Cap Corp. Fdic Gtd
                      2,500       US$ 2,540         N/A       US$ 2,540              
           
General Electric Capital Corp.
                      2,000       US$ 1,930         N/A       US$ 1,930              
           
Georgia Pwr Co.
                      6,000       US$ 6,012         N/A       US$ 6,012              
           
Goldman Sachs Group Inc.
                      2,000       US$ 1,948         N/A       US$ 1,948              
           
Goldman Sachs Group Inc. Mtn
                      1,500       US$ 1,450         N/A       US$ 1,450              
           
Goldman Sachs Group Incser 2
                      3,000       US$ 3,012         N/A       US$ 3,012              
           
Hewlett Packard Co.
                      3,000       US$ 3,001         N/A       US$ 3,001              
           
Hewlett Packard Co.
                      1,365       US$ 1,386         N/A       US$ 1,386              
           
Household Fin Corp.
                      4,330       US$ 4,742         N/A       US$ 4,742              
           
HSBC Fin Corp.
                      2,315       US$ 2,295         N/A       US$ 2,295              
           
HSBC Fin Corp.
                      2,900       US$ 3,119         N/A       US$ 3,119              
           
HSBC USA Inc. Fdic Gtd Tlgp
                      2,200       US$ 2,278         N/A       US$ 2,278              
           
Hutchison Whampoa Intl
                      1,750       US$ 1,799         N/A       US$ 1,799              
           
IBM Corp.
                      6,100       US$ 6,102         N/A       US$ 6,102              
           
IBM Corp.
                      3,000       US$ 3,024         N/A       US$ 3,024              
           
Intl Bk Recon + Develop
                      5,000       US$ 5,013         N/A       US$ 5,013              
           
Intl Bk Recon + Develop
                      2,000       US$ 2,075         N/A       US$ 2,075              
           
Istituto Bancario SA
                      1,700       US$ 1,700         N/A       US$ 1,700              
           
John Deer Capital Corp. Fdic GT
                      3,500       US$ 3,621         N/A       US$ 3,621              
           
JP Morgan Chase + Co.
                      2,500       US$ 2,517         N/A       US$ 2,517              
                                                     

-41-


 

                                                                                     
                                                     
                                      March 31, 2010        
                                                                    Market Value or Net        
                              Shares/Units     Carrying Value     Percentage of     Asset Value        
  Held Company Name     Marketable Securities Type and Name     Relationship with the Company     Financial Statement Account     (In Thousands)     (US$ in Thousands)     Ownership (%)     (US$ in Thousands)     Note  
                                                     
           
 
                                                                       
           
JP Morgan Chase + Co.
                      5,000       US$ 5,025         N/A       US$ 5,025              
           
JP Morgan Chase + Co. Fdic Gtd Tlg
                      3,000       US$ 3,026         N/A       US$ 3,026              
           
Kfw Medium Term Nts Book Entry
                      1,950       US$ 1,952         N/A       US$ 1,952              
           
Kreditanstalt Fur Wiederaufbau
                      650       US$ 672         N/A       US$ 672              
           
Lloyds Tsb Bank Plc Ser 144A
                      4,850       US$ 4,877         N/A       US$ 4,877              
           
Lloyds Tsb Bank Plc Ser 144A
                      5,950       US$ 6,038         N/A       US$ 6,038              
           
Mellon Fdg Corp.
                      3,500       US$ 3,443         N/A       US$ 3,443              
           
Merck + Co. Inc.
                      4,000       US$ 4,038         N/A       US$ 4,038              
           
Merck + Co. Inc.
                      2,000       US$ 2,126         N/A       US$ 2,126              
           
Merrill Lynch + Co. Inc.
                      4,691       US$ 4,602         N/A       US$ 4,602              
           
Met Life Glob Funding I
                      4,675       US$ 4,752         N/A       US$ 4,752              
           
Met Life Glob Funding I
                      500       US$ 502         N/A       US$ 502              
                                                     
(Continued)

-42-


 

                                                                                     
                                                     
                                      March 31, 2010        
                                                                    Market Value or Net        
                              Shares/Units     Carrying Value     Percentage of     Asset Value        
  Held Company Name     Marketable Securities Type and Name     Relationship with the Company     Financial Statement Account     (In Thousands)     (US$ in Thousands)     Ownership (%)     (US$ in Thousands)     Note  
                                                     
           
 
                                                                       
  TSMC Global    
Metlife Inc.
            Available-for-sale financial assets       2,000       US$ 2,016         N/A       US$ 2,016              
           
Metropolitan Life Global Fdg
                      750       US$ 740         N/A       US$ 740              
           
Metropolitan Life Global Fdg I
                      3,340       US$ 3,284         N/A       US$ 3,284              
           
Monumental Glbl Fdg II
                      500       US$ 499         N/A       US$ 499              
           
Morgan Stanley
                      2,200       US$ 2,209         N/A       US$ 2,209              
           
Morgan Stanley
                      1,500       US$ 1,389         N/A       US$ 1,389              
           
Morgan Stanley
                      2,000       US$ 2,041         N/A       US$ 2,041              
           
Morgan Stanley Dean Witter
                      8,000       US$ 8,680         N/A       US$ 8,680              
           
Morgan Stanley for Equity
                      2,000       US$ 1,955         N/A       US$ 1,955              
           
National Australia Bank
                      1,000       US$ 1,006         N/A       US$ 1,006              
           
New York Life Global Fdg
                      2,000       US$ 2,011         N/A       US$ 2,011              
           
Nordea Bank Fld Plc
                      2,250       US$ 2,245         N/A       US$ 2,245              
           
Oesterreichische Kontrollbank
                      2,000       US$ 2,039         N/A       US$ 2,039              
           
Ontario (Province of)
                      2,000       US$ 2,013         N/A       US$ 2,013              
           
Paccar Finl Corp. Mtn Bk Ent
                      1,000       US$ 1,006         N/A       US$ 1,006              
           
Pepsico Inc.
                      3,000       US$ 3,001         N/A       US$ 3,001              
           
Pnc Funding Corp.
                      2,000       US$ 1,985         N/A       US$ 1,985              
           
Pricoa Global Fdg I Med Term
                      1,750       US$ 1,668         N/A       US$ 1,668              
           
Pricoa Global Funding 1
                      1,200       US$ 1,173         N/A       US$ 1,173              
           
Princoa Global Fdg I Medium
                      2,200       US$ 2,141         N/A       US$ 2,141              
           
Roche Hldgs Inc.
                      2,000       US$ 2,114         N/A       US$ 2,114              
           
Royal Bk of Scotland Plc
                      4,000       US$ 4,004         N/A       US$ 4,004              
           
Royal Bk of Scotland Plc
                      5,000       US$ 5,078         N/A       US$ 5,078              
           
Royal Bk Scotlnd Grp Plc 144A
                      9,450       US$ 9,550         N/A       US$ 9,550              
           
Shell International Fin
                      1,200       US$ 1,206         N/A       US$ 1,206              
           
Shell International Fin
                      2,000       US$ 1,998         N/A       US$ 1,998              
           
Southern Co.
                      600       US$ 603         N/A       US$ 603              
           
Sovereign Bancorp Fdic Gtd Tlg
                      2,200       US$ 2,252         N/A       US$ 2,252              
           
State Str Corp.
                      7,020       US$ 7,005         N/A       US$ 7,005              
           
State Street Corp.
                      5,500       US$ 5,561         N/A       US$ 5,561              
           
Suncorp Metway Ltd.
                      8,800       US$ 9,070         N/A       US$ 9,070              
           
Suncorp Metway Ltd.
                      2,000       US$ 2,003         N/A       US$ 2,003              
           
Svenska Handelsbanken AB
                      2,200       US$ 2,242         N/A       US$ 2,242              
           
Swedbank AB
                      2,000       US$ 1,994         N/A       US$ 1,994              
           
Swedbank Foreningssparbanken A
                      1,500       US$ 1,543         N/A       US$ 1,543              
           
Ubs Ag Stamford
                      1,300       US$ 1,300         N/A       US$ 1,300              
           
Ub Bancorp
                      2,000       US$ 2,038         N/A       US$ 2,038              
           
US Central Federal Cred
                      4,800       US$ 4,829         N/A       US$ 4,829              
           
Verizon Communications Inc.
                      2,200       US$ 2,289         N/A       US$ 2,289              
           
Verizon Global Fdg Corp.
                      500       US$ 522         N/A       US$ 522              
           
Wachovia Corp. New
                      1,400       US$ 1,386         N/A       US$ 1,386              
                                                     

-43-


 

                                                                                     
                                                     
                                      March 31, 2010        
                                                                    Market Value or Net        
                              Shares/Units     Carrying Value     Percentage of     Asset Value        
  Held Company Name     Marketable Securities Type and Name     Relationship with the Company     Financial Statement Account     (In Thousands)     (US$ in Thousands)     Ownership (%)     (US$ in Thousands)     Note  
                                                     
           
 
                                                                       
  TSMC Global    
Wachovia Corp. New
                      4,000       US$ 4,232         N/A       US$ 4,232              
           
Wal Mart Stores Inc.
                      2,603       US$ 2,680         N/A       US$ 2,680              
           
Wells Fargo + Company
                      2,000       US$ 2,010         N/A       US$ 2,010              
           
Westfield Cap Corp. Ltd.
                      500       US$ 508         N/A       US$ 508              
           
Westpac Banking Corp.
                      2,100       US$ 2,112         N/A       US$ 2,112              
           
Westpac Banking Corp.
                      4,000       US$ 4,008         N/A       US$ 4,008              
           
Westpac Banking Corp.
                      2,170       US$ 2,168         N/A       US$ 2,168              
           
Nationwide Building Society-UK Government Guarantee
            Held-to-maturity financial assets       8,000       US$ 8,000         N/A       US$ 7,999              
           
Westpac Banking Corporation Govet Gtd
                      5,000       US$ 5,000         N/A       US$ 5,006              
           
Commonwealth Bank of Australia
                      25,000       US$ 25,000         N/A       US$ 25,233              
           
Commonwealth Bank of Australia
                      25,000       US$ 25,000         N/A       US$ 25,253              
                                                     
(Continued)

-44-


 

                                                                                     
                                                     
                                    March 31, 2010        
                                                                    Market Value or Net        
                                      Shares/Units     Carrying Value     Percentage of     Asset Value        
  Held Company Name     Marketable Securities Type and Name     Relationship with the Company     Financial Statement Account     (In Thousands)     (US$ in Thousands)     Ownership (%)     (US$ in Thousands)     Note  
                                                     
           
 
                                                                       
  TSMC Global    
Agency bond
                                                                       
           
Fannie Mae
            Available-for-sale financial assets       8,000       US$ 7,995         N/A       US$ 7,995              
           
Fannie Mae
                      2,820       US$ 2,823         N/A       US$ 2,823              
           
Fannie Mae
                      3,770       US$ 3,761         N/A       US$ 3,761              
           
Fannie Mae
                      4,000       US$ 4,006         N/A       US$ 4,006              
           
Fannie Mae
                      4,000       US$ 3,993         N/A       US$ 3,993              
           
Fannie Mae
                      3,000       US$ 2,985         N/A       US$ 2,985              
           
Fed Hm Ln Pc Pool 1b2830
                      2,261       US$ 2,330         N/A       US$ 2,330              
           
Fed Hm Ln Pc Pool 1g0115
                      2,260       US$ 2,275         N/A       US$ 2,275              
           
Fed Hm Ln Pc Pool 1k1210
                      1,714       US$ 1,771         N/A       US$ 1,771              
           
Fed Hm Ln Pc Pool 780741
                      2,071       US$ 2,099         N/A       US$ 2,099              
           
Federal Farm Cr Bks
                      2,250       US$ 2,253         N/A       US$ 2,253              
           
Federal Farm Cr Bks
                      2,000       US$ 2,110         N/A       US$ 2,110              
           
Federal Farm Credit Bank
                      1,000       US$ 999         N/A       US$ 999              
           
Federal Farm Credit Bank
                      4,000       US$ 3,993         N/A       US$ 3,993              
           
Federal Farm Credit Bank
                      4,020       US$ 4,007         N/A       US$ 4,007              
           
Federal Farm Credit Bank
                      5,000       US$ 4,998         N/A       US$ 4,998              
           
Federal Farm Credit Bank
                      3,100       US$ 3,101         N/A       US$ 3,101              
           
Federal Farm Credit Bank
                      2,200       US$ 2,249         N/A       US$ 2,249              
           
Federal Home Ln Mtg Corp.
                      4,717       US$ 4,671         N/A       US$ 4,671              
           
Federal Home Ln Mtg Corp.
                      2,004       US$ 2,093         N/A       US$ 2,093              
           
Federal Home Ln Mtg Corp.
                      3,630       US$ 3,796         N/A       US$ 3,796              
           
Federal Home Ln Mtg Corp.
                      3,002       US$ 3,101         N/A       US$ 3,101              
           
Federal Home Ln Mtg Corp.
                      2,414       US$ 2,515         N/A       US$ 2,515              
           
Federal Home Ln Mtg Corp.
                      1,945       US$ 1,979         N/A       US$ 1,979              
           
Federal Home Ln Mtg Corp.
                      1,837       US$ 1,870         N/A       US$ 1,870              
           
Federal Home Ln Mtg Corp.
                      2,072       US$ 2,157         N/A       US$ 2,157              
           
Federal Home Ln Mtg Corp.
                      3,681       US$ 3,916         N/A       US$ 3,916              
           
Federal Home Ln Mtg Corp.
                      2,300       US$ 2,302         N/A       US$ 2,302              
           
Federal Home Ln Mtg Corp. Multi
                      4,197       US$ 4,251         N/A       US$ 4,251              
           
Federal Home Loan Bank
                      5,000       US$ 5,005         N/A       US$ 5,005              
           
Federal Home Loan Bank
                      4,700       US$ 4,715         N/A       US$ 4,715              
           
Federal Home Loan Bank
                      5,000       US$ 4,993         N/A       US$ 4,993              
           
Federal Home Loan Bank
                      8,000       US$ 7,991         N/A       US$ 7,991              
           
Federal Home Loan Bank
                      12,700       US$ 12,694         N/A       US$ 12,694              
           
Federal Home Loan Bank
                      3,310       US$ 3,312         N/A       US$ 3,312              
           
Federal Home Loan Bank
                      4,000       US$ 4,009         N/A       US$ 4,009              
           
Federal Home Loan Bank
                      3,000       US$ 3,009         N/A       US$ 3,009              
           
Federal Home Loan Bank
                      3,000       US$ 3,000         N/A       US$ 3,000              
           
Federal Home Loan Mtg Corp.
                      3,684       US$ 3,660         N/A       US$ 3,660              
           
Federal Home Loan Mtg Corp.
                      1,091       US$ 1,105         N/A       US$ 1,105              
           
Federal Home Loan Mtg Corp.
                      1,745       US$ 1,781         N/A       US$ 1,781              
                                                     

-45-


 

                                                                                     
                                                     
                                    March 31, 2010        
                                                                    Market Value or Net        
                                      Shares/Units     Carrying Value     Percentage of     Asset Value        
  Held Company Name     Marketable Securities Type and Name     Relationship with the Company     Financial Statement Account     (In Thousands)     (US$ in Thousands)     Ownership (%)     (US$ in Thousands)     Note  
                                                     
           
Federal National Mort Assoc
                      1,713       US$ 1,753         N/A       US$ 1,753              
           
Federal National Mort Assoc
                      1,192       US$ 1,206         N/A       US$ 1,206              
           
Federal Natl Mtg Assn Gtd
                      3,151       US$ 3,261         N/A       US$ 3,261              
           
Federal Natl Mtg Assn Gtd Remi
                      2,714       US$ 2,838         N/A       US$ 2,838              
                                                     
(Continued)

-46-


 

                                                                                     
                                                     
                                    March 31, 2010        
                                                                    Market Value or Net        
                                      Shares/Units     Carrying Value     Percentage of     Asset Value        
  Held Company Name     Marketable Securities Type and Name     Relationship with the Company     Financial Statement Account     (In Thousands)     (US$ in Thousands)     Ownership (%)     (US$ in Thousands)     Note  
       
  TSMC Global    
Federal Natl Mtg Assn Gtd Remi
            Available-for-sale financial assets       2,235       US$ 2,281         N/A       US$ 2,281              
           
Federal Natl Mtg Assn Mtn
                      2,377       US$ 2,475         N/A       US$ 2,475              
           
Federal Natl Mtg Assn Remic
                      2,377       US$ 2,439         N/A       US$ 2,439              
           
Federal Natl Mtge Assn
                      1,905       US$ 1,998         N/A       US$ 1,998              
           
Fhr 3087 Jb
                      2,242       US$ 2,342         N/A       US$ 2,342              
           
Fnma Pool 745688
                      1,957       US$ 1,993         N/A       US$ 1,993              
           
Fnma Pool 790772
                      1,393       US$ 1,445         N/A       US$ 1,445              
           
Fnma Pool 819649
                      2,177       US$ 2,200         N/A       US$ 2,200              
           
Fnma Pool 829989
                      1,990       US$ 2,063         N/A       US$ 2,063              
           
Fnma Pool 846233
                      2,102       US$ 2,149         N/A       US$ 2,149              
           
Fnma Pool 870884
                      2,223       US$ 2,325         N/A       US$ 2,325              
           
Fnma Pool 879908
                      1,844       US$ 1,917         N/A       US$ 1,917              
           
Fnr 2005 47 HA
                      2,461       US$ 2,570         N/A       US$ 2,570              
           
Fnr 2006 60 CO
                      2,537       US$ 2,605         N/A       US$ 2,605              
           
Fnr 2009 70 NT
                      2,391       US$ 2,479         N/A       US$ 2,479              
           
Freddie Mac
                      1,750       US$ 1,752         N/A       US$ 1,752              
           
Freddie Mac
                      10,420       US$ 10,400         N/A       US$ 10,400              
           
Freddie Mac
                      8,000       US$ 7,997         N/A       US$ 7,997              
           
Freddie Mac
                      4,500       US$ 4,493         N/A       US$ 4,493              
           
Freddie Mac
                      7,000       US$ 6,991         N/A       US$ 6,991              
           
Freddie Mac
                      4,500       US$ 4,496         N/A       US$ 4,496              
           
Freddie Mac
                      1,425       US$ 1,424         N/A       US$ 1,424              
           
Gnma II Pool 082431
                      1,988       US$ 2,024         N/A       US$ 2,024              
           
Gnr 2008 9 SA
                      2,872       US$ 2,865         N/A       US$ 2,865              
           
Gnr 2009 45 AB
                      6,796       US$ 7,073         N/A       US$ 7,073              
           
 
                                                                       
           
Government bond
                                                                       
           
United States Treas Nts
            Available-for-sale financial assets       4,800       US$ 4,819         N/A       US$ 4,819              
           
US Treasury N/B
                      43,900       US$ 43,809         N/A       US$ 43,809              
           
US Treasury N/B
                      47,000       US$ 47,094         N/A       US$ 47,094              
           
US Treasury N/B
                      16,800       US$ 16,887         N/A       US$ 16,887              
           
US Treasury N/B
                      2,170       US$ 2,173         N/A       US$ 2,173              
           
US Treasury Sec
                      8,000       US$ 8,031         N/A       US$ 8,031              
           
Wi Treasury Sec
                      4,400       US$ 4,386         N/A       US$ 4,386              
           
Societe De Financement De Lec
            Held-to-maturity financial assets       15,000       US$ 15,000         N/A       US$ 15,078              
           
 
                                                                       
           
Money market fund
                                                                       
           
Ssga Cash Mgmt Global Offshore
            Available-for-sale financial assets       2,729       US$ 2,729         N/A       US$ 2,729              
           
 
                                                                       
           
Corporate issued note
                                                                       
           
Barclays U.S. Fdg LLC
            Available-for-sale financial assets       2,600       US$ 2,594         N/A       US$ 2,594              
                                                     
(Concluded)

-47-


 

TABLE 2
Taiwan Semiconductor Manufacturing Company Limited and Investees
MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 2010
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
                                                                                                                                 
 
                                Beginning Balance     Acquisition     Disposal (Note 2)        
                                          Amount     Shares/Units     Amount               Amount     Carrying Value     Gain (Loss) or     Ending Balance (Note 3)  
                          Nature of     Shares/Units     (US$ in     (In Thousands)     (US$ in     Shares/Units     (US$ in     (US$ in     Disposal (US$     Shares/Units     Amount (US$  
  Company Name     Marketable Securities Type and Name     Financial Statement Account     Counter-party     Relationship     (In Thousands)     Thousands)     (Note 1)     Thousands)     (In Thousands)     Thousands)     Thousands)     in Thousands)     (In Thousands)     in Thousands)  
 
 
                                                                                                                             
 
TSMC
    Stock                                                                                                                        
 
 
    Motech     Investments accounted for using equity method         Investee accounted for using equity method             $         75,316       $ 6,228,661               $       $       $         75,316       $ 6,210,916    
 
 
                                                                                                                             
 
TSMC Global
    Corporate bond                                                                                                                        
 
 
    American Honda Fin Corp. Mtn     Available-for-sale financial assets                               4,000       US$ 3,985                                         4,000       US$ 3,974    
 
 
    Anz National Intl Ltd.                                   3,500       US$ 3,515                                         3,500       US$ 3,507    
 
 
    AT+T Wireless                                   3,500       US$ 3,979                                         3,500       US$ 3,950    
 
 
    Bank of America                                   2,900       US$ 3,121                                         2,900       US$ 3,121    
 
 
    Bank of America Corp. Fdic Gtd                                   3,400       US$ 3,548                                         3,400       US$ 3,533    
 
 
    Bank of Nova Scotia                                   5,000       US$ 5,000                                         5,000       US$ 4,998    
 
 
    Bank of Scotland Plc                                   4,000       US$ 3,984                                         4,000       US$ 3,991    
 
 
    Barclays Bank Plc                                   12,000       US$ 12,035                                         12,000       US$ 11,995    
 
 
    Bbva US Senior SA Uniper                                   4,745       US$ 4,744                                         4,745       US$ 4,743    
 
 
    Berkshire Hathaway Inc. Del                                   3,500       US$ 3,500                                         3,500       US$ 3,513    
 
 
    Boeing Cap Corp.                                   2,925       US$ 3,235                                         2,925       US$ 3,219    
 
 
    Citibank NA                                   4,020       US$ 4,021                                         4,020       US$ 4,017    
 
 
    Citibank NA                   5,000       US$ 4,996                         5,000       US$ 5,023       US$ 4,995       US$ 28                    
 
 
    Citigroup Funding Inc.                                   6,000       US$ 6,040                                         6,000       US$ 6,043    
 
 
    Countrywide Finl Corp.                                   4,000       US$ 4,291                                         4,000       US$ 4,252    
 
 
    Dexia Credit Local                                   6,000       US$ 6,000                                         6,000       US$ 5,998    
 
 
    Dexia Credit Local SA NY                                   5,000       US$ 5,000                                         5,000       US$ 5,004    
 
 
    Georgia Pwr Co.                                   6,000       US$ 6,000                                         6,000       US$ 6,012    
 
 
    Household Fin Corp.                                   4,330       US$ 4,781                                         4,330       US$ 4,742    
 
 
    HSBC Fin Corp.                                   2,900       US$ 3,142                                         2,900       US$ 3,119    
 
 
    IBM Corp.                   1,800       US$ 1,796         4,300       US$ 4,302                                         6,100       US$ 6,102    
 
 
    Intl Bk Recon + Develop                                   5,000       US$ 5,014                                         5,000       US$ 5,013    
 
 
    John Deer Capital Corp. Fdic GT                                   3,500       US$ 3,634                                         3,500       US$ 3,621    
 
 
    JP Morgan Chase + Co.                                   5,000       US$ 5,000                                         5,000       US$ 5,025    
 
 
    Landwirtsch Rentenbank                                   3,800       US$ 3,800         3,800       US$ 3,801       US$ 3,800       US$ 1                    
 
 
    Lloyds Tsb Bank Plc Ser 144A                                   4,850       US$ 4,895                                         4,850       US$ 4,877    
 
 
    Merck + Co. Inc.                                   4,000       US$ 4,066                                         4,000       US$ 4,038    
 
 
    Merrill Lynch + Co. Inc.                                   4,691       US$ 4,603                                         4,691       US$ 4,602    
 
 
    Morgan Stanley Dean Witter                                   8,000       US$ 8,796                                         8,000       US$ 8,680    
 
 
    Pepsico Inc.                                   3,000       US$ 3,000                                         3,000       US$ 3,001    
 

-48-


 

                                                                                                                                 
 
                                Beginning Balance     Acquisition     Disposal (Note 2)        
                                          Amount     Shares/Units     Amount               Amount     Carrying Value     Gain (Loss) or     Ending Balance (Note 3)  
                          Nature of     Shares/Units     (US$ in     (In Thousands)     (US$ in     Shares/Units     (US$ in     (US$ in     Disposal (US$     Shares/Units     Amount (US$  
  Company Name     Marketable Securities Type and Name     Financial Statement Account     Counter-party     Relationship     (In Thousands)     Thousands)     (Note 1)     Thousands)     (In Thousands)     Thousands)     Thousands)     in Thousands)     (In Thousands)     in Thousands)  
 
 
    Royal Bk of Scotland Plc                                   4,000       US$ 4,015                                         4,000       US$ 4,004    
 
 
    State Str Corp.                   1,940       US$ 1,920         5,080       US$ 5,065                                         7,020       US$ 7,005    
 
 
    State Street Corp.                                   5,500       US$ 5,585                                         5,500       US$ 5,561    
 
 
    Suncorp Metway Ltd.                   5,000       US$ 5,170         3,800       US$ 3,933                                         8,800       US$ 9,070    
 
 
    Westpac Banking Corp.                                   4,000       US$ 4,044                                         4,000       US$ 4,008    
 
 
    Commonwealth Bank of Australia     Held-to-maturity financial assets                               25,000       US$ 25,000                                         25,000       US$ 25,000    
 
 
    Commonwealth Bank of Australia                                   25,000       US$ 25,000                                         25,000       US$ 25,000    
 
(Continued)

-49-


 

                                                                                                                                 
 
                                Beginning Balance     Acquisition     Disposal (Note 2)        
                                          Amount     Shares/Units     Amount               Amount     Carrying Value     Gain (Loss) or     Ending Balance (Note 3)  
                          Nature of     Shares/Units     (US$ in     (In Thousands)     (US$ in     Shares/Units     (US$ in     (US$ in     Disposal (US$     Shares/Units     Amount (US$  
  Company Name     Marketable Securities Type and Name     Financial Statement Account     Counter-party     Relationship     (In Thousands)     Thousands)     (Note 1)     Thousands)     (In Thousands)     Thousands)     Thousands)     in Thousands)     (In Thousands)     in Thousands)  
 
TSMC Global
    Agency bond                                                                                                                        
 
 
    Fannie Mae     Available-for-sale financial assets                     US$         8,000       US$ 7,995               US$       US$       US$         8,000       US$ 7,995    
 
 
    Fannie Mae                                   3,770       US$ 3,770                                         3,770       US$ 3,761    
 
 
    Fannie Mae                                   4,000       US$ 4,014                                         4,000       US$ 4,006    
 
 
    Fannie Mae                                   4,000       US$ 4,011                                         4,000       US$ 3,993    
 
 
    Federal Farm Credit Bank                                   4,000       US$ 3,995                                         4,000       US$ 3,993    
 
 
    Federal Farm Credit Bank                                   4,020       US$ 4,017                                         4,020       US$ 4,007    
 
 
    Federal Farm Credit Bank                                   5,000       US$ 4,997                                         5,000       US$ 4,998    
 
 
    Federal Farm Credit Bank                                   3,100       US$ 3,100                                         3,100       US$ 3,101    
 
 
    Fed Home Ln Bank                   11,000       US$ 11,028                         11,000       US$ 11,049       US$ 11,038       US$ 11                    
 
 
    Fed Home Ln Mtg Corp.                                   4,289       US$ 4,282         4,289       US$ 4,292       US$ 4,282       US$ 10                    
 
 
    Fed Home Ln Mtg Corp.                                   4,717       US$ 4,719                                         4,717       US$ 4,671    
 
 
    Fed Home Ln Mtg Corp.                                   3,840       US$ 4,027                                         3,630       US$ 3,796    
 
 
    Fed Home Ln Mtg Corp.                                   3,720       US$ 3,953                                         3,681       US$ 3,916    
 
 
    Fed Home Ln Mtg Corp. Multi                                   4,197       US$ 4,261                                         4,197       US$ 4,251    
 
 
    Federal Home Loan Bank                   10,000       US$ 9,987                         10,000       US$ 10,007       US$ 9,996       US$ 11                    
 
 
    Federal Home Loan Bank                   8,000       US$ 7,992                         8,000       US$ 8,009       US$ 8,002       US$ 7                    
 
 
    Federal Home Loan Bank                                   5,000       US$ 5,009                                         5,000       US$ 5,005    
 
 
    Federal Home Loan Bank                   10,000       US$ 10,012                         10,000       US$ 10,047       US$ 10,035       US$ 12                    
 
 
    Federal Home Loan Bank                                   5,000       US$ 4,996                                         5,000       US$ 4,993    
 
 
    Federal Home Loan Bank                                   8,000       US$ 7,996                                         8,000       US$ 7,991    
 
 
    Federal Home Loan Bank                                   4,000       US$ 4,012                                         4,000       US$ 4,009    
 
 
    Federal Home Loan Mtg Corp.                                   3,684       US$ 3,682                                         3,684       US$ 3,660    
 
 
    Federal Natl Mtg Assn                   4,000       US$ 4,228                         4,000       US$ 4,205       US$ 4,261       US$ (56 )                  
 
 
    Federal Natl Mtg Assn Gtd                                   3,343       US$ 3,466                                         3,151       US$ 3,261    
 
 
    Freddie Mac                                   10,420       US$ 10,412                                         10,420       US$ 10,400    
 
 
    Freddie Mac                                   8,000       US$ 8,002                                         8,000       US$ 7,997    
 
 
    Freddie Mac                                   7,000       US$ 6,994                                         7,000       US$ 6,991    
 
 
    Freddie Mac                                   4,500       US$ 4,507                                         4,500       US$ 4,496    
 
 
    Gnr 2009 45 AB                                   7,004       US$ 7,305                                         6,796       US$ 7,073    
 
 
                                                                                                                             
 
 
    Government bond                                                                                                                        
 
 
    United States Treas Nts     Available-for-sale financial assets                               24,000       US$ 24,116         24,000       US$ 24,105       US$ 24,116       US$ (11 )                  
 
 
    United States Treas Nts                                   45,070       US$ 45,309         40,270       US$ 40,440       US$ 40,484       US$ (44 )       4,800       US$ 4,819    
 
 
    US Treasury N/B                                   43,900       US$ 43,832                                         43,900       US$ 43,809    
 
 
    US Treasury N/B                   21,400       US$ 21,394                         21,400       US$ 21,487       US$ 21,416       US$ 71                    
 
 
    US Treasury N/B                                   53,000       US$ 53,069         6,000       US$ 6,018       US$ 6,008       US$ 10         47,000       US$ 47,094    
 
 
    US Treasury N/B                                   16,800       US$ 16,889                                         16,800       US$ 16,887    
 
 
    US Treasury Nts                   37,700       US$ 39,012                         37,700         38,784         39,346       US$ (562 )                  
 
 
    US Treasury Sec                                   8,000       US$ 8,040                                         8,000       US$ 8,031    
 
 
    US Treasury Sec                                   4,400       US$ 4,380                                         4,400       US$ 4,386    
 

-50-


 

                                                                                                                                 
 
                                Beginning Balance     Acquisition     Disposal (Note 2)        
                                          Amount     Shares/Units     Amount               Amount     Carrying Value     Gain (Loss) or     Ending Balance (Note 3)  
                          Nature of     Shares/Units     (US$ in     (In Thousands)     (US$ in     Shares/Units     (US$ in     (US$ in     Disposal (US$     Shares/Units     Amount (US$  
  Company Name     Marketable Securities Type and Name     Financial Statement Account     Counter-party     Relationship     (In Thousands)     Thousands)     (Note 1)     Thousands)     (In Thousands)     Thousands)     Thousands)     in Thousands)     (In Thousands)     in Thousands)  
 
 
    Money market fund                                                                                                                        
 
 
    Ssga Cash Mgmt Global Offshore     Available-for-sale financial assets               8,858       US$ 8,858         204,079       US$ 204,079         210,208       US$ 210,208       US$ 210,208                 2,729       US$ 2,729    
 
 
    Corporate issued note                                                                                                                        
 
 
    Barclays U.S. Fdg LLC     Available-for-sale financial assets               4,500       US$ 4,489                         1,900       US$ 1,895       US$ 1,895                 2,600       US$ 2,594    
 
Note 1: The shares/units and amount of marketable securities acquired do not include stock dividends from investees.
Note 2: The data for marketable securities disposed exclude bonds maturities.
Note 3: The ending balance includes the amortization of premium/discount on bonds investments, unrealized valuation gains/ losses on financial assets, translation adjustments, equity in earnings/losses of equity method investees and other adjustments to long-term investment using equity method.
(Concludued)

-51-


 

TABLE 3
Taiwan Semiconductor Manufacturing Company Limited
ACQUISITION OF INDIVIDUAL REAL ESTATE PROPERTIES AT COSTS OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 2010
(Amounts in Thousands of New Taiwan Dollars)
                                                                                           
                                                                                   
  Company     Types of           Transaction                 Nature of     Prior Transaction of Related Counter-party     Price     Purpose of     Other  
  Name     Property     Transaction Date     Amount     Payment Term     Counter-party     Relationships     Owner     Relationships     Transfer Date     Amount     Reference     Acquisition     Terms  
                                                                                   
 
TSMC
    Fab     January 28, 2010 to February 24, 2010     $ 201,231       By the construction progress     China Steel Structure Co., Ltd.         N/A     N/A     N/A     N/A     Public bidding     Manufacturing purpose     None  
 
 
    Fab     January 28, 2010 to March 28, 2010       126,825       By the construction progress     Fu Tsu Construction Co., Ltd.         N/A     N/A     N/A     N/A     Public bidding     Manufacturing purpose     None  
 
 
    Fab     February 19, 2010       426,000       By the construction progress     Da Cin Constructure Co., Ltd.         N/A     N/A     N/A     N/A     Public bidding     Manufacturing purpose     None  
                                                                                   

-52-


 

TABLE 4
Taiwan Semiconductor Manufacturing Company Limited and Investees
TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 2010
(Amounts in Thousands of New Taiwan Dollars)
                                                                                                   
                                                                       
                                                                        Notes/Accounts Payable or        
                                                    Abnormal Transaction     Receivable        
  Company                 Transaction Details     Unit Price     Payment Terms     Ending     % to        
  Name     Related Party     Nature of Relationships     Purchases/ Sales     Amount     % to Total     Payment Terms     (Note)     (Note)     Balance     Total     Note  
                                                                       
 
 
                                                                                               
 
TSMC
    TSMC North America     Subsidiary     Sales     $ 48,676,679         53       Net 30 days after invoice date                     $ 22,055,122         49              
 
 
    GUC     Investee with a controlling financial interest     Sales       320,263               Net 30 days after monthly closing                       205,381                      
 
 
    WaferTech     Indirect subsidiary     Purchases       1,636,493         17       Net 30 days after monthly closing                       (647,205 )       6              
 
 
    TSMC China     Subsidiary     Purchases       1,577,962         16       Net 30 days after monthly closing                       (762,578 )       7              
 
 
    SSMC     Investee accounted for using equity method     Purchases       1,041,954         10       Net 30 days after monthly closing                       (408,809 )       3              
 
 
    VIS     Investee accounted for using equity method     Purchases       960,978         10       Net 30 days after monthly closing                       (695,640 )       6              
 
 
                                                                                               
 
GUC
    TSMC North America     Same parent company     Purchases       181,144         20       Net 30 days after invoice date/net 45 days after monthly closing                       (107,527 )       14              
 
 
                                                                                               
 
Xintec
    OmniVision     Parent company of director (represented for Xintec)     Sales       725,568         75       Net 30 days after monthly closing                       368,052         70              
                                                                       
Note:   The sales prices and payment terms to related parties were not significantly different from those of sales to third parties. For other related party transactions, prices and terms were determined in accordance with mutual agreements.

-53-


 

TABLE 5
Taiwan Semiconductor Manufacturing Company Limited and Investees
RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
MARCH 31, 2010
(Amounts in Thousands of New Taiwan Dollars)
                                                                             
                                                     
                                                            Amounts Received        
  Company                           Turnover Days     Overdue     in Subsequent     Allowance for Bad  
  Name     Related Party     Nature of Relationships     Ending Balance     (Note 1)     Amounts     Action Taken     Period     Debts  
                                                     
 
TSMC
    TSMC North America     Subsidiary     $ 22,063,932         41       $ 6,442,143               $ 8,998,856       $    
 
 
    GUC     Investee with a controlling financial interest       205,381         77         322                 91,107            
 
 
    TSMC China     Subsidiary       123,354       (Note 2)                                  
 
 
    VIS     Investee accounted for using equity method       113,100       (Note 2)       19,545                            
 
Xintec
    OmniVision     Parent company of director (represented for Xintec)       368,052         48         40                 136,161            
                                                     
Note 1:   The calculation of turnover days excludes other receivables from related parties.
Note 2:   The ending balance primarily consisted of other receivables, which is not applicable for the calculation of turnover days.

-54-


 

TABLE 6
Taiwan Semiconductor Manufacturing Company Limited and Investees
NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES OVER WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE
MARCH 31, 2010
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
                                                                                                   
                                                                       
                                                                                      Equity in the        
                          Original Investment Amount     Balance as of March 31, 2010     Net Income     Earnings        
                          March 31,     December 31,                         Carrying     (Losses) of the     (Losses)        
                          2010     2009                         Value     Investee     (Note 1)        
                          (Foreign     (Foreign                         (Foreign     (Foreign     (Foreign        
                          Currencies in     Currencies in     Shares (In     Percentage of     Currencies in     Currencies in     Currencies in        
  Investor Company     Investee Company     Location     Main Businesses and Products     Thousands)     Thousands)     Thousands)     Ownership     Thousands)     Thousands)     Thousands)     Note  
                                                                       
                   
 
                                                                             
  TSMC     TSMC Global     Tortola, British Virgin Islands    
Investment activities
    $ 42,327,245       $ 42,327,245         1         100       $ 45,245,474       $ 119,194       $ 119,194       Subsidiary  
        TSMC Partners     Tortola, British Virgin Islands    
Investing in companies involved in the design, manufacture, and other related business in the semiconductor industry.
      31,456,130         31,456,130         988,268         100         32,637,828         299,571         299,571       Subsidiary  
        VIS     Hsin-Chu, Taiwan    
Research, design, development, manufacture, packaging, testing and sale of memory integrated circuits, LSI, VLSI and related parts
      13,232,288         13,232,288         628,223         37         9,359,350         220,278         (18,084 )     Investee accounted for using equity method  
        SSMC     Singapore    
Fabrication and supply of integrated circuits
      5,120,028         5,120,028         314         39         6,308,810         615,379         189,456       Investee accounted
for using equity
method
 
        Motech     Taipei, Taiwan    
Manufacturing and sales of solar cells, crystalline silicon solar cell, and test and measurement instruments and design and construction of solar power systems
      6,228,661                 75,316         20         6,210,916         301,572         (16,686 )     Investee accounted
for using equity
method
 
        TSMC China     Shanghai, China    
Manufacturing and selling of integrated circuits at the order of and pursuant to product design specifications provided by customers
      12,180,367         12,180,367                 100         2,787,558         (146,829 )       (151,898 )     Subsidiary  
        TSMC North America     San Jose, California, U.S.A.    
Selling and marketing of integrated circuits and semiconductor devices
      333,718         333,718         11,000         100         2,726,868         21,174         21,174       Subsidiary  
        Xintec     Taoyuan, Taiwan    
Wafer level chip size packaging service
      1,357,890         1,357,890         93,081         41         1,532,384         156,535         57,856       Investee with a
controlling
financial interest
 
        VTAF III     Cayman Islands    
Investing in new start-up technology companies
      1,772,789         1,703,163                 98         1,351,399         (19,888 )       (19,490 )     Subsidiary  
        VTAF II     Cayman Islands    
Investing in new start-up technology companies
      1,166,470         1,093,943                 98         1,140,879         34,402         33,714       Subsidiary (Note 3)  
        GUC     Hsin-Chu, Taiwan    
Researching, developing, manufacturing, testing and marketing of integrated circuits
      386,568         386,568         46,688         35         1,039,348         113,610         40,139       Investee with a
controlling
financial interest
 
        Emerging Alliance     Cayman Islands    
Investing in new start-up technology companies
      965,414         959,044                 99         303,768         (6,475 )       (6,442 )     Subsidiary (Note 3)  
        TSMC Europe     Amsterdam, the Netherlands    
Marketing and engineering supporting activities
      15,749         15,749                 100         158,190         11,014         11,014       Subsidiary (Note 3)  
        TSMC Japan     Yokohama, Japan    
Marketing activities
      83,760         83,760         6         100         133,420         (145 )       (145 )     Subsidiary (Note 3)  
        TSMC Korea     Seoul, Korea    
Customer service and technical supporting activities
      13,656         13,656         80         100         19,460         535         535       Subsidiary (Note 3)  
  TSMC Partners     TSMC Development     Delaware, U.S.A.    
Investment activities
    US$ 0.001       US$ 0.001         1         100       US$ 350,118       US$ 9,731       Note 2     Subsidiary  
        VisEra Holding Company     Cayman Islands    
Investing in companies involved in the design, manufacturing, and other related businesses in the semiconductor industry
    US$ 43,000       US$ 43,000         43,000         49       US$ 72,445       US$ 2,246       Note 2     Investee accounted
for using equity
method
 
        ISDF II     Cayman Islands    
Investing in new start-up technology companies
    US$ 21,415       US$ 21,415         21,415         97       US$ 13,670       US$ 30       Note 2     Subsidiary  
        TSMC Technology     Delaware, U.S.A.    
Engineering support activities
    US$ 0.001       US$ 0.001         1         100       US$ 9,431       US$ 360       Note 2     Subsidiary (Note 3)  
        ISDF     Cayman Islands    
Investing in new start-up technology companies
    US$ 7,680       US$ 7,680         7,680         97       US$ 7,188       US$ (30 )     Note 2     Subsidiary  
        TSMC Canada     Ontario, Canada    
Engineering support activities
    US$ 2,300       US$ 2,300         2,300         100       US$ 3,555       US$ 256       Note 2     Subsidiary (Note 3)  
        Mcube Inc. (Common Stock)     Delaware, U.S.A.    
Research, development, and sale of micro-semiconductor device
    US$ 800       US$ 800         5,333         70       US$ 529       US$ (1,493 )     Note 2     Investee accounted
for using equity
method (Note 3)
 
        Mcube Inc. (Preferred Stock)     Delaware, U.S.A.    
Research, development, and sale of micro-semiconductor device
    US$ 1,000       US$ 1,000         1,000         10       US$ 949       US$ (1,493 )     Note 2     Investee accounted
for using equity
method (Note 3)
 
                                                                       
(Continued)

-55-


 

                                                                                               
                                                                       
                                                                                      Equity in the        
                          Original Investment Amount     Balance as of March 31, 2010     Net Income     Earnings        
                          March 31,     December 31,                         Carrying     (Losses) of the     (Losses)        
                          2010     2009                         Value     Investee     (Note 1)        
                          (Foreign     (Foreign                         (Foreign     (Foreign     (Foreign        
                          Currencies in     Currencies in     Shares (In     Percentage of     Currencies in     Currencies in     Currencies in        
  Investor Company     Investee Company     Location     Main Businesses and Products     Thousands)     Thousands)     Thousands)     Ownership     Thousands)     Thousands)     Thousands)     Note  
                                                                       
                   
 
                                                                         
  TSMC Development     WaferTech     Washington, U.S.A.    
Manufacturing, selling, testing and computer-aided designing of integrated circuits and other semiconductor devices
    US$ 330,000       US$ 330,000         293,637         100       US$ 164,246       US$ 9,814       Note 2     Subsidiary  
  VTAF III     Mutual-Pak Technology Co., Ltd.     Taipei, Taiwan    
Manufacturing and selling of electronic parts and researching, developing, and testing of RFID
    US$ 3,088       US$ 3,088         9,180         59       US$ 1,962       US$ (272 )     Note 2     Subsidiary (Note 3)  
        Aiconn Technology Corp.     Taipei, Taiwan    
Wholesaling telecommunication equipments, and manufacturing wired and wireless communication equipments
    US$ 1,777       US$ 1,777         4,500         42       US$ 487       US$ (194 )     Note 2     Investee accounted
for using equity
method (Note 3)
 
        Growth Fund     Cayman Islands    
Investing in new start-up technology companies
    US$ 1,650       US$ 1,550                 100       US$ 892       US$ (31 )     Note 2     Subsidiary (Note 3)  
        VTA Holdings     Delaware, U.S.A.    
Investing in new start-up technology companies
                              62                       Note 2     Subsidiary (Note 3)  
  VTAF II     VTA Holdings     Delaware, U.S.A.    
Investing in new start-up technology companies
                              31                       Note 2     Subsidiary (Note 3)  
  GUC     GUC-NA     U.S.A.    
Consulting services in main products
    US$ 800       US$ 800         800         100       $ 39,313       $ 929       Note 2     Subsidiary  
        GUC-BVI     British Virgin Islands    
Investment activities
    US$ 550       US$ 550         550         100         17,351         (13 )     Note 2     Subsidiary (Note 3)  
        GUC-Japan     Japan    
Consulting services in main products
    JPY 30,000       JPY 30,000         1         100         13,160         508       Note 2     Subsidiary (Note 3)  
        GUC-Europe     The Netherlands    
Consulting services in main products
    EUR 100       EUR 100                 100         4,860         30       Note 2     Subsidiary (Note 3)  
  GUC-BVI     GUC-Shanghai     Shanghai, China    
Consulting services in main products
    US$ 500                         100         15,902               Note 2     Subsidiary (Note 3)  
  Emerging Alliance     VTA Holdings     Delaware, U.S.A.    
Investing in new start-up technology companies
                              7                       Note 2     Subsidiary (Note 3)  
                                                                       
Note 1: Equity in earnings/losses of investees include the effect of unrealized gross profit from affiliates.
Note 2: The equity in the earnings/losses of the investee company is not reflected herein as such amount is already included in the equity in the earnings/ losses of the investor company.
Note 3: Equity in earnings/losses was determined based on the unreviewed financial statements.
(Concluded)

-56-


 

TABLE 7
Taiwan Semiconductor Manufacturing Company Limited and Investees
INFORMATION OF INVESTMENT IN MAINLAND CHINA
FOR THE THREE MONTHS ENDED MARCH 31, 2010
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
 
                                                                                     
                                                                             
                                Accumulated                 Accumulated                                  
                                Outflow of                 Outflow of                                  
                                Investment from                 Investment from                               Accumulated  
                                Taiwan as of                 Taiwan                               Inward  
                    Total Amount of           January 1, 2010                 as of               Equity in the     Carrying Value     Remittance of  
  Investor     Investee     Main Businesses and     Paid-in Capital     Method of     (US$ in     Investment Flows     March 31, 2010     Percentage of     Earnings     as of     Earnings as of  
  Company     Company     Products     (Thousand)     Investment     Thousand)     Outflow     Inflow     (US$ in Thousand)     Ownership     (Losses)     March 31, 2010     March 31, 2010  
                                                                             
                   
 
                                                               
  TSMC     TSMC China     Manufacturing and selling of integrated circuits at the order of and pursuant to product design specifications provided by customers  
$12,180,367
(RMB 3,070,623)
    (Note 1)   $12,180,367
(US$ 371,000)
       
$12,180,367
(US$ 371,000)
      100 %    
$(151,898)
(Note 3)
    $ 2,787,558       $—  
                   
 
                                                               
  GUC     GUC-Shanghai     Consulting services
in main products
   
16,160
(US$ 500)
    (Note 2)        
16,160
(US$ 500)
       
16,160
(US$ 500)
      100 %    

(Note 4)
      15,902        
                                                                       
                       
                       
        Accumulated Investment in Mainland China as     Investment Amounts Authorized by        
        of March 31, 2010     Investment Commission, MOEA     Upper Limit on Investment  
  Investor Company     (US$ in Thousand)     (US$ in Thousand)     (US$ in Thousand)  
                       
 
TSMC
   
$12,180,367
(US$ 371,000)
   
$12,180,367
(US$ 371,000)
   
$12,180,367
(US$ 371,000)
 
 
GUC
   
16,160
(US$ 500)
   
16,160
(US$ 500)
   
1,765,057
(Note 5)
 
                       
 
Note 1: TSMC directly invested US$ 371,000 thousand in TSMC China.
 
Note 2: GUC, TSMC’s investee with a controlling financial interest, indirectly invested in GUC-Shanghai through GUC-BVI.
 
Note 3: Amount was recognized based on the reviewed financial statements.
 
Note 4: Equity in earnings/losses was determined based on the unreviewed financial statements.
 
Note 5: Subject to 60% of net asset value of GUC according to the revised “Guidelines Governing the Approval of Investment or Technical Cooperation in Mainland China” issued by the Investment Commission.

-57-


 

Taiwan Semiconductor Manufacturing
Company Limited and Subsidiaries
Consolidated Financial Statements for the
Three Months Ended March 31, 2010 and 2009 and
Independent Accountants’ Review Report

 


 

INDEPENDENT ACCOUNTANTS’ REVIEW REPORT
The Board of Directors and Shareholders
Taiwan Semiconductor Manufacturing Company Limited
We have reviewed the accompanying consolidated balance sheets of Taiwan Semiconductor Manufacturing Company Limited and subsidiaries as of March 31, 2010 and 2009, and the related consolidated statements of income and cash flows for the three months then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to issue a report on these consolidated financial statements based on our reviews.
We conducted our reviews in accordance with Statement on Auditing Standards No. 36, “Review of Financial Statements,” issued by the Auditing Standards 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 the Republic of China, the objective of which is the expression of an opinion regarding the consolidated 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 consolidated financial statements referred to above for them to be in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers and accounting principles generally accepted in the Republic of China.

- 1 -


 

As discussed in Note 3 to the consolidated financial statements, effective January 1, 2009, Taiwan Semiconductor Manufacturing Company Limited and subsidiaries adopted the newly revised Statements of Financial Accounting Standards No. 10, “Accounting for Inventories.”
April 20, 2010
Notice to Readers
The accompanying consolidated financial statements are intended only to present the consolidated financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdiction. The standards, procedures and practices to review such consolidated financial statements are those generally accepted and applied in the Republic of China.
For the convenience of readers, the accountants’ review report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language accountants’ review report and consolidated financial statements shall prevail.

- 2 -


 

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2010 AND 2009
(In Thousands of New Taiwan Dollars, Except Par Value)
(Reviewed, Not Audited)
                                 
    2010     2009  
    Amount     %     Amount     %  
ASSETS
                               
CURRENT ASSETS
                               
Cash and cash equivalents (Notes 2 and 4)
  $ 159,799,703       25     $ 223,262,081       40  
Financial assets at fair value through profit or loss (Notes 2, 5 and 25)
    83,280             243,109        
Available-for-sale financial assets (Notes 2, 6 and 25)
    24,182,017       4       1,544,968        
Held-to-maturity financial assets (Notes 2, 7 and 25)
    7,944,656       1       4,739,315       1  
Receivables from related parties
    24,673             274        
Notes and accounts receivable
    47,459,954       8       20,607,929       4  
Allowance for doubtful receivables (Notes 2 and 8)
    (547,908 )             (277,287 )      
Allowance for sales returns and others (Notes 2 and 8)
    (7,165,663 )     (1 )     (6,508,609 )     (1 )
Other receivables from related parties (Note 26)
    158,787             52,826        
Other financial assets (Note 27)
    2,597,698             2,478,466       1  
Inventories (Notes 2, 3 and 9)
    22,694,233       4       14,775,167       3  
Deferred income tax assets (Notes 2 and 20)
    6,305,602       1       6,267,893       1  
Prepaid expenses and other current assets
    2,079,007             1,370,899        
 
                       
 
                               
Total current assets
    265,616,039       42       268,557,031       49  
 
                       
 
                               
LONG-TERM INVESTMENTS (Notes 2, 6, 7, 10, 12 and 25)
                               
Investments accounted for using equity method
    24,246,735       4       17,451,182       3  
Available-for-sale financial assets
    1,267,029             1,038,443        
Held-to-maturity financial assets
    11,114,601       2       13,668,922       2  
Financial assets carried at cost
    3,134,539       1       3,523,341       1  
 
                       
 
                               
Total long-term investments
    39,762,904       7       35,681,888       6  
 
                       
 
                               
PROPERTY, PLANT AND EQUIPMENT (Notes 2, 13 and 27)
                               
Cost
                               
Land and land improvements
    928,605             981,274        
Buildings
    143,535,804       23       133,649,278       24  
Machinery and equipment
    818,778,607       131       702,224,877       127  
Office equipment
    14,243,723       2       12,642,166       2  
Leased assets
    709,705             744,074        
 
                       
 
    978,196,444       156       850,241,669       153  
Accumulated depreciation
    (713,352,491 )     (114 )     (640,120,878 )     (115 )
Advance payments and construction in progress
    34,785,266       6       16,957,601       3  
 
                       
 
                               
Net property, plant and equipment
    299,629,219       48       227,078,392       41  
 
                       
 
                               
INTANGIBLE ASSETS
                               
Goodwill (Note 2)
    5,902,572       1       6,188,390       1  
Deferred charges, net (Notes 2 and 14)
    6,290,817       1       6,646,575       1  
 
                       
 
                               
Total intangible assets
    12,193,389       2       12,834,965       2  
 
                       
 
                               
OTHER ASSETS
                               
Deferred income tax assets (Notes 2 and 20)
    6,770,699       1       5,732,151       1  
Refundable deposits
    2,563,884             2,674,090       1  
Others (Notes 2 and 27)
    293,004             216,877        
 
                       
 
                               
Total other assets
    9,627,587       1       8,623,118       2  
 
                       
 
                               
TOTAL
  $ 626,829,138       100     $ 552,775,394       100  
 
                       
 
                               
LIABILITIES AND SHAREHOLDERS’ EQUITY
                               
 
                               
CURRENT LIABILITIES
                               
Short-term loans (Notes 15 and 25)
  $ 318,242           $        
Financial liabilities at fair value through profit or loss (Notes 2, 5 and 25)
    11,810             3,211        
Hedging derivative financial liabilities (Notes 2, 11, 25)
    238                    
Accounts payable
    10,511,246       2       5,314,336       1  
Payables to related parties (Note 26)
    1,114,589             509,311        
Income tax payable (Notes 2 and 20)
    11,057,936       2       9,835,673       2  
Accrued profit sharing to employees and bonus to directors and supervisors (Notes 2 and 22)
    9,128,889       1       15,644,815       3  
Payables to contractors and equipment suppliers
    28,784,713       4       5,144,858       1  
Accrued expenses and other current liabilities (Notes 18, 25 and 29)
    16,302,457       3       8,636,194       1  
Current portion of long-term bank loans (Notes 17, 25 and 27)
    944,736             286,582        
 
                       
 
                               
Total current liabilities
    78,174,856       12       45,374,980       8  
 
                       
 
                               
LONG-TERM LIABILITIES
                               
Bonds payable (Notes 16 and 25)
    4,500,000       1       4,500,000       1  
Long-term bank loans (Notes 17, 25 and 27)
    517,781             1,633,066        
Other long-term payables (Notes 18, 25 and 29)
    5,565,465       1       9,750,821       2  
Obligations under capital leases (Notes 2, 13, and 25)
    702,826             744,074        
 
                       
 
                               
Total long-term liabilities
    11,286,072       2       16,627,961       3  
 
                       
 
                               
OTHER LIABILITIES
                               
Accrued pension cost (Notes 2 and 19)
    3,797,319       1       3,717,959       1  
Guarantee deposits (Note 29)
    932,370             1,319,777        
Deferred credits
    157,610             390,179        
Others
    176,209             30,779        
 
                       
 
                               
Total other liabilities
    5,063,508       1       5,458,694       1  
 
                       
 
                               
Total liabilities
    94,524,436       15       67,461,635       12  
 
                       
 
                               
EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT
                               
Capital stock — NT$10 par value (Note 22)
                               
Authorized: 28,050,000 thousand shares
                               
Issued: 25,903,769 thousand shares in 2010
                               
25,626,012 thousand shares in 2009
    259,037,692       41       256,260,122       46  
 
                       
Capital surplus (Notes 2 and 22)
    55,530,845       9       49,965,450       9  
 
                       
Retained earnings (Note 22)
                               
Appropriated as legal capital reserve
    77,317,710       12       67,324,393       12  
Appropriated as special capital reserve
                391,857        
Unappropriated earnings
    138,228,089       22       103,896,290       19  
 
                       
 
                               
 
    215,545,799       34       171,612,540       31  
 
                       
 
                               
Others (Notes 2, 11 and 25)
                               
Cumulative translation adjustments
    (2,378,010 )           3,531,944       1  
Unrealized gain on financial instruments
    401,390             177,228        
 
                       
 
    (1,976,620 )           3,709,172       1  
 
                       
 
                               
Equity attributable to shareholders of the parent
    528,137,716       84       481,547,284       87  
 
                               
MINORITY INTERESTS (Note 2)
    4,166,986       1       3,766,475       1  
 
                       
 
                               
Total shareholders’ equity
    532,304,702       85       485,313,759       88  
 
                       
 
                               
TOTAL
  $ 626,829,138       100     $ 552,775,394       100  
 
                       
The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche review report dated April 20, 2010)

- 3 -


 

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)
(Reviewed, Not Audited)
                                 
    2010     2009  
    Amount     %     Amount     %  
GROSS SALES (Notes 2 and 26)
  $ 95,020,306             $ 41,171,249          
 
                               
SALES RETURNS AND ALLOWANCES (Notes 2 and 8)
    2,833,620               1,671,123          
 
                           
 
                               
NET SALES
    92,186,686       100       39,500,126       100  
 
                               
COST OF SALES (Notes 3, 9, 21 and 26)
    48,001,195       52       32,019,884       81  
 
                       
 
                               
GROSS PROFIT
    44,185,491       48       7,480,242       19  
 
                       
 
                               
OPERATING EXPENSES (Notes 21 and 26)
                               
Research and development
    6,409,840       7       3,728,933       10  
General and administrative
    2,471,979       3       1,594,563       4  
Marketing
    1,176,010       1       947,405       2  
 
                       
 
                               
Total operating expenses
    10,057,829       11       6,270,901       16  
 
                       
 
                               
INCOME FROM OPERATIONS
    34,127,662       37       1,209,341       3  
 
                       
 
                               
NON-OPERATING INCOME AND GAINS
                               
Settlement income (Note 29)
    637,580       1              
Interest income (Note 2)
    403,215       1       983,772       3  
Valuation gain on financial instruments, net (Notes 2, 5 and 25)
    304,829                    
Equity in earnings of equity method investees, net (Notes 2 and 10)
    177,080                    
Technical service income (Notes 26 and 29)
    116,834             40,271        
Gain on disposal of property, plant and equipment (Notes 2 and 26)
    56,344             296        
Gain on settlement and disposal of financial assets, net (Notes 2 and 25)
    22,016                    
Foreign exchange gain, net (Note 2)
                464,687       1  
Others (Note 2)
    113,696             86,415        
 
                       
 
                               
Total non-operating income and gains
    1,831,594       2       1,575,441       4  
 
                       
(Continued)

- 4 -


 

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)
(Reviewed, Not Audited)
                                 
    2010     2009  
    Amount     %     Amount     %  
NON-OPERATING EXPENSES AND LOSSES
                               
Foreign exchange loss, net (Note 2)
  $ 286,919       1     $        
Casualty loss (Note 9)
    194,137                    
Interest expense
    87,446             107,625        
Impairment of financial assets (Notes 2, 6, 12 and 25)
    8,709             331,284       1  
Loss on disposal of property, plant and equipment (Notes 2 and 26)
    196             1,623        
Equity in losses of equity method investees, net (Notes 2 and 10)
                812,511       2  
Valuation loss on financial instruments, net (Notes 2, 5 and 25)
                444,663       1  
Loss on settlement and disposal of financial assets, net (Notes 2 and 25)
                305,711       1  
Others (Note 2)
    79,073             32,866        
 
                       
 
                               
Total non-operating expenses and losses
    656,480       1       2,036,283       5  
 
                       
 
                               
INCOME BEFORE INCOME TAX
    35,302,776       38       748,499       2  
 
                               
INCOME TAX BENEFIT (EXPENSE) (Notes 2 and 20)
    (1,477,461 )     (1 )     739,228       2  
 
                       
 
                               
NET INCOME
  $ 33,825,315       37     $ 1,487,727       4  
 
                       
 
                               
ATTRIBUTABLE TO:
                               
Shareholders of the parent
  $ 33,663,117       37     $ 1,558,873       4  
Minority interests
    162,198             (71,146 )      
 
                       
 
                               
 
  $ 33,825,315       37     $ 1,487,727       4  
 
                       
                                 
    2010     2009  
    Income Attributable to     Income Attributable to  
    Shareholders of the Parent     Shareholders of the Parent  
    Before     After     Before     After  
    Income Tax     Income Tax     Income Tax     Income Tax  
EARNINGS PER SHARE (NT$, Note 24)
                               
Basic earnings per share
  $ 1.36     $ 1.30     $ 0.03     $ 0.06  
 
                       
Diluted earnings per share
  $ 1.36     $ 1.30     $ 0.03     $ 0.06  
 
                       
The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche review report dated April 20, 2010)
(Concluded)

- 5 -


 

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009
(In Thousands of New Taiwan Dollars)
(Reviewed, Not Audited)
                 
    2010     2009  
CASH FLOWS FROM OPERATING ACTIVITIES
               
Net income attributable to shareholders of the parent
  $ 33,663,117     $ 1,558,873  
Net income (loss) attributable to minority interests
    162,198       (71,146 )
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
    21,002,670       20,483,463  
Amortization of premium/discount of financial assets
    7,828       (6,866 )
Impairment of financial assets
    8,709       331,284  
Loss (gain) on disposal of available-for-sale financial assets, net
    (10,114 )     321,802  
Gain on held-to-maturity financial assets redeemed by the issuer
          (16,091 )
Gain on disposal of financial assets carried at cost, net
    (11,902 )      
Equity in losses (earnings) of equity method investees, net
    (177,080 )     812,511  
Dividends received from equity method investees
          988,201  
Loss (gain) on disposal of property, plant and equipment, net
    (56,148 )     1,327  
Deferred income tax
    (717,689 )     (1,393,841 )
Changes in operating assets and liabilities:
               
Decrease (increase) in:
               
Financial assets and liabilities at fair value through profit or loss
    114,586       (269,355 )
Receivables from related parties
    (12,149 )     133  
Notes and accounts receivable
    (2,822,312 )     4,415,392  
Allowance for doubtful receivables
    4,583       (178,464 )
Allowance for sales returns and others
    (1,558,818 )     437,583  
Other receivables from related parties
    (37,495 )     47,092  
Other financial assets
    (61,077 )     (566,767 )
Inventories
    (1,780,482 )     101,478  
Prepaid expenses and other current assets
    (796,236 )     442,793  
Increase (decrease) in:
               
Accounts payable
    (700,830 )     (238,815 )
Payables to related parties
    331,582       19,454  
Income tax payable
    2,257,687       503,848  
Accrued profit sharing to employees and bonus to directors and supervisors
    2,310,546       275,085  
Accrued expenses and other current liabilities
    (5,059,113 )     (1,188,132 )
Accrued pension cost
    287       16,375  
Deferred credits
    (28,079 )     (38,884 )
 
           
 
               
Net cash provided by operating activities
    46,034,269       26,788,333  
 
           
 
               
CASH FLOWS FROM INVESTING ACTIVITIES
               
Acquisitions of:
               
Property, plant and equipment
    (46,135,779 )     (5,616,980 )
Available-for-sale financial assets
    (24,259,847 )     (9,045,555 )
Held-to-maturity financial assets
    (1,597,750 )     (204,990 )
Investments accounted for using equity method
    (6,228,661 )      
Financial assets carried at cost
    (111,409 )     (83,155 )
(Continued)

- 6 -


 

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009
(In Thousands of New Taiwan Dollars)
(Reviewed, Not Audited)
                 
    2010     2009  
Proceeds from disposal or redemption of:
               
Available-for-sale financial assets
  $ 14,219,695     $ 19,807,173  
Held-to-maturity financial assets
    8,000,000       3,246,100  
Financial assets carried at cost
    25,800        
Property, plant and equipment
    35,632       1,699  
Increase in deferred charges
    (383,034 )     (52,343 )
Decrease in refundable deposits
    169,259       93,109  
Increase in other assets
    (23,080 )     (8,784 )
 
           
 
               
Net cash provided by (used in) investing activities
    (56,289,174 )     8,136,274  
 
           
 
               
CASH FLOWS FROM FINANCING ACTIVITIES
               
Proceed from short-term loans
    318,242        
Proceed from long-term bank loans
          293,351  
Repayment of:
               
Long-term bank loans
    (60,932 )     (36,526 )
Bonds payable
          (8,000,000 )
Decrease in other long-term payables
    (1,112,323 )      
Decrease in guarantee deposits
    (89,653 )     (164,718 )
Proceed from donation
    49,021        
Proceeds from exercise of employee stock options
    36,791       15,418  
Increase in minority interests
    15,187       17,472  
 
           
 
               
Net cash used in financing activities
    (843,667 )     (7,875,003 )
 
           
 
               
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    (11,098,572 )     27,049,604  
 
               
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
    (378,066 )     1,598,725  
 
               
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
    171,276,341       194,613,752  
 
           
 
               
CASH AND CASH EQUIVALENTS, END OF PERIOD
  $ 159,799,703     $ 223,262,081  
 
           
 
               
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
               
Interest paid
  $ 184,499     $ 412,460  
 
           
Income tax paid
  $ 17,732     $ 83,616  
 
           
 
               
INVESTING ACTIVITIES AFFECTING BOTH CASH AND NON-CASH ITEMS
               
Acquisition of property, plant and equipment
  $ 46,425,220     $ 2,763,065  
Decrease (increase) in payables to contractors and equipment suppliers
    (166,640 )     2,853,915  
Nonmonetary exchange trade-out price
    (122,801 )      
 
           
Cash paid
  $ 46,135,779     $ 5,616,980  
 
           
(Continued)

- 7 -


 

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009
(In Thousands of New Taiwan Dollars)
(Reviewed, Not Audited)
                 
    2010     2009  
Disposal of property, plant and equipment
  $ 158,433     $ 1,699  
Nonmonetary exchange trade-out price
    (122,801 )      
 
           
Cash received
  $ 35,632     $ 1,699  
 
           
 
               
Acquisition of available-for-sale financial assets
  $ 24,799,258     $ 9,045,555  
Increase in accrued expenses and other current liabilities
    (539,411 )      
 
           
Cash paid
  $ 24,259,847     $ 9,045,555  
 
           
 
               
Disposal of available-for-sale financial assets
  $ 14,906,329     $ 19,807,173  
Increase in other financial assets
    (686,634 )      
 
           
Cash received
  $ 14,219,695     $ 19,807,173  
 
           
 
               
NON-CASH FINANCING ACTIVITIES
               
Current portion of long-term bank loans
  $ 944,736     $ 286,582  
 
           
Current portion of other long-term payables (under accrued expenses and other current liabilities)
  $ 2,837,536     $ 1,184,679  
 
           
The accompanying notes are an integral part of the consolidated financial statements.
(With Deloitte & Touche review report dated April 20, 2010)
(Concluded)

- 8 -


 

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
(Reviewed, Not Audited)
1.   GENERAL
 
    Taiwan Semiconductor Manufacturing Company, Limited (TSMC), a Republic of China (R.O.C.) corporation, was incorporated on February 21, 1987. TSMC is a dedicated foundry in the semiconductor industry which engages mainly in the manufacturing, selling, packaging, testing and computer-aided designing of integrated circuits and other semiconductor devices and the manufacturing of masks. On September 5, 1994, its shares were listed on the Taiwan Stock Exchange (TSE). On October 8, 1997, TSMC listed some of its shares of stock on the New York Stock Exchange (NYSE) in the form of American Depositary Shares (ADSs).
 
    As of March 31, 2010 and 2009, TSMC and its subsidiaries had 28,303 and 23,557 employees, respectively.
 
2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
    The consolidated financial statements are presented in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers and accounting principles generally accepted in the R.O.C.
 
    For the convenience of readers, the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the R.O.C. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language consolidated financial statements shall prevail.
 
    Significant accounting policies are summarized as follows:
 
    Principles of Consolidation
 
    The accompanying consolidated financial statements include the accounts of all directly and indirectly majority owned subsidiaries of TSMC, and the accounts of investees in which TSMC’s ownership percentage is less than 50% but over which TSMC has a controlling interest. All significant intercompany balances and transactions are eliminated upon consolidation.

- 9 -


 

    The consolidated entities were as follows:
                         
        Percentage of Ownership    
        March 31    
Name of Investor   Name of Investee   2010   2009   Remark
TSMC  
TSMC North America
    100 %     100 %  
   
TSMC Japan Limited (TSMC Japan)
    100 %     100 %  
   
TSMC Partners, Ltd. (TSMC Partners)
    100 %     100 %  
   
TSMC Korea Limited (TSMC Korea)
    100 %     100 %  
   
TSMC Europe B.V. (TSMC Europe)
    100 %     100 %  
   
TSMC International Investment Ltd. (TSMC International)
          100 %   In June 2009, TSMC International was merged into TSMC Partners.
   
TSMC Global Ltd. (TSMC Global)
    100 %     100 %  
   
TSMC China Company Limited (TSMC China)
    100 %     100 %  
   
VentureTech Alliance Fund III, L.P. (VTAF III)
    98 %     98 %  
   
VentureTech Alliance Fund II, L.P. (VTAF II)
    98 %     98 %  
   
Emerging Alliance Fund, L.P. (Emerging Alliance)
    99.5 %     99.5 %  
   
Global Unichip Corporation (GUC)
    35 %     36 %   TSMC has a controlling interest over the financial, operating and personnel hiring decisions of GUC.
   
Xintec Inc. (Xintec)
    41 %     42 %   TSMC obtained three out of five director positions and has a controlling interest in Xintec.
   
 
                   
TSMC Partners  
TSMC Design Technology Canada Inc. (TSMC Canada)
    100 %     100 %  
   
TSMC Technology, Inc. (TSMC Technology)
    100 %         Its previous shareholder, TSMC International, was merged into TSMC Partners in June 2009.
   
TSMC Development, Inc. (TSMC Development)
    100 %         Its previous shareholder, TSMC International, was merged into TSMC Partners in June 2009.
   
InveStar Semiconductor Development Fund, Inc. (ISDF)
    97 %         Its previous shareholder, TSMC International, was merged into TSMC Partners in June 2009.
   
InveStar Semiconductor Development Fund, Inc. (II) LDC. (ISDF II)
    97 %         Its previous shareholder, TSMC International, was merged into TSMC Partners in June 2009.
   
 
                   
TSMC Development  
WaferTech, LLC (WaferTech)
    100 %     99.9 %  
   
 
                   
VTAF III  
Mutual-Pak Technology Co., Ltd. (Mutual-Pak)
    59 %     51 %  
   
Growth Fund Limited (Growth Fund)
    100 %     100 %  
   
 
                   
VTAF III, VTAF II and Emerging Alliance
 
VentureTech Alliance Holdings, LLC (VTA Holdings)
    100 %     100 %  
(Continued)

- 10 -


 

                         
        Percentage of Ownership      
        March 31      
Name of Investor   Name of Investee   2010     2009     Remark
GUC  
Global Unichip Corporation-NA (GUC-NA)
    100 %     100 %  
   
Global Unichip Japan Co., Ltd. (GUC-Japan)
    100 %     100 %  
   
Global Unichip Europe B.V. (GUC-Europe)
    100 %     100 %  
   
Global Unichip (BVI) Corp. (GUC-BVI)
    100 %     100 %  
   
 
                   
GUC-BVI  
Global Unichip (Shanghai) Company, Limited (GUC-Shanghai)
    100 %         Newly established in January 2010.
(Concluded)
    The following diagram presents information regarding the relationship and ownership percentages between TSMC and its consolidated investees as of March 31, 2010:
(CHART)
    TSMC North America is engaged in selling and marketing of integrated circuits and semiconductor devices. TSMC Japan, TSMC Korea and TSMC Europe are engaged mainly in marketing or customer service, engineering and technical supporting activities. TSMC Partners is engaged in investment in companies involved in the design, manufacture, and other related business in the semiconductor industry. TSMC Global and TSMC Development are engaged in investing activities. TSMC China is engaged in the manufacturing and selling of integrated circuits pursuant to the orders from and product design specifications provided by customers. Emerging Alliance, VTAF II, VTAF III, VTA Holdings, ISDF, ISDF II, and Growth Fund are engaged in investing in new start-up technology companies. TSMC Canada and TSMC Technology are engaged mainly in engineering support activities. WaferTech is engaged in the manufacturing, selling, testing and computer-aided designing of integrated circuits and other semiconductor devices. GUC is engaged in researching, developing, manufacturing, testing and marketing of integrated circuits. GUC-NA, GUC-Japan, GUC-Europe, and GUC-Shanghai are engaged in providing products consulting in North America, Japan, Europe, and China, respectively. GUC-BVI is engaged in investing activities. Xintec is engaged in the provision of wafer packaging service. Mutual-Pak is engaged in the manufacturing and selling of electronic parts, and researching, developing and testing of RFID.
 
    TSMC Partners and TSMC International were both 100% owned subsidiaries of TSMC. To simplify the organization structure of investment, TSMC Partners merged TSMC International in June 2009.
 
    TSMC together with its subsidiaries are hereinafter referred to collectively as the “Company.”
 
    Minority interests in the aforementioned subsidiaries are presented as a separate component of shareholders’ equity.

- 11 -


 

    Use of Estimates
 
    The preparation of consolidated financial statements in conformity with the aforementioned guidelines and principles requires management to make reasonable assumptions and estimates of matters that are inherently uncertain. The actual results may differ from management’s estimates.
 
    Classification of Current and Noncurrent Assets and Liabilities
 
    Current assets are assets held for trading purposes and assets expected to be converted to cash, sold or consumed within one year from the balance sheet date. Current liabilities are obligations incurred for trading purposes and obligations expected to be settled within one year from the balance sheet date. Assets and liabilities that are not classified as current are noncurrent assets and liabilities, respectively.
 
    Cash Equivalents
 
    Repurchase agreements collateralized by government bonds, treasury bills, corporate bonds and commercial papers acquired with maturities of less than three months from the date of purchase are classified as cash equivalents. The carrying amount approximates fair value.
 
    Financial Assets/Liabilities at Fair Value Through Profit or Loss
 
    Derivatives that do not meet the criteria for hedge accounting and financial assets acquired principally for the purpose of selling them in the near term are initially recognized at fair value, with transaction costs expensed as incurred. The derivatives and financial assets are remeasured at fair value subsequently with changes in fair value recognized in earnings. A regular way purchase or sale of financial assets is accounted for using settlement date accounting.
 
    Fair value is determined as follows: Publicly traded stocks — closing prices at the end of the period; derivatives — using valuation techniques incorporating estimates and assumptions that are consistent with prevailing market conditions. When the fair value is positive, the derivative is recognized as a financial asset; when the fair value is negative, the derivative is recognized as a financial liability.
 
    Hedging Derivative Financial Instruments
 
    Hedge derivatives are mainly derivatives instruments that are for cash flow hedge purposes and determined to be an effective hedge. The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognized in shareholders’ equity. The amount recognized in shareholders’ equity is recognized in profit or loss in the same period or period during which the hedged forecast transaction or an asset or liability arising from the hedged forecast transaction affects profit or loss. However, if all or a portion of a loss recognized in shareholders’ equity is not expected to be recovered in the future, the amount that is not expected to be recovered is reclassified into profit or loss.
 
    Available-for-sale Financial Assets
 
    Investments designated as available-for-sale financial assets include debt securities and equity securities. Available-for-sale financial assets are initially recognized at fair value plus transaction costs that are directly attributable to the acquisition. Changes in fair value from subsequent remeasurement are reported as a separate component of shareholders’ equity. The corresponding accumulated gains or losses are recognized in earnings when the financial asset is derecognized from the balance sheet. A regular way purchase or sale of financial assets is accounted for using settlement date accounting.
 
    Fair value is determined as follows: Open-end mutual funds and money market funds — net asset values at the end of the period; publicly traded stocks — closing prices at the end of the period; and other debt securities — average of bid and asked prices at the end of the period.

- 12 -


 

    Cash dividends are recognized as investment income upon resolution of shareholders of an investee but are accounted for as a reduction to the original cost of investment if such dividends are declared on the earnings of the investee attributable to the period prior to the purchase of the investment. Stock dividends are recorded as an increase in the number of shares held and do not affect investment income. The cost per share is recalculated based on the new total number of shares.
 
    Any difference between the initial carrying amount of a debt security and the amount due at maturity is amortized using the effective interest method, with the amortization recognized in earnings.
 
    If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. If, in a subsequent period, the amount of the impairment loss decreases, for equity securities, the previously recognized impairment loss is reversed to the extent of the decrease and recorded as an adjustment to shareholders’ equity; for debt securities, the amount of the decrease is recognized in earnings, provided that the decrease is clearly attributable to an event which occurred after the impairment loss was recognized.
 
    Held-to-maturity Financial Assets
 
    Debt securities for which the Company has a positive intention and ability to hold to maturity are categorized as held-to-maturity financial assets and are carried at amortized cost. Those financial assets are initially recognized at fair value plus transaction costs that are directly attributable to the acquisition. Gains or losses are recognized at the time of derecognition, impairment or amortization. A regular way purchase or sale of financial assets is accounted for using settlement date accounting.
 
    If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. If, in a subsequent period, the amount of the impairment loss decreases and the decrease is clearly attributable to an event which occurred after the impairment loss was recognized, the previously recognized impairment loss is reversed to the extent of the decrease. The reversal may not result in a carrying amount that exceeds the amortized cost that would have been determined as if no impairment loss had been recognized.
 
    Allowance for Doubtful Receivables
 
    An allowance for doubtful receivables is provided based on a review of the collectability of receivables. The amount of the allowance for doubtful receivables is determined based on the account aging analysis and current trends in the credit quality of the customers. TSMC’s provision is set at 1% of the amount of outstanding receivables.
 
    Revenue Recognition and Allowance for Sales Returns and Others
 
    The Company recognizes revenue when evidence of an arrangement exists, the rewards of ownership and significant risk of the goods has been transferred to the buyer; price is fixed or determinable, and collectability is reasonably assured. Provisions for estimated sales returns and others are recorded in the period the related revenue is recognized, based on historical experience, management’s judgment, and any known factors that would significantly affect the allowance.
 
    Sales prices are determined using fair value taking into account related sales discounts agreed to by the Company and its customers. Sales agreements typically provide that payment is due 30 days from invoice date for a majority of the customers and 30 to 45 days after the end of the month in which sales occur for some customers. Since the receivables from sales are collectible within one year and such transactions are frequent, fair value of the receivables is equivalent to the nominal amount of the cash to be received.
 
    Inventories
 
    Inventories are recorded at standard cost and adjusted to approximate weighted-average cost on the balance sheet date.

- 13 -


 

    Prior to January 1, 2009, inventories were stated at the lower of cost or market value. Any write-down was made on a total-inventory basis. Market value represented replacement cost for raw materials, supplies and spare parts and net realizable value for work in process and finished goods.
 
    As stated in Note 3, effective January 1, 2009, inventories are stated at the lower of cost or net realizable value. Inventory write-downs are made on an item-by-item basis, except where it may be appropriate to group similar or related items. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and necessary selling costs.
 
    Investments Accounted for Using Equity Method
 
    Investments in companies wherein the Company exercises significant influence over the operating and financial policy decisions are accounted for using the equity method. The Company’s share of the net income or net loss of an investee is recognized in the “equity in earnings/losses of equity method investees, net” account. The cost of an investment shall be analyzed and the cost of investment in excess of the fair value of identifiable net assets acquired, representing goodwill, shall not be amortized. If the fair value of identifiable net assets acquired exceeds the cost of investment, the excess shall be proportionately allocated as reductions to fair values of non-current assets (except for financial assets other than investments accounted for using the equity method and deferred income tax assets). When an indication of impairment is identified, the carrying amount of the investment is reduced, with the related impairment loss recognized in earnings.
 
    When the Company subscribes for additional investee’s shares at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment in the investee differs from the amount of the Company’s share of the investee’s equity. The Company records such a difference as an adjustment to long-term investments with the corresponding amount charged or credited to capital surplus.
 
    Gains or losses on sales from the Company to equity method investees or from equity method investees to the Company are deferred in proportion to the Company’s ownership percentages in the investees until such gains or losses are realized through transactions with third parties.
 
    If an investee’s functional currency is a foreign currency, differences will result from the translation of the investee’s financial statements into the reporting currency of the Company. Such differences are charged or credited to cumulative translation adjustments, a separate component of shareholders’ equity.
 
    Financial Assets Carried at Cost
 
    Investments for which the Company does not exercise significant influence and that do not have a quoted market price in an active market and whose fair value cannot be reliably measured, such as non-publicly traded stocks and mutual funds, are carried at their original cost. The costs of non-publicly traded stocks and mutual funds are determined using the weighted-average method. If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. A subsequent reversal of such impairment loss is not allowed.
 
    The accounting treatment for cash dividends and stock dividends arising from financial assets carried at cost is the same as that for cash and stock dividends arising from available-for-sale financial assets.
 
    Property, Plant and Equipment, Assets Leased to Others and Idle Assets
 
    Property, plant and equipment and assets leased to others are stated at cost less accumulated depreciation. Properties covered by agreements qualifying as capital leases are carried at the lower of the leased equipment’s market value or the present value of the minimum lease payments at the inception date of the lease, with the corresponding amount recorded as obligations under capital leases. When an indication of impairment is identified, any excess of the carrying amount of an asset over its recoverable amount is recognized as a loss. If the recoverable amount increases in a subsequent period, the amount previously recognized as impairment would be reversed and recognized as a gain. However, the adjusted amount

- 14 -


 

    may not exceed the carrying amount that would have been determined, net of depreciation, as if no impairment loss had been recognized. Significant additions, renewals and betterments incurred during the construction period are capitalized. Maintenance and repairs are expensed as incurred.
 
    Depreciation is computed using the straight-line method over the following estimated service lives: land improvements — 20 years; buildings — 10 to 20 years; machinery and equipment — 3 to 5 years; office equipment — 3 to 15 years; and leased assets — 20 years.
 
    Upon sale or disposal of property, plant and equipment and assets leased to others, the related cost and accumulated depreciation are deducted from the corresponding accounts, with any gain or loss recorded as non-operating gains or losses in the period of sale or disposal.
 
    When property, plant and equipment are determined to be idle or useless, they are transferred to idle assets at the lower of the net realizable value or carrying amount. Depreciation on the idle assets is provided continuously, and the idle assets are tested for impairment on a periodical basis.
 
    Intangible Assets
 
    Goodwill represents the excess of the consideration paid for acquisition over the fair value of identifiable net assets acquired. Goodwill is no longer amortized and instead is tested for impairment annually. If an event occurs or circumstances change which indicate that the fair value of goodwill is more likely than not below its carrying amount, an impairment loss is recognized. A subsequent reversal of such impairment loss is not allowed.
 
    Deferred charges consist of technology license fees, software and system design costs and other charges. The amounts are amortized over the following periods: Technology license fees — the shorter of the estimated life of the technology or the term of the technology transfer contract; software and system design costs and other charges — 2 to 5 years. When an indication of impairment is identified, any excess of the carrying amount of an asset over its recoverable amount is recognized as a loss. If the recoverable amount increases in a subsequent period, the previously recognized impairment loss would be reversed and recognized as a gain. However, the adjusted amount may not exceed the carrying amount that would have been determined, net of amortization, as if no impairment loss had been recognized.
 
    Expenditures related to research activities and those related to development activities that do not meet the criteria for capitalization are charged to expenses when incurred.
 
    Pension Costs
 
    For employees who participate in defined contribution pension plans, pension costs are recorded based on the actual contributions made to employees’ individual pension accounts during their service periods. For employees who participate in defined benefit pension plans, pension costs are recorded based on actuarial calculations.
 
    Income Tax
 
    The Company applies an inter-period allocation for its income tax whereby deferred income tax assets and liabilities are recognized for the tax effects of temporary differences, net operating loss carryforwards and unused tax credits. Valuation allowances are provided to the extent, if any, that it is more likely than not that deferred income tax assets will not be realized. A deferred tax asset or liability is classified as current or noncurrent in accordance with the classification of its related asset or liability. However, if a deferred tax asset or liability does not relate to an asset or liability in the financial statements, then it is classified as either current or noncurrent based on the expected length of time before it is realized or settled.
 
    Any tax credits arising from purchases of machinery, equipment and technology, research and development expenditures, personnel training expenditures, and investments in important technology-based enterprises are recognized using the flow-through method.

- 15 -


 

    Adjustments of prior years’ tax liabilities are added to or deducted from the current period’s tax provision.
 
    Income tax on unappropriated earnings (excluding earnings from foreign consolidated subsidiaries) at a rate of 10% is expensed in the year of shareholder approval which is the year subsequent to the year the earnings are generated.
 
    Stock-based Compensation
 
    Employee stock options that were granted or modified in the period from January 1, 2004 to December 31, 2007 are accounted for by the interpretations issued by the Accounting Research and Development Foundation of the Republic of China. The Company adopted the intrinsic value method and any compensation cost determined using this method is recognized in earnings over the employee vesting period. Employee stock option plans that were granted or modified after December 31, 2007 are accounted for using fair value method in accordance with Statement of Financial Accounting Standards No. 39, “Accounting for Share-based Payment.” The Company did not grant or modify any employee stock options since January 1, 2008.
 
    Profit Sharing to Employees and Bonus to Directors and Supervisors
 
    Effective January 1, 2008, the Company adopted Interpretation 2007-052, “Accounting for Bonuses to Employees, Directors and Supervisors,” which requires companies to record profit sharing to employees and bonus to directors and supervisors as an expense rather than as an appropriation of earnings.
 
    Foreign-currency Transactions
 
    Foreign-currency transactions other than derivative contracts are recorded in New Taiwan dollars at the rates of exchange in effect when the transactions occur. Exchange gains or losses derived from foreign-currency transactions or monetary assets and liabilities denominated in foreign currencies are recognized in earnings.
 
    At the balance sheet date, monetary assets and liabilities denominated in foreign currencies are revalued at prevailing exchange rates with the resulting gains or losses recognized in earnings.
 
    Translation of Foreign-currency Financial Statements
 
    The financial statements of foreign subsidiaries are translated into New Taiwan dollars at the following exchange rates: Assets and liabilities — spot rates at period-end; shareholders’ equity — historical rates; income and expenses — average rates during the period. The resulting translation adjustments are recorded as a separate component of shareholders’ equity.
 
3.   ACCOUNTING CHANGES
 
    Effective January 1, 2009, the Company adopted the newly revised Statement of Financial Accounting Standard (SFAS) No. 10, “Accounting for Inventories.” The main revisions are (1) inventories are stated at the lower of cost or net realizable value, and inventories are written down to net realizable value on an item-by-item except when the grouping of similar or related items is appropriate; (2) unallocated overheads are recognized as expenses in the period in which they are incurred; and (3) abnormal cost, write-downs of inventories and any reversal of write-downs are recorded as cost of sales for the period. Such changes in accounting principle did not have significant effect on the Company’s consolidated financial statements as of and for the three months ended March 31, 2009.

- 16 -


 

4.   CASH AND CASH EQUIVALENTS
                 
    March 31  
    2010     2009  
Cash and deposits in banks
  $ 157,826,361     $ 212,439,489  
Repurchase agreements collateralized by government bonds
    1,241,551       10,822,592  
Treasury bills
    540,900        
Corporate bonds
    159,077        
Commercial papers
    31,814        
 
           
 
               
 
  $ 159,799,703     $ 223,262,081  
 
           
5.   FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
                 
    March 31  
    2010     2009  
Trading financial assets
               
 
               
Forward exchange contracts
  $ 3,974     $ 201,446  
Cross currency swap contracts
    79,306       28,057  
Publicly traded stocks
          13,606  
 
           
 
               
 
  $ 83,280     $ 243,109  
 
           
 
               
Trading financial liabilities
               
 
               
Forward exchange contracts
  $ 2,040     $ 455  
Cross currency swap contracts
    9,770       2,756  
 
           
 
               
 
  $ 11,810     $ 3,211  
 
           
    The Company entered into the above derivative contracts during the three months ended March 31, 2010 and 2009 to manage exposures due to the fluctuations of foreign exchange rates. The above derivative contracts entered into by the Company did not meet the criteria for hedge accounting. Therefore, the Company did not apply hedge accounting treatment for the above derivative contracts.
 
    Outstanding forward exchange contracts consisted of the following:
         
        Contract Amount
    Maturity Date   (In Thousands)
March 31, 2010
       
 
       
Sell EUR/Buy NT$
  April 2010   EUR7,500/NT$323,205
Sell EUR/Buy US$
  April 2010   EUR4,500/US$5,998
Sell US$/Buy RMB
  April 2010   US$1,000/RMB6,827
Sell US$/Buy NT$
  April 2010 to May 2010   US$13,750/NT$438,590
 
       
March 31, 2009
       
 
       
Sell US$/Buy NT$
  April 2009   US$200,300/NT$6,989,885
Sell EUR/Buy US$
  April 2009   EUR6,140/US$8,266
Sell RMB/Buy US$
  April 2009 to June 2009   RMB54,800/US$8000
Sell US$/Buy JPY
  April 2009   US$46/JPY4,500

- 17 -


 

    Outstanding cross currency swap contracts consisted of the following:
             
        Range of   Range of
    Contract Amount   Interest Rates   Interest Rates
        Maturity Date   (In Thousands)   Paid   Received
March 31, 2010
           
April 2010 to May 2010
  US$930,000/NT$29,662,580   0.21%-0.45%   0.00%-0.09%
March 31, 2009
           
April 2009 to May 2009
  US$130,000/NT$4,434,625   0.66%-6.79%   0.00%-0.61%
    For the three months ended March 31, 2010 and 2009, changes in fair value related to derivative financial instruments recognized in earnings was a net gain of NT$304,829 thousand and a net loss of NT$444,663 thousand, respectively.
 
6.   AVAILABLE-FOR-SALE FINANCIAL ASSETS
                 
    March 31  
    2010     2009  
Corporate bonds
  $ 13,026,082     $ 1,038,443  
Agency bonds
    7,557,888        
Government bonds
    4,047,337       358,690  
Publicly traded stocks
    478,293       346,850  
Open-end mutual funds
    170,090       560,520  
Money market funds
    86,827       132,929  
Corporate issued notes
    82,529        
Corporate issued asset-backed securities
          145,979  
 
           
 
    25,449,046       2,583,411  
Current portion
    (24,182,017 )     (1,544,968 )
 
           
 
               
 
  $ 1,267,029     $ 1,038,443  
 
           
    For the three months ended March 31, 2009, the Company recognized impairment on available-for-sale financial assets of NT$56,407 thousand.
 
7.   HELD-TO-MATURITY FINANCIAL ASSETS
                 
    March 31  
    2010     2009  
Corporate bonds
  $ 16,683,171     $ 17,529,874  
Government bonds
    1,376,086       878,363  
Structured time deposits
    1,000,000        
 
           
 
    19,059,257       18,408,237  
Current portion
    (7,944,656 )     (4,739,315 )
 
           
 
               
 
  $ 11,114,601     $ 13,668,922  
 
           

- 18 -


 

    Structured time deposits categorized as held-to-maturity financial assets consisted of the following:
                                 
    Principal     Interest     Range of        
    Amount     Receivable     Interest Rates     Maturity Date  
March 31, 2010
                               
Callable domestic deposits
  $ 1,000,000     $ 809       0.36 %   July 2010
 
                           
8.   ALLOWANCES FOR DOUBTFUL RECEIVABLES, SALES RETURNS AND OTHERS
 
    Movements of the allowance for doubtful receivables were as follows:
                 
    Three Months Ended March 31  
    2010     2009  
Balance, beginning of period
  $ 543,325     $ 455,751  
Provision
    4,583       59,306  
Write-off
          (237,770 )
 
           
 
               
Balance, end of period
  $ 547,908     $ 277,287  
 
           
    Movements of the allowance for sales returns and others were as follows:
                 
    Three Months Ended March 31  
    2010     2009  
Balance, beginning of period
  $ 8,724,481     $ 6,071,026  
Provision
    2,833,620       1,671,123  
Write-off
    (4,392,438 )     (1,233,540 )
 
           
 
               
Balance, end of period
  $ 7,165,663     $ 6,508,609  
 
           
9.   INVENTORIES
                 
    March 31  
    2010     2009  
Finished goods
  $ 2,278,534     $ 2,548,051  
Work in process
    17,265,051       10,365,616  
Raw materials
    1,708,680       679,349  
Supplies and spare parts
    1,441,968       1,182,151  
 
           
 
               
 
  $ 22,694,233     $ 14,775,167  
 
           
    Write-downs of inventories to net realizable value in the amount of NT$201,653 thousand and NT$249,339 thousand, respectively, were included in the cost of sales for the three months ended March 31, 2010 and 2009. And inventories losses related to earthquake in the amount of NT$194,137 thousand were classified under non-operating expenses and losses for the three months ended March 31, 2010.

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10.   INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD
                                 
    March 31  
    2010     2009  
    Carrying     % of     Carrying     % of  
    Amount     Ownership     Amount     Ownership  
Common stock
                               
Vanguard International Semiconductor Corporation (VIS)
  $ 9,359,350       37     $ 9,491,037       37  
Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)
    6,308,810       39       5,720,868       39  
Motech Industries Inc. (Motech)
    6,210,916       20              
VisEra Holding Company (VisEra Holding)
    2,305,135       49       2,207,895       49  
Mcube Inc. (Mcube)
    16,817       70              
Aiconn Technology Corporation (Aiconn)
    15,508       42       31,382       41  
Preferred stock
                               
Mcube
    30,199       10              
 
                           
 
                               
 
  $ 24,246,735             $ 17,451,182          
 
                           
    In February 2010, the Company subscribed 75,316 thousand shares in Motech through a private placement for NT$6,228,661 thousand; after the subscription, the Company’s percentage of ownership in Motech was 20%. Transfer of the aforementioned common shares within three years is prohibited according to the related regulations.
 
    In September 2009, the Company acquired common stock and preferred stock of Mcube for NT$57,960 thousand. The Company took both ownership of stock and controlling power into consideration and concluded that the Company did not have controlling interest over Mcube. Accordingly, the Company applied equity method to account for this investment and the related equity in earnings/losses.
 
    For the three months ended March 31, 2010 and 2009, equity in earnings/losses of equity method investees was a net gain of NT$177,080 thousand and a net loss of NT$812,511 thousand, respectively. Related equity in earnings/losses of equity method investees were determined based on the reviewed financial statements, except for Aiconn and Mcube. The Company believes that, had Aiconn and Mcube’s financial statements been reviewed, any adjustments arising would have had no material effect on the Company’s consolidated financial statements.
 
    Fair values of equity-method investments traded over-the-counter which were calculated at their closing prices as of March 31, 2010 and 2009 were as follows:
                 
    March 31  
    2010     2009  
VIS
  $ 10,240,043     $ 7,350,215  
Motech
    10,167,705        
 
           
 
               
 
  $ 20,407,748     $ 7,350,215  
 
           

- 20 -


 

    Movements of the difference between the cost of investment and the Company’s share in investees’ net assets allocated to depreciable assets were as follows:
                 
    Three Months Ended March 31  
    2010     2009  
Balance, beginning of period
  $ 1,391,500     $ 1,990,621  
Additions
    2,055,660        
Deductions
    (212,358 )     (149,780 )
 
           
 
               
Balance, end of period
  $ 3,234,802     $ 1,840,841  
 
           
    Movements of the difference allocated to goodwill were as follows:
                 
    Three Months Ended March 31  
    2010     2009  
Balance, beginning of period
  $ 1,061,885     $ 1,061,885  
Additions
    353,680        
 
           
 
               
Balance, end of period
  $ 1,415,565     $ 1,061,885  
 
           
11.   HEDGING DERIVATIVE FINANCIAL INSTRUMENTS
                 
    March 31  
    2010     2009  
Hedging derivative financial liabilities
               
Interest rate swap contract
  $ 238     $  
 
           
    The Company’s long-term bank loans bear floating interest rates; therefore, changes in the market interest rate may cause future cash flows to be volatile. Accordingly, the Company entered into an interest rate swap contract in order to hedge cash flow risk caused by floating interest rates. As of March 31, 2010, the outstanding interest rate swap contract consisted of the following:
             
        Range of   Range of
Contract Amount       Interest Rates   Interest Rates
(In Thousands)   Maturity Date   Paid   Received
NT$140,000
  August 31, 2012   1.38%   0.55%-0.57%
    The Company recognized NT$238 thousand as an adjustment in shareholders equity for the above interest rate swap contract for the three months ended March 31, 2010.
 
12.   FINANCIAL ASSETS CARRIED AT COST
                 
    March 31  
    2010     2009  
Non-publicly traded stocks
  $ 2,975,288     $ 3,361,348  
Mutual funds
    159,251       161,993  
 
           
 
               
 
  $ 3,134,539     $ 3,523,341  
 
           

- 21 -


 

    In August 2009, the common stock of Leadtrend Technology Corporation (“Leadtrend”) was listed on the Taiwan Stock Exchange. Thus, the Company reclassified its investment in Leadtrend from financial assets carried at cost to available-for-sale financial assets-noncurrent.
 
    For the three months ended March 31, 2010 and 2009, the Company recognized impairment on financial assets carried at cost of NT$8,709 thousand and NT$274,877 thousand, respectively.
 
13.   PROPERTY, PLANT AND EQUIPMENT
                                                 
    Three Months Ended March 31, 2010  
    Balance,                             Effect of        
    Beginning of                             Exchange Rate     Balance,  
    Period     Additions     Disposals     Reclassification     Changes     End of Period  
Cost
                                               
Land and land improvements
  $ 934,090     $     $     $     $ (5,485 )   $ 928,605  
Buildings
    142,294,558       1,351,012             4,422       (114,188 )     143,535,804  
Machinery and equipment
    775,653,489       43,807,043       (352,530 )     40,643       (370,038 )     818,778,607  
Office equipment
    13,667,747       560,945       (22,804 )     52,685       (14,850 )     14,243,723  
Leased asset
    714,424                         (4,719 )     709,705  
 
                                   
 
    933,264,308     $ 45,719,000     $ (375,334 )   $ 97,750     $ (509,280 )     978,196,444  
 
                                   
Accumulated depreciation
                                               
Land and land improvements
    317,580     $ 7,283     $     $     $ (2,123 )     322,740  
Buildings
    81,821,718       2,366,466                   (55,562 )     84,132,622  
Machinery and equipment
    600,795,474       17,787,671       (352,334 )     443       (394,503 )     617,836,751  
Office equipment
    10,589,349       280,027       (22,782 )     (443 )     (12,862 )     10,833,289  
Leased asset
    219,765       8,811                   (1,487 )     227,089  
 
                                   
 
    693,743,886     $ 20,450,258     $ (375,116 )   $     $ (466,537 )     713,352,491  
 
                                   
Advance payments and construction in progress
    34,154,365     $ 730,760     $     $ (97,750 )   $ (2,109 )     34,785,266  
 
                                   
 
                                               
 
  $ 273,674,787                                     $ 299,629,219  
 
                                           
                                                 
    Three Months Ended March 31, 2009  
    Balance,                             Effect of        
    Beginning of     Additions                     Exchange Rate     Balance,  
    Period     (Deductions)     Disposals     Reclassification     Changes     End of Period  
Cost
                                               
Land and land improvements
  $ 953,857     $     $     $     $ 27,417     $ 981,274  
Buildings
    132,249,996       875,051             (19,976 )     544,207       133,649,278  
Machinery and equipment
    697,498,743       3,359,954       (439,515 )     (57,435 )     1,863,130       702,224,877  
Office equipment
    12,430,800       224,966       (103,488 )     33,634       56,254       12,642,166  
Leased asset
    722,339                         21,735       744,074  
 
                                   
 
    843,855,735     $ 4,459,971     $ (543,003 )   $ (43,777 )   $ 2,512,743       850,241,669  
 
                                   
Accumulated depreciation
                                               
Land and land improvements
    295,898     $ 7,703     $     $     $ 9,517     $ 313,118  
Buildings
    72,681,699       2,348,227             (5,846 )     227,548       75,251,628  
Machinery and equipment
    535,962,291       17,275,751       (436,524 )     (14,348 )     1,621,920       554,409,090  
Office equipment
    9,693,809       310,301       (103,453 )     7,049       42,006       9,949,712  
Leased asset
    182,570       9,271                   5,489       197,330  
 
                                   
 
    618,816,267     $ 19,951,253     $ (539,977 )   $ (13,145 )   $ 1,906,480       640,120,878  
 
                                   
Advance payments and construction in progress
    18,605,882     $ (1,696,906 )   $     $ 34,719     $ 13,906       16,957,601  
 
                                   
 
                                               
 
  $ 243,645,350                                     $ 227,078,392  
 
                                           
    The Company entered into agreements to lease buildings that qualify as capital leases. The terms of the leases ranged from December 2003 to December 2013. The future minimum lease payments as of March 31, 2010 were NT$781,893 thousand.
 
14.   DEFERRED CHARGES, NET
                                                 
    Three Months Ended March 31, 2010  
    Balance,                             Effect of        
    Beginning of                             Exchange Rate     Balance, End  
    Period     Additions     Amortization     Reclassification     Changes     of Period  
Technology license fee
  $ 3,230,624     $     $ (214,183 )   $     $ 910     $ 3,017,351  
Software and system design costs
    1,834,528       377,852       (240,858 )           (28 )     1,971,494  
Patent and others
    1,393,402       5,182       (95,936 )           (676 )     1,301,972  
 
                                   
 
                                               
 
  $ 6,458,554     $ 383,034     $ (550,977 )   $     $ 206     $ 6,290,817  
 
                                   

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    Three Months Ended March 31, 2009  
    Balance,                             Effect of        
    Beginning of                             Exchange Rate     Balance, End  
    Period     Additions     Amortization     Reclassification     Changes     of Period  
Technology license fee
  $ 4,125,212     $ 726     $ (238,875 )   $     $ (34 )   $ 3,887,029  
Software and system design costs
    1,801,831       50,475       (217,431 )     (4,424 )     391       1,630,842  
Patent and others
    1,198,785       1,142       (74,470 )           3,247       1,128,704  
 
                                   
 
                                               
 
  $ 7,125,828     $ 52,343     $ (530,776 )   $ (4,424 )   $ 3,604     $ 6,646,575  
 
                                   
15.   SHORT-TERM LOANS
                 
    March 31  
    2010     2009  
Unsecured loans
               
Repayable in April 2010, annual interest at 1.07%
  $ 318,242     $  
 
           
16.   BONDS PAYABLE
                 
    March 31  
    2010     2009  
Domestic unsecured bonds:
               
Issued in January 2002 and repayable in January 2012, 3.00% interest payable annually
  $ 4,500,000     $ 4,500,000  
 
           
17.   LONG-TERM BANK LOANS
                 
    March 31  
    2010     2009  
Secured loans:
               
Repayable from August 2009 in 17 quarterly installments, annual interest at 0.66%-1.11% in 2010 and 0.92%-2.70% in 2009
  $ 727,157     $ 1,021,751  
US$20,000 thousand, repayable in full in one lump sum payment in November 2010, annual interest at 0.83% in 2010 and 0.97% in 2009
    636,485       678,668  
Repayable from December 2007 in 8 semi-annual installments, annual interest at 1.10% in 2010 and 1.17%-2.42% in 2009
    98,875       168,750  
Repayable from May 2007 in 16 quarterly installments, fully repaid in June 2009, annual interest at 1.42%-2.20%
          33,625  
Repayable from March 2007 in 12 quarterly installments, fully repaid in June 2009, annual interest at 1.30%-2.53%
          16,854  
 
           
 
    1,462,517       1,919,648  
Current portion
    (944,736 )     (286,582 )
 
           
 
               
 
  $ 517,781     $ 1,633,066  
 
           
    Pursuant to the loan agreements, financial ratios calculated based on annual audited financial statements of TSMC China as well as semi-annual and annual financial statements of Xintec must comply with predetermined financial covenants.

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    As of March 31, 2010, future principal repayments for the long-term bank loans were as follows:
         
Year of Repayment   Amount  
2010 (2nd to 4th quarter)
  $ 884,298  
2011
    275,351  
2012
    242,452  
2013
    60,416  
 
     
 
       
 
  $ 1,462,517  
 
     
18.   OTHER LONG-TERM PAYABLES
                 
    March 31  
    2010     2009  
Payables for acquisition of property, plant and equipment (Note 29g)
  $ 7,192,395     $ 8,837,883  
Payables for royalties
    1,210,606       2,097,617  
 
           
 
    8,403,001       10,935,500  
Current portion (classified under accrued expenses and other current liabilities)
    (2,837,536 )     (1,184,679 )
 
           
 
               
 
  $ 5,565,465     $ 9,750,821  
 
           
    The payables for royalties were primarily attributable to several license arrangements that the Company entered into for certain semiconductor-related patents.
    As of March 31, 2010, future payments for other long-term payables were as follows:
         
Year of Payment   Amount  
2010 (2nd to 4th quarter)
  $ 2,837,536  
2011
    3,054,834  
2012
    2,510,631  
 
     
 
       
 
  $ 8,403,001  
 
     
19.   PENSION PLANS
    The pension mechanism under the Labor Pension Act is deemed a defined contribution plan. Pursuant to the Act, TSMC, GUC, Xintec and Mutual-Pak have made monthly contributions equal to 6% of each employee’s monthly salary to employees’ pension accounts. Furthermore, TSMC North America, TSMC China, TSMC Europe and TSMC Canada are required by local regulations to make monthly contributions at certain percentage of the basic salary of their employees. Pursuant to the aforementioned Act and local regulations, the Company recognized pension costs of NT$228,158 thousand and NT$187,975 thousand for the three months ended March 31, 2010 and 2009, respectively.
    TSMC, GUC and Xintec have defined benefit plans under the Labor Standards Law that provide benefits based on an employee’s service years and average monthly salary for the six-month period prior to retirement. The aforementioned companies contribute an amount equal to 2% of salaries paid each month to their respective pension funds (the Funds), which are administered by the Labor Pension Fund Supervisory Committee (the Committee) and deposited in the name of the committees in the Bank of Taiwan. The Company recognized pension costs of NT$59,683 thousand and NT$72,409 thousand for the three months ended March 31, 2010 and 2009, respectively.

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    Movements in the Funds and accrued pension cost under the defined benefit plans were summarized as follows:
                 
    Three Months Ended March 31  
    2010     2009  
The Funds
               
Balance, beginning of period
  $ 2,644,988     $ 2,434,876  
Contributions
    69,292       61,413  
Interest
    41,105       53,066  
Payments
          (19,355 )
 
           
 
               
Balance, end of period
  $ 2,755,385     $ 2,530,000  
 
           
 
               
Accrued pension cost
               
Balance, beginning of period
  $ 3,797,032     $ 3,701,584  
Accruals
    287       16,375  
 
           
 
               
Balance, end of period
  $ 3,797,319     $ 3,717,959  
 
           
20.   INCOME TAX
  a.   A reconciliation of income tax expense based on “income before income tax” at statutory rates and income tax currently payable was as follows:
                 
    Three Months Ended March 31  
    2010     2009  
Income tax expense based on “income before income tax” at statutory rates
  $ 7,338,355     $ 105,374  
The effect of the following:
               
Tax-exempt income
    (3,999,921 )     (595,378 )
Temporary and permanent differences
    (93,665 )     1,351,613  
Others
          88,417  
Net operating loss carryforwards used
    (81,389 )     163,636  
Income tax credits used
    (1,604,378 )     (471,154 )
 
           
 
Income tax currently payable
  $ 1,559,002     $ 642,508  
 
           
  b.   Income tax expense (benefit) consisted of the following:
                 
Income tax currently payable
  $ 1,559,002     $ 642,508  
Income tax adjustments on prior years
    647,144        
Other income tax adjustments
    (9,164 )     4,980  
Net change in deferred income tax assets
               
Investment tax credits
    (1,039,371 )     (422,525 )
Net operating loss carryforwards
    84,051       (228,893 )
Temporary differences
    (562,476 )     109,041  
Valuation allowance
    798,275       (844,339 )
 
           
 
               
Income tax expense (benefit)
  $ 1,477,461     $ (739,228 )
 
           

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  c.   Net deferred income tax assets consisted of the following:
                 
    March 31  
    2010     2009  
Current deferred income tax assets
               
Investment tax credits
  $ 5,265,061     $ 5,236,275  
Temporary differences
               
Allowance for sales returns and others
    739,785       622,641  
Others
    446,489       613,422  
Valuation allowance
    (145,733 )     (204,445 )
 
           
 
               
 
  $ 6,305,602     $ 6,267,893  
 
           
 
               
Noncurrent deferred income tax assets
               
Investment tax credits
  $ 11,263,026     $ 9,383,864  
Net operating loss carryforwards
    3,331,918       3,932,945  
Temporary differences
               
Depreciation
    2,521,058       1,449,904  
Others
    530,685       736,048  
Valuation allowance
    (10,875,988 )     (9,770,610 )
 
           
 
               
 
  $ 6,770,699     $ 5,732,151  
 
           
      In May 2009, the amendment of Article 5 of the Income Tax Law of the Republic of China announced that the income tax rate of profit-seeking enterprises would be reduced from 25% to 20%, and would be effective starting in 2010. TSMC and its domestic subsidiaries which are subject to the Income Tax Law of the Republic of China had recalculated their deferred tax assets in accordance with the amended Article and adjusted the resulting difference as an income tax expense in 2009.
 
      Under Article 10 of the Statute for Industrial Innovation (SII) passed by the Legislative Yuan on April 16, 2010, a profit-seeking enterprise may deduct up to 15% of its research and development expenditures from its income tax payable for the fiscal year in which these expenditures are incurred, but this deduction should not exceed 30% of the income tax payable for that fiscal year. This incentive is retroactive to January 1, 2010 and effective till December 31, 2019. Thus, TSMC and its domestic subsidiaries which are subject to the tax law of the Republic of China estimated that its income tax credits arising from the SII was NT$507,098 thousand as of March 31, 2010, which will be recognized in the six months ended June 30, 2010.
 
      As of March 31, 2010, the net operating loss carryforwards were generated by WaferTech, TSMC Development and Mutual-Pak and would expire on various dates through 2026.
  d.   Integrated income tax information:
 
      The balance of the imputation credit account (ICA) of TSMC as of March 31, 2010 and 2009 was NT$369,265 thousand and NT$521,634 thousand, respectively.
 
      The estimated and actual creditable ratios for distribution of TSMC’s earnings of 2009 and 2008 were 0.35% and 9.10%, respectively.
 
      The imputation credit allocated to the shareholders is based on its balance as of the date of dividend distribution. The estimated creditable ratio may change when the actual distribution of the imputation credit is made.
  e.   All of TSMC’s earnings generated prior to December 31, 1997 have been appropriated.

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  f.   As of March 31, 2010, investment tax credits of TSMC, GUC, Xintec and Mutual-Pak consisted of the following:
                                 
            Total     Remaining        
            Creditable     Creditable     Expiry  
                  Law/Statute   Item     Amount     Amount     Year  
Statute for Upgrading Industries
  Purchase of machinery and equipment   $ 110,489     $ 110,489       2010  
 
            66,368       66,368       2011  
 
            3,464,868       2,986,504       2012  
 
            6,693,346       6,693,346       2013  
 
            153,481       153,481       2014  
 
                           
 
                               
 
          $ 10,488,552     $ 10,010,188          
 
                           
 
                               
Statute for Upgrading Industries
  Research and development expenditures   $ 9,352     $ 1,051       2010  
 
            1,202,750       104,938       2011  
 
            2,968,209       2,968,209       2012  
 
            3,409,744       3,409,744       2013  
 
                           
 
                               
 
          $ 7,590,055     $ 6,483,942          
 
                           
 
                               
Statute for Upgrading Industries
  Personnel training expenditures   $ 759     $ 151       2010  
 
            20,081       788       2011  
 
            32,534       32,534       2012  
 
            484       484       2013  
 
                           
 
                               
 
          $ 53,858     $ 33,957          
 
                           
  g.   The profits generated from the following projects of TSMC, GUC and Xintec are exempt from income tax for a five-year period:
         
    Tax-Exemption Period
Construction of Fab 14 - Module A
    2006 to 2010  
Construction of Fab 12 - Module B and expansion of Fab 14 - Module A
    2007 to 2011  
Construction of Fab 14 - Module B and expansion of Fab 12 and others
    2008 to 2012  
Construction of Fab 14 - Module B and expansion of Fab 12 and others
    2010 to 2014 (proposed)
Construction and expansion of 2003 by GUC
    2007 to 2011  
Construction and expansion of 2005 and 2006 by GUC
    To be determined  
Construction and expansion of 2003 by Xintec
    2007 to 2011  
Construction and expansion of 2002, 2003 and 2006 by Xintec
    2010 to 2014  
  h.   The tax authorities have examined income tax returns of TSMC through 2007. All investment tax credit adjustments assessed by the tax authorities have been recognized accordingly.

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21.   LABOR COST, DEPRECIATION AND AMORTIZATION
                         
    Three Months Ended March 31, 2010  
            Classified as        
    Classified as     Operating        
    Cost of Sales     Expenses     Total  
Labor cost
                       
Salary and bonus
  $ 5,731,160     $ 4,706,686     $ 10,437,846  
Labor and health insurance
    199,239       166,519       365,758  
Pension
    169,499       118,342       287,841  
Meal
    131,445       56,286       187,731  
Welfare
    150,950       62,137       213,087  
Others
    23,797       72,265       96,062  
 
                 
 
                       
 
  $ 6,406,090     $ 5,182,235     $ 11,588,325  
 
                 
 
                       
Depreciation
  $ 19,218,310     $ 1,225,382     $ 20,443,692  
 
                 
Amortization
  $ 334,090     $ 216,887     $ 550,977  
 
                 
                         
    Three Months Ended March 31, 2009  
            Classified as        
    Classified as     Operating        
    Cost of Sales     Expenses     Total  
Labor cost
                       
Salary and bonus
  $ 2,604,282     $ 2,119,946     $ 4,724,228  
Labor and health insurance
    195,585       129,338       324,923  
Pension
    153,618       106,766       260,384  
Meal
    99,958       39,796       139,754  
Welfare
    115,174       46,532       161,706  
Others
    22,075       43,334       65,409  
 
                 
 
                       
 
  $ 3,190,692     $ 2,485,712     $ 5,676,404  
 
                 
 
                       
Depreciation
  $ 18,968,736     $ 978,451     $ 19,947,187  
 
                 
Amortization
  $ 316,495     $ 214,281     $ 530,776  
 
                 
22.   SHAREHOLDERS’ EQUITY
    As of March 31, 2010, 1,097,513 thousand ADSs of TSMC were traded on the NYSE. The number of common shares represented by the ADSs was 5,487,565 thousand (one ADS represents five common shares).
    Capital surplus can only be used to offset a deficit under the Company Law. However, the capital surplus generated from donations and the excess of the issuance price over the par value of capital stock (including the stock issued for new capital, mergers, convertible bonds and the surplus from treasury stock transactions) may be appropriated as stock dividends, which are limited to a certain percentage of TSMC’s paid-in capital. Also, the capital surplus from long-term investments may not be used for any purpose.

- 28 -


 

    Capital surplus consisted of the following:
                 
    March 31  
    2010     2009  
Additional paid-in capital
  $ 23,483,970     $ 17,972,138  
From merger
    22,805,390       22,805,390  
From convertible bonds
    8,893,190       8,893,190  
From long-term investments
    348,240       294,677  
Donations
    55       55  
 
           
 
               
 
  $ 55,530,845     $ 49,965,450  
 
           
    TSMC’s Articles of Incorporation provide that, when allocating the net profits for each fiscal year, TSMC shall first offset its losses in previous years and then set aside the following items accordingly:
  a.   Legal capital reserve at 10% of the profits left over, until the accumulated legal capital reserve equals TSMC’s paid-in capital;
  b.   Special capital reserve in accordance with relevant laws or regulations or as requested by the authorities in charge;
  c.   Bonus to directors and profit sharing to employees of TSMC of not more than 0.3% and not less than 1% of the remainder, respectively. Directors who also serve as executive officers of TSMC are not entitled to receive the bonus to directors. TSMC may issue profit sharing to employees in stock of an affiliated company meeting the conditions set by the Board of Directors or, by the person duly authorized by the Board of Directors;
  d.   Any balance left over shall be allocated according to the resolution of the shareholders’ meeting.
    TSMC’s Articles of Incorporation also provide that profits of TSMC may be distributed by way of cash dividend and/or stock dividend. However, distribution of profits shall be made preferably by way of cash dividend. Distribution of profits may also be made by way of stock dividend; provided that the ratio for stock dividend shall not exceed 50% of the total distribution.
    Any appropriations of the profits are subject to shareholders’ approval in the following year.
    TSMC accrued profit sharing to employees as a charge to earnings of certain percentage of net income during the period amounted to NT$2,272,790 thousand and NT$236,060 thousand for the three months ended March 31, 2010 and 2009, respectively; bonuses to directors were accrued with an estimate based on historical experience. If the actual amounts subsequently resolved by the shareholders differ from the estimated amounts, the differences are recorded in the year of shareholders’ resolution as a change in accounting estimate. If profit sharing is resolved to be distributed to employees in stock, the number of shares is determined by dividing the amount of profit sharing by the closing price (after considering the effect of dividends) of the shares on the day preceding the shareholders’ meeting.
    TSMC no longer has supervisors since January 1, 2007. The required duties of supervisors are being fulfilled by the Audit Committee.
    The appropriation for legal capital reserve shall be made until the reserve equals TSMC’s paid-in capital. The reserve may be used to offset a deficit, or be distributed as dividends and bonuses for the portion in excess of 50% of the paid-in capital if TSMC has no unappropriated earnings and the reserve balance has exceeded 50% of TSMC’s paid-in capital. The Company Law also prescribes that, when the reserve has reached 50% of TSMC’s paid-in capital, up to 50% of the reserve may be transferred to capital.

- 29 -


 

    A special capital reserve equivalent to the net debit balance of the other components of shareholders’ equity (for example, cumulative translation adjustments and unrealized loss on financial instruments, but excluding treasury stock) shall be made from unappropriated earnings pursuant to existing regulations promulgated by the Securities and Futures Bureau (SFB). Any special reserve appropriated may be reversed to the extent that the net debit balance reverses.
    The appropriations of earnings for 2009 and 2008 had been approved in TSMC’s Board of Directors’ meeting held on February 9, 2010 and a shareholders’ meeting held on June 10, 2009, respectively. The appropriations and dividends per share were as follows:
                                 
                    Dividends Per Share  
    Appropriation of Earnings     (NT$)  
    For Fiscal     For Fiscal     For Fiscal     For Fiscal  
    Year 2009     Year 2008     Year 2009     Year 2008  
Legal capital reserve
  $ 8,921,784     $ 9,993,317                  
Special capital reserve
    1,313,047       (391,857 )                
Cash dividends to shareholders
    77,708,120       76,876,312     $ 3.00     $ 3.00  
Stock dividends to shareholders
          512,509             0.02  
 
                           
 
                               
 
  $ 87,942,951     $ 86,990,281                  
 
                           
    TSMC’s profit sharing to employees and bonus to directors that will be paid in cash in the amounts of NT$6,691,338 thousand and NT$67,692 thousand for the year ended December 31, 2009, respectively, were resolved in the meeting of the Board of Directors held on February 9, 2010. Such amounts were not materially different from the amounts that have been charged against earnings for the year ended December 31, 2009.
    The 2009 earnings appropriations related to profit sharing to employees and bonus to directors will be resolved by the shareholders. TSMC’s annual shareholders’ meeting is scheduled for June 15, 2010.
    Profit sharing to employees that have been paid in cash and in stock as well as bonus to directors in the amounts of NT$7,494,988 thousand, NT$7,494,988 thousand and NT$158,080 thousand for 2008, respectively, had been approved in the shareholders’ meeting held on June 10, 2009. The profit sharing to employee in stock of 141,870 thousand shares was determined by the closing price of TSMC’s common shares (after considering the effect of dividends) of the day immediately preceding the shareholders’ meeting, which was NT$52.83. The resolved amounts of the profit sharing to employees and bonus to directors were consistent with the resolutions of meeting of the Board of Directors held on February 10, 2009 and same amount had been charged against earnings of 2008.
    The shareholders’ meeting held on June 10, 2009 also resolved to distribute stock dividends out of capital surplus, and stock dividends to shareholders as well as profit sharing to employees to be paid in stock in the amount of NT$768,763 thousand, NT$512,509 thousand and NT$7,494,988 thousand, respectively. The aforementioned capital increase had taken effect on July 21, 2009.
    The information about the appropriations of bonuses to employees, directors and supervisors is available at the Market Observation Post System website.
    Under the Integrated Income Tax System that became effective on January 1, 1998, the R.O.C. resident shareholders are allowed a tax credit for their proportionate share of the income tax paid by TSMC on earnings generated since January 1, 1998.

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23.   STOCK-BASED COMPENSATION PLANS
    TSMC’s Employee Stock Option Plans, consisting of under the TSMC 2004 Plan, TSMC 2003 Plan and TSMC 2002 Plan were approved by the SFB on January 6, 2005, October 29, 2003 and June 25, 2002, respectively. The maximum number of options authorized to be granted under the TSMC 2004 Plan, TSMC 2003 Plan and TSMC 2002 Plan was 11,000 thousand, 120,000 thousand and 100,000 thousand, respectively, with each option eligible to subscribe for one common share of TSMC when exercisable. The options may be granted to qualified employees of TSMC or any of its domestic or foreign subsidiaries, in which TSMC’s shareholding with voting rights, directly or indirectly, is more than fifty percent (50%). The options of all the plans are valid for ten years and exercisable at certain percentages subsequent to the second anniversary of the grant date. Under the terms of the plans, the options are granted at an exercise price equal to the closing price of TSMC’s common shares listed on the TSE on the grant date.
    Options of the plans that had never been granted or had been granted but subsequently canceled had expired as of March 31, 2010.
    Information about TSMC’s outstanding stock options for the three months ended March 31, 2010 and 2009 was as follows:
                 
            Weighted-
    Number of   average
    Options   Exercise
    (In Thousands)   Price (NT$)
Three months ended March 31, 2010
               
 
               
Balance, beginning of period
    28,810     $ 33.5  
Options exercised
    (1,063 )     34.6  
 
               
 
               
Balance, end of period
    27,747       33.4  
 
               
 
               
Three months ended March 31, 2009
               
 
               
Balance, beginning of period
    36,234       35.3  
Options exercised
    (575 )     26.8  
Options canceled
    (127 )     45.4  
 
               
 
               
Balance, end of period
    35,532       35.4  
 
               
    The numbers of outstanding options and exercise prices have been adjusted to reflect the distribution of earnings by TSMC in accordance with the plans.
    As of March 31, 2010, information about TSMC’s outstanding options was as follows:
                                 
            Options Outstanding
                    Weighted-average    
                    Remaining   Weighted-average
Range of Exercise       Number of Options   Contractual Life   Exercise Price
Price (NT$)           (In Thousands)   (Years)   (NT$)
$ 22.8-$32.0    
 
    20,484       2.93     $ 29.1  
  38.0- 50.1    
 
    7,263       4.65       45.6  
       
 
                       
       
 
    27,747       3.38       33.4  
       
 
                       
    As of March 31, 2010, all of the above outstanding options were exercisable.

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    GUC’s Employee Stock Option Plans, consisting of the GUC 2003 Plan and GUC 2002 Plan, were approved by its Board of Directors on January 23, 2003 and July 1, 2002, respectively. The maximum number of options authorized to be granted under the GUC 2003 Plan and GUC 2002 Plan was 7,535 and 5,000, respectively, with each option eligible to subscribe for one thousand common shares of GUC when exercisable. The options may be granted to qualified employees of GUC. The options of all the plans are valid for six years and exercisable at certain percentages subsequent to the second anniversary of the grant date.
    Moreover, the GUC 2007 Plan, GUC 2006 Plan, and GUC 2004 Plan were approved by the SFB on November 28, 2007, July 3, 2006, and August 16, 2004 to grant a maximum of 1,999 options, 3,665 options and 2,500 options, respectively, with each option eligible to subscribe for one thousand common shares of GUC when exercisable. The options may be granted to qualified employees of GUC or any of its subsidiaries. Except for the options of the GUC 2006 Plan which are valid until August 15, 2011, the options of the other two GUC option Plans are valid for six years. Options of all three Plans are exercisable at certain percentages subsequent to the second anniversary of the grant date.
    Information about GUC’s outstanding options for the three months ended March 31, 2010 and 2009 was as follows:
                 
            Weighted-
            average
    Number of   Exercise
    Options   Price (NT$)
Three months ended March 31, 2010
               
 
               
Balance, beginning of period
    3,810     $ 83.5  
Options exercised
    (170 )     10.1  
Options canceled
    (140 )     90.7  
 
               
 
               
Balance, end of period
    3,500       86.7  
 
               
 
               
Three months ended March 31, 2009
               
 
               
Balance, beginning of period
    5,557       66.6  
Options exercised
    (630 )     12.0  
Options canceled
    (240 )     33.3  
 
               
 
               
Balance, end of period
    4,687       75.6  
 
               
    The numbers of outstanding options and exercise prices have been adjusted to reflect the appropriation of earnings by GUC in accordance with the plans.
    As of March 31, 2010, information about GUC’s outstanding and exercisable options was as follows:
                                                 
            Options Outstanding   Options Exercisable
                    Weighted-   Weighted-           Weighted-
                    average   average           average
Range of               Remaining   Exercise           Exercise
Exercise       Number of   Contractual   Price   Number of   Price
Price (NT$)       Options   Life (Years)   (NT$)   Options   (NT$)
$ 8.4    
 
    244       0.75     $ 8.4       244     $ 8.4  
  15.5    
 
    1,682       1.42       15.5       82       15.5  
  175.0    
 
    1,574       3.75       175.0       728       175.0  
       
 
                                       
       
 
                                       
       
 
    3,500       2.42       86.7       1,054       124.0  
       
 
                                       

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    Xintec’s Employee Stock Option Plans, consisting of the Xintec 2007 Plan and Xintec 2006 Plan, were approved by the SFB on June 26, 2007 and July 3, 2006, respectively. The maximum number of options authorized to be granted under the Xintec 2007 Plan and Xintec 2006 Plan was 6,000 thousand each, with each option eligible to subscribe for one common share of Xintec when exercisable. The options may be granted to qualified employees of Xintec or any of its subsidiaries. The options of all the plans are valid for ten years and exercisable at certain percentages subsequent to the second anniversary of the grant date.
    Information about Xintec’s outstanding options for the three months ended March 31, 2010 and 2009 was as follows:
                 
            Weighted-
    Number of   average
    Options   Exercise
    (In Thousands)   Price (NT$)
Three months ended March 31, 2010
               
 
               
Balance, beginning of period
    3,960     $ 14.7  
Options exercised
    (746 )     14.2  
Options canceled
    (170 )     17.1  
 
               
 
               
Balance, end of period
    3,044       14.7  
 
               
 
               
Three months ended March 31, 2009
               
 
               
Balance, beginning of period
    7,442       14.8  
Options exercised
    (653 )     12.8  
Options canceled
    (404 )     15.4  
 
               
 
               
Balance, end of period
    6,385       15.0  
 
               
    The exercise prices have been adjusted to reflect the appropriation of earnings by Xintec in accordance with the plans.
    As of March 31, 2009, information about Xintec’s outstanding and exercisable options was as follows:
                                                 
            Options Outstanding   Options Exercisable
                    Weighted-   Weighted-           Weighted-
                    average   average           average
Range of       Number of   Remaining   Exercise   Number of   Exercise
Exercise       Options (In   Contractual   Price   Options (In   Price
Price (NT$)       Thousands)   Life (Years)   (NT$)   Thousands)   (NT$)
$ 12.2-$14.1    
 
    1,523       6.75     $ 12.5       510     $ 12.5  
  15.2-$19.1    
 
    1,521       7.60       17.0       330       17.4  
       
 
                                       
 
       
 
    3,044       7.17       14.7       840       14.4  
       
 
                                       

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    No compensation cost was recognized under the intrinsic value method for the three months ended March 31, 2010 and 2009. Had the Company used the fair value based method to evaluate the options using the Black-Scholes model, the assumptions and pro forma results of the Company for the three months ended March 31, 2010 and 2009 would have been as follows:
                     
        Three Months Ended March 31
        2010   2009
Assumptions:
                   
TSMC
  Expected dividend yield     1.00%-3.44 %     1.00%-3.44 %
 
  Expected volatility     43.77%-46.15 %     43.77%-46.15 %
 
  Risk free interest rate     3.07%-3.85 %     3.07%-3.85 %
 
  Expected life   5 years   5 years
 
                   
GUC
  Expected dividend yield     0.00%-0.60 %     0.00%-0.60 %
 
  Expected volatility     22.65%-45.47 %     22.65%-45.47 %
 
  Risk free interest rate     2.12%-2.56 %     2.12%-2.56 %
 
  Expected life   3-6 years   3-6 years
 
                   
Xintec
  Expected dividend yield     0.80 %     0.80 %
 
  Expected volatility     31.79%-47.42 %     31.79%-47.42 %
 
  Risk free interest rate     1.88%-2.45 %     1.88%-2.45 %
 
  Expected life   3 years   3 years
 
                   
                         
Net income attributable to shareholders of the parent:
                       
As reported
          $ 33,663,117     $ 1,558,873  
Pro forma
            33,700,273       1,445,013  
 
                       
Earnings per share (EPS) — after income tax (NT$):
                       
Basic EPS as reported
          $ 1.30     $ 0.06  
Pro forma basic EPS
            1.30       0.06  
Diluted EPS as reported
            1.30       0.06  
Pro forma diluted EPS
            1.30       0.06  
24.   EARNINGS PER SHARE
    EPS was computed as follows:
                                         
                    Number of     EPS (NT$)  
    Amounts (Numerator)     Shares     Before     After  
    Before     After     (Denominator)     Income     Income  
    Income Tax     Income Tax     (In Thousands)     Tax     Tax  
Three months ended March 31, 2010
                                       
 
                                       
Basic EPS
                                       
Earnings attributable to common shareholders of the parent
  $ 35,123,918     $ 33,663,117       25,903,465     $ 1.36     $ 1.30  
 
                                   
Effect of dilutive potential common shares
                12,822                  
 
                                 
 
                                       
Diluted EPS
                                       
Earnings attributable to common shareholders of the parent (including effect of dilutive potential common shares)
  $ 35,123,918     $ 33,663,117       25,916,287     $ 1.36     $ 1.30  
 
                             
(Continued)

- 34 -


 

                                         
                    Number of     EPS (NT$)  
    Amounts (Numerator)     Shares     Before     After  
    Before     After     (Denominator)     Income     Income  
    Income Tax     Income Tax     (In Thousands)     Tax     Tax  
Three months ended March 31, 2009
                                       
 
                                       
Basic EPS
                                       
Earnings attributable to common shareholders of the parent
  $ 812,429     $ 1,558,873       25,753,921     $ 0.03     $ 0.06  
 
                                   
Effect of dilutive potential common shares
                165,978                  
 
                                 
 
                                       
Diluted EPS
                                       
Earnings attributable to common shareholders of the parent (including effect of dilutive potential common shares)
  $ 812,429     $ 1,558,873       25,919,899     $ 0.03     $ 0.06  
 
                             
(Concluded)
    Effective January 1, 2008, the Company adopted Interpretation 2007-052 that requires companies to record profit sharing to employees as an expense rather than as an appropriation of earnings. If the Company may settle the obligation by cash, by issuing shares, or in combination of both cash and shares, profit sharing to employees which will be settled in shares should be included in the weighted average number of shares outstanding in calculation of diluted EPS, if the shares have a dilutive effect. The number of shares is estimated by dividing the amount of profit sharing to employees in stock by the closing price (after consideration of the dilutive effect of dividends) of the common shares on the balance sheet date. Such dilutive effect of the potential shares needs to be included in the calculation of diluted EPS until the shares of profit sharing to employees are resolved in the shareholders’ meeting in the following year.
    The average number of shares outstanding for EPS calculation has been retroactively adjusted for the issuance of stock dividends. This adjustment caused each of the basic and diluted after income tax EPS for the three months ended March 31, 2009 to remain at NT$0.06.
25.   DISCLOSURES FOR FINANCIAL INSTRUMENTS
  a.   Fair values of financial instruments were as follows:
                                 
    March 31
    2010   2009
    Carrying           Carrying    
    Amount   Fair Value   Amount   Fair Value
Assets
                               
 
                               
Financial assets at fair value through profit or loss
  $ 83,280     $ 83,280     $ 243,109     $ 243,109  
Available-for-sale financial assets
    25,449,046       25,449,046       2,583,411       2,583,411  
Held-to-maturity financial assets
    19,059,257       19,275,147       18,408,237       18,420,653  
Financial assets carried at cost
    3,134,539             3,523,341        
 
                               
Liabilities
                               
 
                               
Short-term loans
    318,242       318,242              
Financial liabilities at fair value through profit or loss
    11,810       11,810       3,211       3,211  
Hedging derivative financial liabilities
    238       238              
Bonds payable
    4,500,000       4,565,957       4,500,000       4,601,709  
Long-term bank loans (including current portion)
    1,462,517       1,462,517       1,919,648       1,919,648  
Other long-term payables (including current portion)
    8,403,001       8,403,001       10,935,500       10,935,500  
Obligations under capital leases
    702,826       702,826       744,074       744,074  

- 35 -


 

  b.   Methods and assumptions used in the estimation of fair values of financial instruments
  1)   The aforementioned financial instruments do not include cash and cash equivalents, receivables, other financial assets, refundable deposits, payables and guarantee deposits. The carrying amounts of these financial instruments approximate their fair values due to their short maturities.
 
  2)   Except for derivatives and structured time deposits, fair values of financial assets at fair value through profit or loss, available-for-sale and held-to-maturity financial assets were based on their quoted market prices.
 
  3)   The fair values of those derivatives and structured time deposits are determined using valuation techniques incorporating estimates and assumptions that were consistent with prevailing market conditions.
 
  4)   Financial assets carried at cost have no quoted prices in an active market and entail an unreasonably high cost to obtain verifiable fair values. Therefore, no fair value is presented.
 
  5)   Fair value of bonds payable was based on their quoted market price.
 
  6)   Fair values of short-term loans, long-term bank loans, other long-term payables and obligations under capital leases were based on the present value of expected cash flows, which approximates their carrying amount.
  c.   The changes in fair value of derivatives contracts which were outstanding as of March 31, 2010 and 2009 estimated using valuation techniques were recognized as net gains of NT$71,470 thousand and NT$226,292 thousand, respectively.
  d.   As of March 31, 2010 and 2009, financial assets exposed to fair value interest rate risk were NT$44,113,290 thousand and NT$20,874,301 thousand, respectively; financial liabilities exposed to fair value interest rate risk were NT$4,830,052 thousand and NT$4,503,211 thousand, respectively; and financial liabilities exposed to cash flow interest rate risk were NT$1,462,754 thousand and NT$1,919,648 thousand, respectively.
  e.   Movements of the unrealized gains or losses on financial instruments for the three months ended March 31, 2010 and 2009 were as follows:
                                 
    Three Months Ended March 31, 2010  
    From                      
    Available-             Gain (Loss) on        
    for-sale     Equity Method     Cash Flow        
    Financial Assets     Investments     Hedges     Total  
Balance, beginning of period
  $ 424,128     $ 29,493     $     $ 453,621  
Recognized directly in shareholders’ equity
    (55,489 )     12,662       (97 )     (42,924 )
Removed from shareholders’ equity and recognized in earnings
    (9,307 )                 (9,307 )
 
                       
 
                               
Balance, end of period
  $ 359,332     $ 42,155     $ (97 )   $ 401,390  
 
                       

- 36 -


 

                                 
    Three Months Ended March 31, 2009  
    From                      
    Available-             Gain (Loss) on        
    for-sale     Equity Method     Cash Flow        
    Financial Assets     Investments     Hedges     Total  
Balance, beginning of period
  $ (198,413 )   $ (88,929 )   $     $ (287,342 )
Recognized directly in shareholders’ equity
    55,753       30,608             86,361  
Removed from shareholders’ equity and recognized in earnings
    378,209                   378,209  
 
                       
 
                               
Balance, end of period
  $ 235,549     $ (58,321 )   $     $ 177,228  
 
                       
  f.   Information about financial risk
  1)   Market risk. The publicly traded stocks categorized as financial assets at fair value through profit or loss are exposed to market price fluctuations. The derivative financial instruments categorized as financial assets/liabilities at fair value through profit or loss are mainly used to hedge the exchange rate fluctuations of foreign-currency assets and liabilities; therefore, the market risk of derivatives will be offset by the foreign exchange risk of these hedged items. Available-for-sale financial assets and held-to-maturity financial assets held by the Company are mainly fixed-interest-rate debt securities; therefore, the fluctuations in market interest rates would result in changes in fair value of these debt securities.
 
  2)   Credit risk. Credit risk represents the potential loss that would be incurred by the Company if the counter-parties or third-parties breached contracts. Financial instruments with positive fair values at the balance sheet date are evaluated for credit risk. The Company evaluated whether the financial instruments for any possible counter-parties or third-parties are reputable financial institutions, business organizations and government agencies and accordingly, the Company believed that the Company’s exposure to credit risk was not significant.
 
  3)   Liquidity risk. The Company has sufficient operating capital to meet cash needs upon settlement of derivative financial instruments, bonds payable and bank loans. Therefore, the liquidity risk is low.
 
  4)   Cash flow interest rate risk. The Company mainly invests in fixed-interest-rate debt securities. Therefore, cash flows are not expected to fluctuate significantly due to changes in market interest rates. The Company’s long-term bank loans were floating-rate loans. Therefore, changes in the market interest rates will result in changes in the effective rate of the long-term bank loans, which will affect future cash flows.

- 37 -


 

  g.   The Company seeks to reduce the effects of future cash flow related interest rate changes by primarily using derivative financial instruments.
      The Company’s long-term bank loans bear floating interest rates; therefore, changes in the market interest rate may cause future cash flows to be volatile. Accordingly, the Company entered into an interest rate swap contract in order to hedge cash flow risk caused by floating interest rates. Information about outstanding interest rate swap contract consisted of the following:
                                 
                    Expected   Expected Timing for the
    Hedging Financial   Fair Value   Cash Flow   Recognition of Gains
Hedged Item   Instrument   March 31, 2010   Generated Period   or Losses from Hedge
Long-term bank loans
  Interest rate swap contracts   $ (238 )     2010 to 2012       2010 to 2012  
26.   RELATED PARTY TRANSACTIONS
    Except as disclosed elsewhere in the consolidated financial statements and other notes, the following is a summary of significant related party transactions:
  a.   Investees of TSMC
      VIS (accounted for using equity method)
SSMC (accounted for using equity method)
  b.   VisEra Technology Company, Ltd. (VisEra), an indirect investee accounted for using equity method.
                                 
    2010     2009  
    Amount     %     Amount     %  
For the three months ended March 31
                               
 
                               
Sales
                               
VIS
  $ 49,345           $ 10,520        
VisEra
    24,064             504        
SSMC
    956                    
 
                       
 
                               
 
  $ 74,365           $ 11,024        
 
                       
 
                               
Purchases
                               
SSMC
  $ 1,041,954       2     $ 514,174       2  
VIS
    965,783       2       397,579       1  
VisEra
                2,685        
 
                       
 
                               
 
  $ 2,007,737       4     $ 914,438       3  
 
                       
 
                               
Manufacturing expenses — rent and outsourcing
                               
VisEra
  $ 18,567           $ 20,630        
 
                       
 
                               
Research and development expense
                               
VIS (rent)
  $ 2,274           $        
VisEra
    1,663             133        
 
                       
 
                               
 
  $ 3,937           $ 133        
 
                       

- 38 -


 

                                 
    2010     2009  
    Amount     %     Amount     %  
Sales of property, plant and equipment
                               
VIS
  $ 15,940       10     $        
 
                       
 
                               
Purchase of property, plant and equipment
                               
VIS
  $ 15,865           $        
 
                       
 
                               
Non-operating income and gains
                               
VIS (primarily technical service income; see Note 29e)
  $ 86,868       5     $ 24,108       2  
SSMC (primarily technical service income; see Note 29d)
    44,503       2       17,289       1  
 
                       
 
  $ 131,371       7     $ 41,397       3  
 
                       
 
                               
As of March 31
                               
 
                               
Other receivables
                               
VIS
  $ 113,100       71     $ 35,615       67  
SSMC
    45,687       29       17,211       33  
 
                       
 
                               
 
  $ 158,787       100     $ 52,826       100  
 
                       
 
                               
Payables
                               
VIS
  $ 697,992       63     $ 299,259       59  
SSMC
    408,809       37       202,534       40  
VisEra
    7,788             7,518       1  
 
                       
 
                               
 
  $ 1,114,589       100     $ 509,311       100  
 
                       
    The sales prices and payment terms to related parties were not significantly different from those of sales to third parties. For other related party transactions, prices and terms were determined in accordance with mutual agreements.
    The Company leased certain office space and building from VIS. The lease terms and prices were determined in accordance with mutual agreements. The rental expense was prepaid by the Company and the related expenses were classified under research and development expenses.
    The Company leased certain building from VisEra. The lease terms and prices were determined in accordance with mutual agreements. The rental expense was paid monthly and classified under manufacturing expenses.

- 39 -


 

27.   PLEDGED OR MORTGAGED ASSETS
    The Company provided certain assets as collateral mainly for long-term bank loans, land lease agreements and customs duty guarantee, which were as follows:
                 
    March 31  
    2010     2009  
Other financial assets
  $ 880,700     $ 488,110  
Property, plant and equipment, net
    2,636,977       3,672,552  
Other assets
    20,000        
 
           
 
               
 
  $ 3,537,677     $ 4,160,662  
 
           
28.   SIGNIFICANT LONG-TERM LEASES
    The Company leases several parcels of land and office premises from the SPA and Jhongli Industrial Park Service Center. These operating leases expire on various dates from December 2010 to December 2029 and can be renewed upon expiration.
    The Company entered into lease agreements for its office premises and certain equipment located in the United States, Europe, Japan, Shanghai and Taiwan. These operating leases expire between 2010 and 2018 and can be renewed upon expiration.
    As of March 31, 2010, future lease payments were as follows:
         
                   Year   Amount  
2010 (2nd to 4th quarter)
  $ 455,823  
2011
    555,332  
2012
    534,610  
2013
    507,618  
2014
    486,612  
2015 and thereafter
    3,702,407  
 
     
 
       
 
  $ 6,242,402  
 
     
29.   SIGNIFICANT COMMITMENTS AND CONTINGENCIES
    Significant commitments and contingencies of the Company as of March 31, 2010, excluding those disclosed in other notes, were as follows:
  a.   Under a technical cooperation agreement with ITRI, the R.O.C. Government or its designee approved by TSMC can use up to 35% of TSMC’s capacity if TSMC’s outstanding commitments to its customers are not prejudiced. The term of this agreement is for five years beginning from January 1, 1987 and is automatically renewed for successive periods of five years unless otherwise terminated by either party with one year prior notice.
  b.   Under several foundry agreements, TSMC shall reserve a portion of its production capacity for certain major customers that have guarantee deposits with TSMC. As of March 31, 2010 TSMC had a total of US$26,937 thousand of guarantee deposits.

- 40 -


 

  c.   Under a Shareholders Agreement entered into with Philips and EDB Investments Pte Ltd. on March 30, 1999, the parties formed a joint venture company, SSMC, which is an integrated circuit foundry in Singapore. TSMC’s equity interest in SSMC was 32%. Nevertheless, Philips parted with its semiconductor company which was renamed as NXP B.V. in September 2006. TSMC and NXP B.V. purchased all the SSMC shares owned by EDB Investments Pte Ltd. pro rata according to the Shareholders Agreement on November 15, 2006. After the purchase, TSMC and NXP B.V. currently own approximately 39% and 61% of the SSMC shares respectively. TSMC and Philips (now NXP B.V.) are required, in the aggregate, to purchase at least 70% of SSMC’s capacity, but TSMC alone is not required to purchase more than 28% of the capacity. If any party defaults on the commitment and the capacity utilization of SSMC fall below a specific percentage of its capacity, the defaulting party is required to compensate SSMC for all related unavoidable costs.
  d.   TSMC provides technical services to SSMC under a Technical Cooperation Agreement (the Agreement) effective March 30, 1999. TSMC receives compensation for such services computed at a specific percentage of net selling price of all products sold by SSMC. The Agreement shall remain in force for ten years and will be automatically renewed for successive periods of five years each unless pre-terminated by either party under certain conditions.
  e.   TSMC provides a technology transfer to VIS under a Manufacturing License and Technology Transfer Agreement entered into on April 1, 2004. TSMC receives compensation for such technology transfer in the form of royalty payments from VIS computed at specific percentages of net selling price of certain products sold by VIS. VIS agreed to reserve its certain capacity to manufacture for TSMC certain products at prices as agreed by the parties.
  f.   TSMC, TSMC North America and WaferTech filed a series of lawsuits in late 2003 and 2004 against Semiconductor Manufacturing International Corporation, SMIC (Shanghai) and SMIC Americas (aggregately referring to as “SMIC”). The lawsuits alleged that SMIC infringed multiple TSMC, TSMC North America and WaferTech patents and misappropriated TSMC, TSMC North America and WaferTech’s trade secrets. These suits were settled out of court on January 30, 2005. As part of the settlement, Semiconductor Manufacturing International Corporation shall pay US$175 million over six years to resolve TSMC, TSMC North America and WaferTech’s claims. As of March 31, 2010, SMIC had paid US$135 million in accordance with the terms of this settlement agreement. In August 2006, TSMC, TSMC North America and WaferTech filed a lawsuit against SMIC in Alameda County Superior Court in California for breach of aforementioned settlement agreement, breach of promissory notes and trade secret misappropriation, seeking injunctive relief and monetary damages. In September 2006, SMIC filed a cross-complaint against TSMC, TSMC North America and WaferTech in the same court, alleging TSMC, TSMC North America and WaferTech of breach of the settlement agreement and implied covenant of good faith and fair dealing, in response to TSMC, TSMC North America and WaferTech’s August complaint. In November 2006, SMIC filed a complaint with Beijing People’s High Court against TSMC, TSMC North America and WaferTech alleging defamation and breach of good faith. The California State Superior Court of Alameda County issued an Order on TSMC, TSMC North America and WaferTech’s pre-trial motion for a preliminary injunction against SMIC on September 7, 2007. In the Order, the Court found “TSMC has demonstrated a significant likelihood that it will ultimately prevail on the merits of its claim for breach of certain paragraphs of the (2005) Settlement Agreement” with SMIC. The Court also found “TSMC has demonstrated a significant probability of establishing that SMIC retains and is using TSMC Information in SMIC’s 0.13um and smaller technologies, and there is significant threat of serious irreparable harm to TSMC if SMIC were to disclose or transfer that information before final resolution of the case.” Therefore, the Court ordered that, effective immediately, SMIC must provide advance notice and an opportunity for TSMC, TSMC North America and WaferTech to object before disclosing items enumerated in the Court Order to SMIC’s third party partners. The Court, however, did not grant a preliminary injunction as requested by TSMC, TSMC North America and WaferTech. In January 2009, the court in the California action held a four-day bench trial to determine whether a Settlement Agreement existed between the parties, and if there were an agreement, the interpretation of certain terms. SMIC contended that there was no binding Settlement Agreement, and TSMC, TSMC North America and WaferTech contended that the Settlement Agreement signed on January 30, 2005 and finalized shortly

- 41 -


 

      thereafter and repeatedly ratified bound the parties. On March 10, 2009, the Court issued its Statement of Decision. The Court rejected SMIC’s contention, and found that the parties were bound by the Settlement Agreement identified by TSMC, TSMC North America and WaferTech. The Court also interpreted the meaning of certain provisions within the Settlement Agreement. Regarding the claims raised by SMIC in the Beijing lawsuit, the Beijing People’s High Court has on June 10, 2009 rejected those claims and dismissed the lawsuit. On November 4, 2009, after a two-month trial, a jury in the California action found SMIC to have both breached the 2005 settlement agreement and misappropriated TSMC, TSMC North America and WaferTech’s trade secrets. TSMC, TSMC North America and WaferTech have subsequently settled both lawsuits with SMIC. Pursuant to the new settlement agreement, the parties have agreed to the entry of a stipulated judgment in favor of TSMC, TSMC North America and WaferTech in the California action, and to the dismissal of SMIC’s appeal against the Beijing High Court’s finding in favor of TSMC, TSMC North America and WaferTech. Under the new settlement agreement and the related stipulated judgment, SMIC has agreed to make cash payments by installments to TSMC totaling US$200 million, which are in addition to the US$135 million previously paid to TSMC under the 2005 settlement agreement, and, conditional upon relevant government regulatory approvals, to issue to TSMC a total of 1,789,493,218 common shares of Semiconductor Manufacturing International Corporation (representing about 8% of Semiconductor Manufacturing International Corporation’s total shares outstanding as of December 31, 2009) and a three-year warrant to purchase 695,914,030 common shares (subject to adjustment) of Semiconductor Manufacturing International Corporation at HK$1.30 per share (subject to adjustment).
  g.   The Company entered into an agreement with a counterparty in 2003 whereby TSMC China is obligated to purchase certain property, plant and equipment at the agreed-upon price within the contract period. If the purchase is not completed, TSMC China is obligated to compensate the counterparty for the loss incurred. The property, plant and equipment have been in use by TSMC China since 2004 and are being depreciated over their estimated service lives. The related obligation totaled NT$7,192,395 thousand and NT$8,837,883 thousand as of March 31, 2010 and 2009, respectively, which is included in other long-term payables.
  h.   Amounts available under unused letters of credit as of March 31, 2010 were NT$99,022 thousand.
30.   ADDITIONAL DISCLOSURES
    Following are the additional disclosures required by the SFB for TSMC and its investees in which all significant intercompany balances and transactions are eliminated upon consolidation:
  a.   Financing provided: None
  b.   Endorsement/guarantee provided: None
  c.   Marketable securities held: Please see Table 1 attached;
  d.   Marketable securities acquired and disposed of at costs or prices of at least NT$100 million or 20% of the paid-in capital: Please see Table 2 attached;
  e.   Acquisition of individual real estate properties at costs of at least NT$100 million or 20% of the paid-in capital: Please see Table 3 attached;
  f.   Disposal of individual real estate properties at prices of at least NT$100 million or 20% of the paid-in capital: None;
  g.   Total purchases from or sales to related parties amounting to at least NT$100 million or 20% of the paid-in capital: Please see Table 4 attached;
  h.   Receivable from related parties amounting to at least NT$100 million or 20% of the paid-in capital: Please see Table 5 attached;

- 42 -


 

  i.   Names, locations, and related information of investees over which TSMC exercises significant influence: Please see Table 6 attached;
  j.   Information on investment in Mainland China
  1)   The name of the investee in mainland China, the main businesses and products, its issued capital, method of investment, information on inflow or outflow of capital, percentage of ownership, equity in the net gain or net loss, ending balance, amount received as dividends from the investee, and the limitation on investee: Please see Table 7 attached.
  2)   Significant direct or indirect transactions with the investee, its prices and terms of payment, unrealized gain or loss, and other related information which is helpful to understand the impact of investment in mainland China on financial reports: Please see Table 8 attached.
  k.   Intercompany relationships and significant intercompany transactions: Please see Table 8 attached.

- 43 -


 

TABLE 1
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
MARKETABLE SECURITIES HELD
MARCH 31, 2010
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
                                                     
                March 31, 2010    
                                        Market Value or Net    
                Shares/Units   Carrying Value   Percentage of   Asset Value    
Held Company Name   Marketable Securities Type and Name   Relationship with the Company   Financial Statement Account   (In Thousands)   (US$ in Thousands)   Ownership (%)   (US$ in Thousands)   Note
TSMC
  Corporate bond                                                
 
  Taiwan Mobile Co., Ltd.     Available-for-sale financial assets         $ 1,043,306       N/A     $ 1,043,306          
 
  Formosa Petrochemical Corporation     Held-to-maturity financial assets           3,178,032       N/A       3,204,143          
 
  Taiwan Power Company               3,000,247       N/A       3,005,673          
 
  Nan Ya Plastics Corporation               2,000,539       N/A       2,044,833          
 
  Formosa Plastics Corporation               1,671,753       N/A       1,686,870          
 
  China Steel Corporation               1,510,969       N/A       1,524,294          
 
  CPC Corporation, Taiwan               500,016       N/A       499,921          
 
  Taipei Fubon Commercial Bank Co., Ltd.               299,297       N/A       299,215          
 
  First Commercial Bank Co., Ltd.               99,950       N/A       99,952          
 
                                                   
 
  Government bond                                                
 
  2003 Asian Development Bank Govt. Bond     Held-to-maturity financial assets           898,801       N/A       875,103          
 
                                                   
 
  Stock                                                
 
  TSMC Global   Subsidiary   Investments accounted for using equity method     1       45,245,474       100       45,245,474          
 
  TSMC Partners   Subsidiary       988,268       32,637,828       100       32,637,828          
 
  VIS   Investee accounted for using equity method       628,223       9,359,350       37       10,240,043          
 
  SSMC   Investee accounted for using equity method       314       6,308,810       39       5,782,912          
 
  Motech   Investee accounted for using equity method       75,316       6,210,916       20       10,167,705          
 
  TSMC North America   Subsidiary       11,000       2,726,868       100       2,726,868          
 
  Xintec   Investee with a controlling financial interest       93,081       1,532,384       41       1,501,019          
 
  GUC   Investee with a controlling financial interest       46,688       1,039,348       35       6,723,052          
 
  TSMC Europe   Subsidiary             158,190       100       158,190          
 
  TSMC Japan   Subsidiary       6       133,420       100       133,420          
 
  TSMC Korea   Subsidiary       80       19,460       100       19,460          
 
  United Industrial Gases Co., Ltd.     Financial assets carried at cost     16,783       193,584       10       315,767          
 
  Shin-Etsu Handotai Taiwan Co., Ltd.         10,500       105,000       7       339,223          
 
  W.K. Technology Fund IV         4,000       40,000       2       43,606          
 
                                                   
 
  Fund                                                
 
  Horizon Ventures Fund     Financial assets carried at cost           103,992       12       103,992          
 
  Crimson Asia Capital               55,259       1       55,259          
 
                                                   
 
  Capital                                                
 
  TSMC China   Subsidiary   Investments accounted for using equity method           2,787,558       100       2,792,627          
 
  VTAF III   Subsidiary             1,351,399       98       1,333,492          
 
  VTAF II   Subsidiary             1,140,879       98       1,135,109          
 
  Emerging Alliance   Subsidiary             303,768       99       303,768          
(Continued)

- 44 -


 

                                                     
                March 31, 2010    
                                        Market Value or Net    
                Shares/Units   Carrying Value   Percentage of   Asset Value    
Held Company Name   Marketable Securities Type and Name   Relationship with the Company   Financial Statement Account   (In Thousands)   (US$ in Thousands)   Ownership (%)   (US$ in Thousands)   Note
TSMC Partners
  Corporate bond                                                
 
  General Elec Cap Corp. Mtn     Held-to-maturity financial assets         US$ 20,480       N/A     US$ 21,443          
 
  General Elec Cap Corp. Mtn             US$ 20,200       N/A     US$ 21,582          
 
                                                   
 
  Common stock                                                
 
  TSMC Development, Inc. (TSMC Development)   Subsidiary   Investments accounted for using equity method     1     US$ 350,118       100     US$ 350,118          
 
  VisEra Holding Company   Investee accounted for using equity method       43,000     US$ 72,445       49     US$ 72,445          
 
  InveStar Semiconductor Development Fund, Inc. (II) LDC. (ISDF II)   Subsidiary       21,415     US$ 13,670       97     US$ 13,670          
 
  TSMC Technology   Subsidiary       1     US$ 9,431       100     US$ 9,431          
 
  InveStar Semiconductor Development Fund, Inc. (ISDF)   Subsidiary       7,680     US$ 7,188       97     US$ 7,188          
 
  TSMC Canada   Subsidiary       2,300     US$ 3,555       100     US$ 3,555          
 
  Mcube Inc.   Investee accounted for using equity method       5,333     US$ 529       70     US$ 529          
 
                                                   
 
  Preferred stock                                                
 
  Mcube Inc.   Investee accounted for using equity method   Investments accounted for using equity method     1,000     US$ 949       10     US$ 949          
 
                                                   
TSMC Development
  Corporate bond                                                
 
  GE Capital Corp.     Held-to-maturity financial assets         US$ 20,305       N/A     US$ 21,582          
 
  JP Morgan Chase & Co.             US$ 15,000       N/A     US$ 15,103          
 
                                                   
 
  Stock                                                
 
  WaferTech   Subsidiary   Investments accounted for using equity method     293,637     US$ 164,246       100     US$ 164,246          
 
                                                   
Emerging Alliance
  Common stock                                                
 
  RichWave Technology Corp.     Financial assets carried at cost     4,247     US$ 1,648       10     US$ 1,648          
 
  Global Investment Holding Inc.         11,124     US$ 3,065       6     US$ 3,065          
 
                                                   
 
  Preferred stock                                                
 
  Audience, Inc.     Financial assets carried at cost     1,654     US$ 250           US$ 250          
 
  Axiom Microdevices, Inc.         1,000     US$ 24       1     US$ 24          
 
  Mosaic Systems, Inc.         2,481     US$ 12       6     US$ 12          
 
  Next IO, Inc.         800     US$ 500       1     US$ 500          
 
  Optichron, Inc.         710     US$ 1,072       2     US$ 1,072          
 
  Pixim, Inc.         4,641     US$ 1,137       2     US$ 1,137          
 
  QST Holdings, LLC             US$ 131       4     US$ 131          
 
  Teknovus, Inc.         6,977     US$ 1,327       2     US$ 1,327          
 
                                                   
 
  Capital                                                
 
  VentureTech Alliance Holdings, LLC (VTA Holdings)   Subsidiary   Investments accounted for using equity method                 7                
 
                                                   
VTAF II
  Common stock                                                
 
  Leadtrend     Available-for-sale financial assets     1,272     US$ 554       3     US$ 554          
 
  Aether Systems, Inc.     Financial assets carried at cost     1,600     US$ 1,503       25     US$ 1,503          
 
  RichWave Technology Corp.         1,043     US$ 730       1     US$ 730          
 
  Sentelic         1,200     US$ 2,040       15     US$ 2,040          
 
                                                   
 
  Preferred stock                                                
 
  5V Technologies, Inc.     Financial assets carried at cost     2,890     US$ 2,168       4     US$ 2,168          
 
  Aquantia         3,974     US$ 3,816       3     US$ 3,816          
 
  Audience, Inc.         12,378     US$ 2,378       3     US$ 2,378          
 
  Axiom Microdevices, Inc.         759     US$ 517       13     US$ 517          
(Continued)

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                March 31, 2010    
                                        Market Value or Net    
                Shares/Units   Carrying Value   Percentage of   Asset Value    
Held Company Name   Marketable Securities Type and Name   Relationship with the Company   Financial Statement Account   (In Thousands)   (US$ in Thousands)   Ownership (%)   (US$ in Thousands)   Note
VTAF II
  Beceem Communications     Financial assets carried at cost     797     US$ 1,701       1     US$ 1,701          
 
  Impinj, Inc.         475     US$ 1,000           US$ 1,000          
 
  Next IO, Inc.         3,795     US$ 953       2     US$ 953          
 
  Optichron, Inc.         1,583     US$ 2,664       4     US$ 2,664          
 
  Pixim, Inc.         33,347     US$ 1,878       2     US$ 1,878          
 
  Power Analog Microelectronics         7,027     US$ 3,383       19     US$ 3,383          
 
  QST Holdings, LLC             US$ 593       13     US$ 593          
 
  Teknovus, Inc.         1,599     US$ 454           US$ 454          
 
  Xceive         4,210     US$ 1,554       3     US$ 1,554          
 
                                                   
 
  Capital                                                
 
  VTA Holdings   Subsidiary   Investments accounted for using equity method                 31                
 
                                                   
VTAF III
  Common stock                                                
 
  Mutual-Pak Technology Co., Ltd.   Subsidiary   Investments accounted for using equity method     9,180     US$ 1,962       59     US$ 1,962          
 
  Aiconn Technology Corporation   Investee accounted for using equity method       4,500     US$ 487       42     US$ 487          
 
                                                   
 
  Preferred stock                                                
 
  Auramicro, Inc.     Financial assets carried at cost     4,694     US$ 1,408       20     US$ 1,408          
 
  BridgeLux, Inc.         6,113     US$ 7,781       4     US$ 7,781          
 
  Exclara, Inc.         21,708     US$ 4,568       18     US$ 4,568          
 
  GTBF, Inc.         1,154     US$ 1,500       N/A     US$ 1,500          
 
  InvenSense, Inc.         816     US$ 1,000       1     US$ 1,000          
 
  LiquidLeds Lighting Corp.         1,600     US$ 800       11     US$ 800          
 
  M2000, Inc.         3,000     US$ 3,000       5     US$ 3,000          
 
  Neoconix, Inc.         3,283     US$ 4,608       6     US$ 4,608          
 
  Powervation, Ltd.         310     US$ 4,678       16     US$ 4,678          
 
  Quellan, Inc.         3,106     US$ 457       6     US$ 457          
 
  Silicon Technical Services, LLC         1,055     US$ 1,208           US$ 1,208          
 
  Tilera, Inc.         3,222     US$ 2,781       2     US$ 2,781          
 
  Validity Sensors, Inc.         8,070     US$ 3,089       4     US$ 3,089          
 
                                                   
 
  Capital                                                
 
  Growth Fund Limited (Growth Fund)   Subsidiary   Investments accounted for using equity method         US$ 892       100     US$ 892          
 
  VTA Holdings   Subsidiary                   62                
 
                                                   
Growth Fund
  Common stock                                                
 
  SiliconBlue Technologies, Inc.     Financial assets carried at cost     5,107     US$ 762       2     US$ 762          
 
  Staccato         10     US$ 25           US$ 25          
 
                                                   
ISDF
  Common stock                                                
 
  Memsic, Inc.     Available-for-sale financial assets     1,364     US$ 4,350       6     US$ 4,350          
 
  Capella Microsystems (Taiwan), Inc.     Financial assets carried at cost     557     US$ 154       2     US$ 154          
 
                                                   
 
  Preferred stock                                                
 
  Integrated Memory Logic, Inc.     Financial assets carried at cost     5,226     US$ 1,221       9     US$ 1,221          
 
  IP Unity, Inc.         1,008     US$ 290       1     US$ 290          
 
  Sonics, Inc.         230     US$ 497       2     US$ 497          
 
                                                   
ISDF II
  Common stock                                                
 
  Memsic, Inc.     Available-for-sale financial assets     1,145     US$ 3,651       5     US$ 3,651          
 
  Sonics, Inc.     Financial assets carried at cost     278     US$ 10       3     US$ 10          
 
  EON Technology, Corp.         1,804     US$ 500       2     US$ 500          
(Continued)

- 46 -


 

                                                     
                March 31, 2010    
                                        Market Value or Net    
                Shares/Units   Carrying Value   Percentage   Asset Value    
Held Company Name   Marketable Securities Type and Name   Relationship with the Company   Financial Statement Account   (In Thousands)   (US$ in Thousands)   of Ownership (%)   (US$ in Thousands)   Note
ISDF II  
Goyatek Technology, Corp.
    Financial assets carried at cost     932     US$ 545       6     US$ 545          
   
Capella Microsystems (Taiwan), Inc.
        561     US$ 210       2     US$ 210          
   
Auden Technology MFG. Co., Ltd.
        1,049     US$ 223       3     US$ 223          
   
 
                                               
   
Preferred stock
                                               
   
Alchip Technologies Limited
    Financial assets carried at cost     6,979     US$ 3,664       18     US$ 3,664          
   
FangTek, Inc.
        1,032     US$ 686       6     US$ 686          
   
Kilopass Technology, Inc.
        3,887     US$ 250       5     US$ 250          
   
Sonics, Inc.
        264     US$ 456       3     US$ 456          
   
 
                                               
GUC  
Open-end mutual fund
                                               
   
Jih Sun Bond Fund
   
Available-for-sale financial assets
    5,668     $ 80,059           $ 80,059          
   
Cathay Bond Fund
        2,509       30,014             30,014          
   
Hua Nan Phoenix Bond Fund
        1,926       30,009             30,009          
   
Prudential Financial Bond Fund
        1,982       30,008             30,008          
   
 
                                               
   
Common stock
                                               
   
GUC-NA
  Subsidiary  
Investments accounted for using equity method
    800       39,313       100       39,313          
   
GUC-BVI
  Subsidiary       550       17,351       100       17,351          
   
GUC-Japan
  Subsidiary       1       13,160       100       13,160          
   
GUC-Europe
  Subsidiary             4,860       100       4,860          
   
 
                                               
GUC-BVI  
Capital
                                               
   
Global Unichip (Shanghai) Company, Limited (GUC-Shanghai)
  Subsidiary  
Investments accounted for using equity method
          15,902       100       15,902          
   
 
                                               
Xintec  
Capital
                                               
   
Compositech Ltd.
    Financial assets carried at cost     587             3                
   
 
                                               
TSMC Global  
Corporate bond
                                               
   
Ab Svensk Exportkredit Swedish
   
Available-for-sale financial assets
    5,000     US$ 5,095       N/A     US$ 5,095          
   
African Development Bank
        2,600     US$ 2,620       N/A     US$ 2,620          
   
Alltel Corp.
        100     US$ 111       N/A     US$ 111          
   
American Honda Fin Corp. Mtn
        4,000     US$ 3,974       N/A     US$ 3,974          
   
Anz National Intl Ltd.
        3,500     US$ 3,507       N/A     US$ 3,507          
   
Asian Development Bank
        2,500     US$ 2,498       N/A     US$ 2,498          
   
Astrazeneca Plc
        3,150     US$ 3,440       N/A     US$ 3,440          
   
AT+T Wireless
        3,500     US$ 3,950       N/A     US$ 3,950          
   
Australia + New Zealand Bkg
        2,000     US$ 2,066       N/A     US$ 2,066          
   
Banco Bilbao Vizcaya P R
        3,250     US$ 3,248       N/A     US$ 3,248          
   
Bank New York Inc.
        1,615     US$ 1,602       N/A     US$ 1,602          
   
Bank New York Inc. Medium
        2,100     US$ 2,277       N/A     US$ 2,277          
   
Bank of America
        2,900     US$ 3,121       N/A     US$ 3,121          
   
Bank of America Corp. Fdic Gtd
        3,400     US$ 3,533       N/A     US$ 3,533          
   
Bank of New York Mellon
        2,200     US$ 2,208       N/A     US$ 2,208          
   
Bank of Nova Scotia
        5,000     US$ 4,998       N/A     US$ 4,998          
   
Bank of Scotland Plc
        4,000     US$ 3,991       N/A     US$ 3,991          
   
Barclays Bank Plc
        12,000     US$ 11,995       N/A     US$ 11,995          
   
Bbva US Senior SA Uniper
        4,745     US$ 4,743       N/A     US$ 4,743          
   
Bear Stearns Cos Inc.
        5,000     US$ 4,982       N/A     US$ 4,982          
   
Bear Stearns Cos Inc.
        3,500     US$ 3,442       N/A     US$ 3,442          
   
Berkshire Hathaway Inc. Del
        3,500     US$ 3,513       N/A     US$ 3,513          
   
Bhp Billiton Fin USA Ltd.
        2,000     US$ 2,141       N/A     US$ 2,141          
   
Bk Tokyo Mitsubishi Ufj
        2,000     US$ 2,015       N/A     US$ 2,015          
   
Bmw US Capital LLC
        1,600     US$ 1,602       N/A     US$ 1,602          
(Continued)

- 47 -


 

                                                             
                        March 31, 2010    
                                                Market Value or Net    
                        Shares/Units   Carrying Value   Percentage   Asset Value    
Held Company Name   Marketable Securities Type and Name   Relationship with the Company   Financial Statement Account   (In Thousands)   (US$ in Thousands)   of Ownership (%)   (US$ in Thousands)   Note
TSMC Global  
Bnp Paribas SA
       
Available-for-sale financial assets
    2,310     US$ 2,343       N/A     US$ 2,343          
   
Boeing Cap Corp.
                2,925     US$ 3,219       N/A     US$ 3,219          
   
Boeing Co.
                450     US$ 452       N/A     US$ 452          
   
Bsch Issuances Ltd.
                2,250     US$ 2,313       N/A     US$ 2,313          
   
Caterpillar Financial SE
                300     US$ 303       N/A     US$ 303          
   
Cello Part/Veri Wirelss
                3,000     US$ 3,087       N/A     US$ 3,087          
   
Citibank NA
                4,020     US$ 4,017       N/A     US$ 4,017          
   
Citigroup Funding Inc.
                6,000     US$ 6,043       N/A     US$ 6,043          
   
Citigroup Funding Inc.
                2,000     US$ 2,029       N/A     US$ 2,029          
   
Citigroup Inc.
                1,000     US$ 1,030       N/A     US$ 1,030          
   
Citigroup Inc.
                400     US$ 420       N/A     US$ 420          
   
Commonwealth Bank Aust
                2,800     US$ 2,805       N/A     US$ 2,805          
   
Countrywide Finl Corp.
                4,000     US$ 4,252       N/A     US$ 4,252          
   
Credit Suisse First Boston USA
                2,150     US$ 2,310       N/A     US$ 2,310          
   
Credit Suisse New York
                3,945     US$ 4,084       N/A     US$ 4,084          
   
Dexia Credit Local
                6,000     US$ 5,998       N/A     US$ 5,998          
   
Dexia Credit Local SA NY
                5,000     US$ 5,004       N/A     US$ 5,004          
   
Finance for Danish Ind
                1,900     US$ 1,899       N/A     US$ 1,899          
   
General Elec Cap Corp.
                1,000     US$ 985       N/A     US$ 985          
   
General Elec Cap Corp.
                300     US$ 299       N/A     US$ 299          
   
General Elec Cap Corp.
                7,000     US$ 7,005       N/A     US$ 7,005          
   
General Elec Cap Corp. Fdic Gtd
                2,500     US$ 2,540       N/A     US$ 2,540          
   
General Electric Capital Corp.
                2,000     US$ 1,930       N/A     US$ 1,930          
   
Georgia Pwr Co.
                6,000     US$ 6,012       N/A     US$ 6,012          
   
Goldman Sachs Group Inc.
                2,000     US$ 1,948       N/A     US$ 1,948          
   
Goldman Sachs Group Inc. Mtn
                1,500     US$ 1,450       N/A     US$ 1,450          
   
Goldman Sachs Group Incser 2
                3,000     US$ 3,012       N/A     US$ 3,012          
   
Hewlett Packard Co.
                3,000     US$ 3,001       N/A     US$ 3,001          
   
Hewlett Packard Co.
                1,365     US$ 1,386       N/A     US$ 1,386          
   
Household Fin Corp.
                4,330     US$ 4,742       N/A     US$ 4,742          
   
HSBC Fin Corp.
                2,315     US$ 2,295       N/A     US$ 2,295          
   
HSBC Fin Corp.
                2,900     US$ 3,119       N/A     US$ 3,119          
   
HSBC USA Inc. Fdic Gtd Tlgp
                2,200     US$ 2,278       N/A     US$ 2,278          
   
Hutchison Whampoa Intl
                1,750     US$ 1,799       N/A     US$ 1,799          
   
IBM Corp.
                6,100     US$ 6,102       N/A     US$ 6,102          
   
IBM Corp.
                3,000     US$ 3,024       N/A     US$ 3,024          
   
Intl Bk Recon + Develop
                5,000     US$ 5,013       N/A     US$ 5,013          
   
Intl Bk Recon + Develop
                2,000     US$ 2,075       N/A     US$ 2,075          
   
Istituto Bancario SA
                1,700     US$ 1,700       N/A     US$ 1,700          
   
John Deer Capital Corp. Fdic GT
                3,500     US$ 3,621       N/A     US$ 3,621          
   
JP Morgan Chase + Co.
                2,500     US$ 2,517       N/A     US$ 2,517          
   
JP Morgan Chase + Co.
                5,000     US$ 5,025       N/A     US$ 5,025          
   
JP Morgan Chase + Co. Fdic Gtd Tlg
                3,000     US$ 3,026       N/A     US$ 3,026          
   
Kfw Medium Term Nts Book Entry
                1,950     US$ 1,952       N/A     US$ 1,952          
   
Kreditanstalt Fur Wiederaufbau
                650     US$ 672       N/A     US$ 672          
   
Lloyds Tsb Bank Plc Ser 144A
                4,850     US$ 4,877       N/A     US$ 4,877          
   
Lloyds Tsb Bank Plc Ser 144A
                5,950     US$ 6,038       N/A     US$ 6,038          
   
Mellon Fdg Corp.
                3,500     US$ 3,443       N/A     US$ 3,443          
   
Merck + Co. Inc.
                4,000     US$ 4,038       N/A     US$ 4,038          
   
Merck + Co. Inc.
                2,000     US$ 2,126       N/A     US$ 2,126          
   
Merrill Lynch + Co. Inc.
                4,691     US$ 4,602       N/A     US$ 4,602          
   
Met Life Glob Funding I
                4,675     US$ 4,752       N/A     US$ 4,752          
   
Met Life Glob Funding I
                500     US$ 502       N/A     US$ 502          
(Continued)

- 48 -


 

                                                             
                        March 31, 2010    
                                                Market Value or Net    
                        Shares/Units   Carrying Value   Percentage   Asset Value    
Held Company Name   Marketable Securities Type and Name   Relationship with the Company   Financial Statement Account   (In Thousands)   (US$ in Thousands)   of Ownership (%)   (US$ in Thousands)   Note
TSMC Global  
Metlife Inc.
       
Available-for-sale financial assets
    2,000     US$ 2,016       N/A     US$ 2,016          
   
Metropolitan Life Global Fdg
                750     US$ 740       N/A     US$ 740          
   
Metropolitan Life Global Fdg I
                3,340     US$ 3,284       N/A     US$ 3,284          
   
Monumental Glbl Fdg II
                500     US$ 499       N/A     US$ 499          
   
Morgan Stanley
                2,200     US$ 2,209       N/A     US$ 2,209          
   
Morgan Stanley
                1,500     US$ 1,389       N/A     US$ 1,389          
   
Morgan Stanley
                2,000     US$ 2,041       N/A     US$ 2,041          
   
Morgan Stanley Dean Witter
                8,000     US$ 8,680       N/A     US$ 8,680          
   
Morgan Stanley for Equity
                2,000     US$ 1,955       N/A     US$ 1,955          
   
National Australia Bank
                1,000     US$ 1,006       N/A     US$ 1,006          
   
New York Life Global Fdg
                2,000     US$ 2,011       N/A     US$ 2,011          
   
Nordea Bank Fld Plc
                2,250     US$ 2,245       N/A     US$ 2,245          
   
Oesterreichische Kontrollbank
                2,000     US$ 2,039       N/A     US$ 2,039          
   
Ontario (Province of)
                2,000     US$ 2,013       N/A     US$ 2,013          
   
Paccar Finl Corp. Mtn Bk Ent
                1,000     US$ 1,006       N/A     US$ 1,006          
   
Pepsico Inc.
                3,000     US$ 3,001       N/A     US$ 3,001          
   
Pnc Funding Corp.
                2,000     US$ 1,985       N/A     US$ 1,985          
   
Pricoa Global Fdg I Med Term
                1,750     US$ 1,668       N/A     US$ 1,668          
   
Pricoa Global Funding 1
                1,200     US$ 1,173       N/A     US$ 1,173          
   
Princoa Global Fdg I Medium
                2,200     US$ 2,141       N/A     US$ 2,141          
   
Roche Hldgs Inc.
                2,000     US$ 2,114       N/A     US$ 2,114          
   
Royal Bk of Scotland Plc
                4,000     US$ 4,004       N/A     US$ 4,004          
   
Royal Bk of Scotland Plc
                5,000     US$ 5,078       N/A     US$ 5,078          
   
Royal Bk Scotlnd Grp Plc 144A
                9,450     US$ 9,550       N/A     US$ 9,550          
   
Shell International Fin
                1,200     US$ 1,206       N/A     US$ 1,206          
   
Shell International Fin
                2,000     US$ 1,998       N/A     US$ 1,998          
   
Southern Co.
                600     US$ 603       N/A     US$ 603          
   
Sovereign Bancorp Fdic Gtd Tlg
                2,200     US$ 2,252       N/A     US$ 2,252          
   
State Str Corp.
                7,020     US$ 7,005       N/A     US$ 7,005          
   
State Street Corp.
                5,500     US$ 5,561       N/A     US$ 5,561          
   
Suncorp Metway Ltd.
                8,800     US$ 9,070       N/A     US$ 9,070          
   
Suncorp Metway Ltd.
                2,000     US$ 2,003       N/A     US$ 2,003          
   
Svenska Handelsbanken AB
                2,200     US$ 2,242       N/A     US$ 2,242          
   
Swedbank AB
                2,000     US$ 1,994       N/A     US$ 1,994          
   
Swedbank Foreningssparbanken A
                1,500     US$ 1,543       N/A     US$ 1,543          
   
Ubs Ag Stamford
                1,300     US$ 1,300       N/A     US$ 1,300          
   
Ub Bancorp
                2,000     US$ 2,038       N/A     US$ 2,038          
   
US Central Federal Cred
                4,800     US$ 4,829       N/A     US$ 4,829          
   
Verizon Communications Inc.
                2,200     US$ 2,289       N/A     US$ 2,289          
   
Verizon Global Fdg Corp.
                500     US$ 522       N/A     US$ 522          
   
Wachovia Corp. New
                1,400     US$ 1,386       N/A     US$ 1,386          
   
Wachovia Corp. New
                4,000     US$ 4,232       N/A     US$ 4,232          
   
Wal Mart Stores Inc.
                2,603     US$ 2,680       N/A     US$ 2,680          
   
Wells Fargo + Company
                2,000     US$ 2,010       N/A     US$ 2,010          
   
Westfield Cap Corp. Ltd.
                500     US$ 508       N/A     US$ 508          
   
Westpac Banking Corp.
                2,100     US$ 2,112       N/A     US$ 2,112          
   
Westpac Banking Corp.
                4,000     US$ 4,008       N/A     US$ 4,008          
   
Westpac Banking Corp.
                2,170     US$ 2,168       N/A     US$ 2,168          
   
Nationwide Building Society-UK Government Guarantee
       
Held-to-maturity financial assets
    8,000     US$ 8,000       N/A     US$ 7,999          
   
Westpac Banking Corporation Govet Gtd
                5,000     US$ 5,000       N/A     US$ 5,006          
   
Commonwealth Bank of Australia
                25,000     US$ 25,000       N/A     US$ 25,233          
   
Commonwealth Bank of Australia
                25,000     US$ 25,000       N/A     US$ 25,253          
(Continued)

- 49 -


 

                                                             
                        March 31, 2010        
                                                Market Value or Net        
                        Shares/Units   Carrying Value   Percentage of   Asset Value        
Held Company Name   Marketable Securities Type and Name   Relationship with the Company   Financial Statement Account   (In Thousands)   (US$ in Thousands)   Ownership (%)   (US$ in Thousands)   Note
TSMC Global  
Agency bond
                                                       
   
Fannie Mae
        Available-for-sale financial assets     8,000     US$ 7,995       N/A     US$ 7,995          
   
Fannie Mae
                2,820     US$ 2,823       N/A     US$ 2,823          
   
Fannie Mae
                3,770     US$ 3,761       N/A     US$ 3,761          
   
Fannie Mae
                4,000     US$ 4,006       N/A     US$ 4,006          
   
Fannie Mae
                4,000     US$ 3,993       N/A     US$ 3,993          
   
Fannie Mae
                3,000     US$ 2,985       N/A     US$ 2,985          
   
Fed Hm Ln Pc Pool 1b2830
                2,261     US$ 2,330       N/A     US$ 2,330          
   
Fed Hm Ln Pc Pool 1g0115
                2,260     US$ 2,275       N/A     US$ 2,275          
   
Fed Hm Ln Pc Pool 1k1210
                1,714     US$ 1,771       N/A     US$ 1,771          
   
Fed Hm Ln Pc Pool 780741
                2,071     US$ 2,099       N/A     US$ 2,099          
   
Federal Farm Cr Bks
                2,250     US$ 2,253       N/A     US$ 2,253          
   
Federal Farm Cr Bks
                2,000     US$ 2,110       N/A     US$ 2,110          
   
Federal Farm Credit Bank
                1,000     US$ 999       N/A     US$ 999          
   
Federal Farm Credit Bank
                4,000     US$ 3,993       N/A     US$ 3,993          
   
Federal Farm Credit Bank
                4,020     US$ 4,007       N/A     US$ 4,007          
   
Federal Farm Credit Bank
                5,000     US$ 4,998       N/A     US$ 4,998          
   
Federal Farm Credit Bank
                3,100     US$ 3,101       N/A     US$ 3,101          
   
Federal Farm Credit Bank
                2,200     US$ 2,249       N/A     US$ 2,249          
   
Federal Home Ln Mtg Corp.
                4,717     US$ 4,671       N/A     US$ 4,671          
   
Federal Home Ln Mtg Corp.
                2,004     US$ 2,093       N/A     US$ 2,093          
   
Federal Home Ln Mtg Corp.
                3,630     US$ 3,796       N/A     US$ 3,796          
   
Federal Home Ln Mtg Corp.
                3,002     US$ 3,101       N/A     US$ 3,101          
   
Federal Home Ln Mtg Corp.
                2,414     US$ 2,515       N/A     US$ 2,515          
   
Federal Home Ln Mtg Corp.
                1,945     US$ 1,979       N/A     US$ 1,979          
   
Federal Home Ln Mtg Corp.
                1,837     US$ 1,870       N/A     US$ 1,870          
   
Federal Home Ln Mtg Corp.
                2,072     US$ 2,157       N/A     US$ 2,157          
   
Federal Home Ln Mtg Corp.
                3,681     US$ 3,916       N/A     US$ 3,916          
   
Federal Home Ln Mtg Corp.
                2,300     US$ 2,302       N/A     US$ 2,302          
   
Federal Home Ln Mtg Corp. Multi
                4,197     US$ 4,251       N/A     US$ 4,251          
   
Federal Home Loan Bank
                5,000     US$ 5,005       N/A     US$ 5,005          
   
Federal Home Loan Bank
                4,700     US$ 4,715       N/A     US$ 4,715          
   
Federal Home Loan Bank
                5,000     US$ 4,993       N/A     US$ 4,993          
   
Federal Home Loan Bank
                8,000     US$ 7,991       N/A     US$ 7,991          
   
Federal Home Loan Bank
                12,700     US$ 12,694       N/A     US$ 12,694          
   
Federal Home Loan Bank
                3,310     US$ 3,312       N/A     US$ 3,312          
   
Federal Home Loan Bank
                4,000     US$ 4,009       N/A     US$ 4,009          
   
Federal Home Loan Bank
                3,000     US$ 3,009       N/A     US$ 3,009          
   
Federal Home Loan Bank
                3,000     US$ 3,000       N/A     US$ 3,000          
   
Federal Home Loan Mtg Corp.
                3,684     US$ 3,660       N/A     US$ 3,660          
   
Federal Home Loan Mtg Corp.
                1,091     US$ 1,105       N/A     US$ 1,105          
   
Federal Home Loan Mtg Corp.
                1,745     US$ 1,781       N/A     US$ 1,781          
   
Federal National Mort Assoc
                1,713     US$ 1,753       N/A     US$ 1,753          
   
Federal National Mort Assoc
                1,192     US$ 1,206       N/A     US$ 1,206          
   
Federal Natl Mtg Assn Gtd
                3,151     US$ 3,261       N/A     US$ 3,261          
   
Federal Natl Mtg Assn Gtd Remi
                2,714     US$ 2,838       N/A     US$ 2,838          
(Continued)

- 50 -


 

                                                             
                        March 31, 2010        
                                                Market Value or Net        
                        Shares/Units   Carrying Value   Percentage of   Asset Value        
Held Company Name   Marketable Securities Type and Name   Relationship with the Company   Financial Statement Account   (In Thousands)   (US$ in Thousands)   Ownership (%)   (US$ in Thousands)   Note
TSMC Global  
Federal Natl Mtg Assn Gtd Remi
        Available-for-sale financial assets     2,235     US$ 2,281       N/A     US$ 2,281          
   
Federal Natl Mtg Assn Mtn
                2,377     US$ 2,475       N/A     US$ 2,475          
   
Federal Natl Mtg Assn Remic
                2,377     US$ 2,439       N/A     US$ 2,439          
   
Federal Natl Mtge Assn
                1,905     US$ 1,998       N/A     US$ 1,998          
   
Fhr 3087 Jb
                2,242     US$ 2,342       N/A     US$ 2,342          
   
Fnma Pool 745688
                1,957     US$ 1,993       N/A     US$ 1,993          
   
Fnma Pool 790772
                1,393     US$ 1,445       N/A     US$ 1,445          
   
Fnma Pool 819649
                2,177     US$ 2,200       N/A     US$ 2,200          
   
Fnma Pool 829989
                1,990     US$ 2,063       N/A     US$ 2,063          
   
Fnma Pool 846233
                2,102     US$ 2,149       N/A     US$ 2,149          
   
Fnma Pool 870884
                2,223     US$ 2,325       N/A     US$ 2,325          
   
Fnma Pool 879908
                1,844     US$ 1,917       N/A     US$ 1,917          
   
Fnr 2005 47 HA
                2,461     US$ 2,570       N/A     US$ 2,570          
   
Fnr 2006 60 CO
                2,537     US$ 2,605       N/A     US$ 2,605          
   
Fnr 2009 70 NT
                2,391     US$ 2,479       N/A     US$ 2,479          
   
Freddie Mac
                1,750     US$ 1,752       N/A     US$ 1,752          
   
Freddie Mac
                10,420     US$ 10,400       N/A     US$ 10,400          
   
Freddie Mac
                8,000     US$ 7,997       N/A     US$ 7,997          
   
Freddie Mac
                4,500     US$ 4,493       N/A     US$ 4,493          
   
Freddie Mac
                7,000     US$ 6,991       N/A     US$ 6,991          
   
Freddie Mac
                4,500     US$ 4,496       N/A     US$ 4,496          
   
Freddie Mac
                1,425     US$ 1,424       N/A     US$ 1,424          
   
Gnma II Pool 082431
                1,988     US$ 2,024       N/A     US$ 2,024          
   
Gnr 2008 9 SA
                2,872     US$ 2,865       N/A     US$ 2,865          
   
Gnr 2009 45 AB
                6,796     US$ 7,073       N/A     US$ 7,073          
   
 
                                                       
   
Government bond
                                                       
   
United States Treas Nts
        Available-for-sale financial assets     4,800     US$ 4,819       N/A     US$ 4,819          
   
US Treasury N/B
                43,900     US$ 43,809       N/A     US$ 43,809          
   
US Treasury N/B
                47,000     US$ 47,094       N/A     US$ 47,094          
   
US Treasury N/B
                16,800     US$ 16,887       N/A     US$ 16,887          
   
US Treasury N/B
                2,170     US$ 2,173       N/A     US$ 2,173          
   
US Treasury Sec
                8,000     US$ 8,031       N/A     US$ 8,031          
   
Wi Treasury Sec
                4,400     US$ 4,386       N/A     US$ 4,386          
   
Societe De Financement De Lec
        Held-to-maturity financial assets     15,000     US$ 15,000       N/A     US$ 15,078          
   
 
                                                       
   
Money market fund
                                                       
   
Ssga Cash Mgmt Global Offshore
        Available-for-sale financial assets     2,729     US$ 2,729       N/A     US$ 2,729          
   
 
                                                       
   
Corporate issued note
                                                       
   
Barclays U.S. Fdg LLC
        Available-for-sale financial assets     2,600     US$ 2,594       N/A     US$ 2,594          
(Concluded)

- 51 -


 

TABLE 2
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 2010
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
                                                                                                             
                                Beginning Balance   Acquisition   Disposal (Note 2)   Ending Balance (Note 3)
                                        Amount   Shares/Units   Amount           Amount   Carrying Value   Gain (Loss) or           Amount
    Marketable Securities Type and   Financial Statement           Nature of   Shares/Units   (US$ in   (In Thousands)   (US$ in   Shares/Units   (US$ in   (US$ in   Disposal (US$   Shares/Units   (US$ in
Company Name   Name   Account   Counter-party   Relationship   (In Thousands)   Thousands)   (Note 1)   Thousands)   (In Thousands)   Thousands)   Thousands)   in Thousands)   (In Thousands)   Thousands)
TSMC  
Stock
                                                                                                       
   
Motech
 
Investments accounted for using equity method
       
Investee accounted for using equity method
        $       75,316     $ 6,228,661           $     $     $       75,316     $ 6,210,916  
TSMC Global  
Corporate bond
                                                                                                       
   
American Honda Fin Corp. Mtn
 
Available-for-sale financial assets
                            4,000     US$ 3,985                               4,000     US$ 3,974  
   
Anz National Intl Ltd.
                                  3,500     US$ 3,515                               3,500     US$ 3,507  
   
AT+T Wireless
                                  3,500     US$ 3,979                               3,500     US$ 3,950  
   
Bank of America
                                  2,900     US$ 3,121                               2,900     US$ 3,121  
   
Bank of America Corp. Fdic Gtd
                                  3,400     US$ 3,548                               3,400     US$ 3,533  
   
Bank of Nova Scotia
                                  5,000     US$ 5,000                               5,000     US$ 4,998  
   
Bank of Scotland Plc
                                  4,000     US$ 3,984                               4,000     US$ 3,991  
   
Barclays Bank Plc
                                  12,000     US$ 12,035                               12,000     US$ 11,995  
   
Bbva US Senior SA Uniper
                                  4,745     US$ 4,744                               4,745     US$ 4,743  
   
Berkshire Hathaway Inc. Del
                                  3,500     US$ 3,500                               3,500     US$ 3,513  
   
Boeing Cap Corp.
                                  2,925     US$ 3,235                               2,925     US$ 3,219  
   
Citibank NA
                                  4,020     US$ 4,021                               4,020     US$ 4,017  
   
Citibank NA
                      5,000     US$ 4,996                   5,000     US$ 5,023     US$ 4,995     US$ 28              
   
Citigroup Funding Inc.
                                  6,000     US$ 6,040                               6,000     US$ 6,043  
   
Countrywide Finl Corp.
                                  4,000     US$ 4,291                               4,000     US$ 4,252  
   
Dexia Credit Local
                                  6,000     US$ 6,000                               6,000     US$ 5,998  
   
Dexia Credit Local SA NY
                                  5,000     US$ 5,000                               5,000     US$ 5,004  
   
Georgia Pwr Co.
                                  6,000     US$ 6,000                               6,000     US$ 6,012  
   
Household Fin Corp.
                                  4,330     US$ 4,781                               4,330     US$ 4,742  
   
HSBC Fin Corp.
                                  2,900     US$ 3,142                               2,900     US$ 3,119  
   
IBM Corp.
                      1,800     US$ 1,796       4,300     US$ 4,302                               6,100     US$ 6,102  
   
Intl Bk Recon + Develop
                                  5,000     US$ 5,014                               5,000     US$ 5,013  
   
John Deer Capital Corp. Fdic GT
                                  3,500     US$ 3,634                               3,500     US$ 3,621  
   
JP Morgan Chase + Co.
                                  5,000     US$ 5,000                               5,000     US$ 5,025  
   
Landwirtsch Rentenbank
                                  3,800     US$ 3,800       3,800     US$ 3,801     US$ 3,800     US$ 1              
   
Lloyds Tsb Bank Plc Ser 144A
                                  4,850     US$ 4,895                               4,850     US$ 4,877  
   
Merck + Co. Inc.
                                  4,000     US$ 4,066                               4,000     US$ 4,038  
   
Merrill Lynch + Co. Inc.
                                  4,691     US$ 4,603                               4,691     US$ 4,602  
   
Morgan Stanley Dean Witter
                                  8,000     US$ 8,796                               8,000     US$ 8,680  
   
Pepsico Inc.
                                  3,000     US$ 3,000                               3,000     US$ 3,001  
   
Royal Bk of Scotland Plc
                                  4,000     US$ 4,015                               4,000     US$ 4,004  
   
State Str Corp.
                      1,940     US$ 1,920       5,080     US$ 5,065                               7,020     US$ 7,005  
   
State Street Corp.
                                  5,500     US$ 5,585                               5,500     US$ 5,561  
   
Suncorp Metway Ltd.
                      5,000     US$ 5,170       3,800     US$ 3,933                               8,800     US$ 9,070  
   
Westpac Banking Corp.
                                  4,000     US$ 4,044                               4,000     US$ 4,008  
   
Commonwealth Bank of Australia
 
Held-to-maturity financial assets
                            25,000     US$ 25,000                               25,000     US$ 25,000  
   
Commonwealth Bank of Australia
                                  25,000     US$ 25,000                               25,000     US$ 25,000  
(Continued)

- 52 -


 

                                                                                                         
                            Beginning Balance   Acquisition   Disposal (Note 2)   Ending Balance (Note 3)
                                    Amount   Shares/Units   Amount           Amount   Carrying Value   Gain (Loss) or        
    Marketable Securities Type and   Financial Statement           Nature of   Shares/Units   (US$ in   (In Thousands)   (US$ in   Shares/Units   (US$ in   (US$ in   Disposal (US$   Shares/Units   Amount (US$
Company Name   Name   Account   Counter-party   Relationship   (In Thousands)   Thousands)   (Note 1)   Thousands)   (In Thousands)   Thousands)   Thousands)   in Thousands)   (In Thousands)   in Thousands)
TSMC Global
  Agency bond                                                                                                    
 
  Fannie Mae   Available-for-sale financial assets                     US$       8,000     US$ 7,995           US$     US$     US$       8,000     US$ 7,995  
 
  Fannie Mae                               3,770     US$ 3,770                               3,770     US$ 3,761  
 
  Fannie Mae                               4,000     US$ 4,014                               4,000     US$ 4,006  
 
  Fannie Mae                               4,000     US$ 4,011                               4,000     US$ 3,993  
 
  Federal Farm Credit Bank                               4,000     US$ 3,995                               4,000     US$ 3,993  
 
  Federal Farm Credit Bank                               4,020     US$ 4,017                               4,020     US$ 4,007  
 
  Federal Farm Credit Bank                               5,000     US$ 4,997                               5,000     US$ 4,998  
 
  Federal Farm Credit Bank                               3,100     US$ 3,100                               3,100     US$ 3,101  
 
  Fed Home Ln Bank                   11,000     US$ 11,028                   11,000     US$ 11,049     US$ 11,038     US$ 11              
 
  Fed Home Ln Mtg Corp.                               4,289     US$ 4,282       4,289     US$ 4,292     US$ 4,282     US$ 10              
 
  Fed Home Ln Mtg Corp.                               4,717     US$ 4,719                               4,717     US$ 4,671  
 
  Fed Home Ln Mtg Corp.                               3,840     US$ 4,027                               3,630     US$ 3,796  
 
  Fed Home Ln Mtg Corp.                               3,720     US$ 3,953                               3,681     US$ 3,916  
 
  Fed Home Ln Mtg Corp. Multi                               4,197     US$ 4,261                               4,197     US$ 4,251  
 
  Federal Home Loan Bank                   10,000     US$ 9,987                   10,000     US$ 10,007     US$ 9,996     US$ 11              
 
  Federal Home Loan Bank                   8,000     US$ 7,992                   8,000     US$ 8,009     US$ 8,002     US$ 7              
 
  Federal Home Loan Bank                               5,000     US$ 5,009                               5,000     US$ 5,005  
 
  Federal Home Loan Bank                   10,000     US$ 10,012                   10,000     US$ 10,047     US$ 10,035     US$ 12              
 
  Federal Home Loan Bank                               5,000     US$ 4,996                               5,000     US$ 4,993  
 
  Federal Home Loan Bank                               8,000     US$ 7,996                               8,000     US$ 7,991  
 
  Federal Home Loan Bank                               4,000     US$ 4,012                               4,000     US$ 4,009  
 
  Federal Home Loan Mtg Corp.                               3,684     US$ 3,682                               3,684     US$ 3,660  
 
  Federal Natl Mtg Assn                   4,000     US$ 4,228                   4,000     US$ 4,205     US$ 4,261     US$ (56 )              
 
  Federal Natl Mtg Assn Gtd                               3,343     US$ 3,466                               3,151     US$ 3,261  
 
  Freddie Mac                               10,420     US$ 10,412                               10,420     US$ 10,400  
 
  Freddie Mac                               8,000     US$ 8,002                               8,000     US$ 7,997  
 
  Freddie Mac                               7,000     US$ 6,994                               7,000     US$ 6,991  
 
  Freddie Mac                               4,500     US$ 4,507                               4,500     US$ 4,496  
 
  Gnr 2009 45 AB                               7,004     US$ 7,305                               6,796     US$ 7,073  
 
                                                                                                       
 
  Government bond                                                                                                    
 
  United States Treas Nts   Available-for-sale financial assets                             24,000     US$ 24,116       24,000     US$ 24,105     US$ 24,116     US$ (11 )              
 
  United States Treas Nts                               45,070     US$ 45,309       40,270     US$ 40,440     US$ 40,484     US$ (44 )       4,800     US$ 4,819  
 
  US Treasury N/B                               43,900     US$ 43,832                               43,900     US$ 43,809  
 
  US Treasury N/B                   21,400     US$ 21,394                   21,400     US$ 21,487     US$ 21,416     US$ 71              
 
  US Treasury N/B                               53,000     US$ 53,069       6,000     US$ 6,018     US$ 6,008     US$ 10       47,000     US$ 47,094  
 
  US Treasury N/B                               16,800     US$ 16,889                               16,800     US$ 16,887  
 
  US Treasury Nts                   37,700     US$ 39,012                   37,700       38,784       39,346     US$ (562 )              
 
  US Treasury Sec                               8,000     US$ 8,040                               8,000     US$ 8,031  
 
  US Treasury Sec                               4,400     US$ 4,380                               4,400     US$ 4,386  
 
  Money market fund                                                                                                    
 
  Ssga Cash Mgmt Global Offshore   Available-for-sale financial assets                 8,858     US$ 8,858       204,079     US$ 204,079       210,208     US$ 210,208     US$ 210,208             2,729     US$ 2,729  
 
                                                                                                       
 
  Corporate issued note                                                                                                    
 
  Barclays U.S. Fdg LLC   Available-for-sale financial assets                 4,500     US$ 4,489                   1,900     US$ 1,895     US$ 1,895             2,600     US$ 2,594  
 
Note 1: The shares/units and amount of marketable securities acquired do not include stock dividends from investees.
 
Note 2: The data for marketable securities disposed exclude bonds maturities.
 
Note 3: The ending balance includes the amortization of premium/discount on bonds investments, unrealized valuation gains/ losses on financial assets, translation adjustments, equity in earnings/losses of equity method investees and other adjustments to long-term investment using equity method.
(Concluded)

- 53 -


 

TABLE 3
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
ACQUISITION OF INDIVIDUAL REAL ESTATE PROPERTIES AT COSTS OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 2010
(Amounts in Thousands of New Taiwan Dollars)
                                                                             
Company   Types of       Transaction           Nature of   Prior Transaction of Related Counter-party           Price   Purpose of   Other
Name   Property   Transaction Date   Amount   Payment Term   Counter-party   Relationships   Owner   Relationships   Transfer Date   Amount   Reference   Acquisition   Terms
TSMC   Fab  
January 28, 2010 to February 24, 2010
  $ 201,231     By the construction progress   China Steel Structure Co., Ltd.           N/A       N/A       N/A       N/A     Public bidding   Manufacturing purpose   None
    Fab  
January 28, 2010 to March 28, 2010
    126,825     By the construction progress   Fu Tsu Construction Co., Ltd.           N/A       N/A       N/A       N/A     Public bidding   Manufacturing purpose   None
    Fab  
February 19, 2010
    426,000     By the construction progress   Da Cin Constructure Co., Ltd.           N/A       N/A       N/A       N/A     Public bidding   Manufacturing purpose   None

- 54 -


 

TABLE 4
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
TOTAL PURCHASES FROM OR SALES TO RELATED PARTIES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
FOR THE THREE MONTHS ENDED MARCH 31, 2010
(Amounts in Thousands of New Taiwan Dollars)
     
                                                                         
                                                    Notes/Accounts Payable or    
            Transaction Details   Abnormal Transaction   Receivable    
            Purchases/           % to       Unit Price   Payment Terms           % to    
Company Name   Related Party   Nature of Relationships   Sales   Amount   Total   Payment Terms   (Note)   (Note)   Ending Balance   Total   Note
TSMC   TSMC North America  
Subsidiary
  Sales   $ 48,676,679       53     Net 30 days after invoice
   date
              $ 22,055,122       49          
    GUC  
Investee with a controlling financial interest
  Sales     320,263           Net 30 days after monthly
   closing
                205,381                
    WaferTech  
Indirect subsidiary
  Purchases     1,636,493       17     Net 30 days after monthly
   closing
                (647,205 )     6          
    TSMC China  
Subsidiary
  Purchases     1,577,962       16     Net 30 days after monthly
   closing
                (762,578 )     7          
    SSMC  
Investee accounted for using equity method
  Purchases     1,041,954       10     Net 30 days after monthly
   closing
                (408,809 )     3          
    VIS  
Investee accounted for using equity method
  Purchases     960,978       10     Net 30 days after monthly
   closing
                (695,640 )     6          
       
 
                                                               
GUC   TSMC North America  
Same parent company
  Purchases     181,144       20     Net 30 days after invoice
   date/net 45 days after
   monthly closing
                (107,527 )     14          
       
 
                                                               
Xintec   OmniVision  
Parent company of director (represented for Xintec)
  Sales     725,568       75     Net 30 days after monthly
   closing
                368,052       70          
 
Note:   The sales prices and payment terms to related parties were not significantly different from those of sales to third parties. For other related party transactions, prices and terms were determined in accordance with mutual agreements.

- 55 -


 

TABLE 5
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL
MARCH 31, 2010
(Amounts in Thousands of New Taiwan Dollars)
                                                         
                                            Amounts Received    
                    Turnover Days   Overdue   in Subsequent   Allowance for Bad
Company Name   Related Party   Nature of Relationships   Ending Balance   (Note 1)   Amounts   Action Taken   Period   Debts
TSMC   TSMC North America  
Subsidiary
  $ 22,063,932       41     $ 6,442,143           $ 8,998,856     $  
    GUC  
Investee with a controlling financial interest
    205,381       77       322             91,107        
    TSMC China  
Subsidiary
    123,354     (Note 2)                        
    VIS  
Investee accounted for using equity method
    113,100     (Note 2)     19,545                    
Xintec   OmniVision  
Parent company of director (represented for Xintec)
    368,052       48       40             136,161        
 
Note 1: The calculation of turnover days excludes other receivables from related parties.
 
Note 2: The ending balance primarily consisted of other receivables, which is not applicable for the calculation of turnover days.

- 56 -


 

     
TABLE 6
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES OVER WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE
MARCH 31, 2010
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
                                                                         
                                                                Equity in the    
                Original Investment Amount   Balance as of March 31, 2010   Net Income   Earnings    
                March 31,   December 31,                   Carrying   (Losses) of the   (Losses)    
                2010   2009                   Value   Investee   (Note 1)    
                (Foreign   (Foreign                   (Foreign   (Foreign   (Foreign    
                Currencies in   Currencies in   Shares (In   Percentage of   Currencies in   Currencies in   Currencies in    
Investor Company   Investee Company   Location   Main Businesses and Products   Thousands)   Thousands)   Thousands)   Ownership   Thousands)   Thousands)   Thousands)   Note
TSMC   TSMC Global   Tortola, British Virgin Islands  
Investment activities
  $ 42,327,245     $ 42,327,245       1       100     $ 45,245,474     $ 119,194     $ 119,194     Subsidiary
           
 
                                                           
    TSMC Partners   Tortola, British Virgin Islands  
Investing in companies involved in the design, manufacture, and other related business in the semiconductor industry.
    31,456,130       31,456,130       988,268       100       32,637,828       299,571       299,571     Subsidiary
    VIS   Hsin-Chu, Taiwan  
Research, design, development, manufacture, packaging, testing and sale of memory integrated circuits, LSI, VLSI and related parts
    13,232,288       13,232,288       628,223       37       9,359,350       220,278       (18,084 )   Investee accounted for using equity method
    SSMC   Singapore  
Fabrication and supply of integrated circuits
    5,120,028       5,120,028       314       39       6,308,810       615,379       189,456     Investee accounted for using equity method
    Motech   Taipei, Taiwan  
Manufacturing and sales of solar cells, crystalline silicon solar cell, and test and measurement instruments and design and construction of solar power systems
    6,228,661             75,316       20       6,210,916       301,572       (16,686 )   Investee accounted for using equity method
    TSMC China   Shanghai, China  
Manufacturing and selling of integrated circuits at the order of and pursuant to product design specifications provided by customers
    12,180,367       12,180,367             100       2,787,558       (146,829 )     (151,898 )   Subsidiary
    TSMC North America   San Jose, California, U.S.A.  
Selling and marketing of integrated circuits and semiconductor devices
    333,718       333,718       11,000       100       2,726,868       21,174       21,174     Subsidiary
    Xintec   Taoyuan, Taiwan  
Wafer level chip size packaging service
    1,357,890       1,357,890       93,081       41       1,532,384       156,535       57,856     Investee with a controlling financial interest
    VTAF III   Cayman Islands  
Investing in new start-up technology companies
    1,772,789       1,703,163             98       1,351,399       (19,888 )     (19,490 )   Subsidiary
    VTAF II   Cayman Islands  
Investing in new start-up technology companies
    1,166,470       1,093,943             98       1,140,879       34,402       33,714     Subsidiary
(Note 3)
    GUC   Hsin-Chu, Taiwan  
Researching, developing, manufacturing, testing and marketing of integrated circuits
    386,568       386,568       46,688       35       1,039,348       113,610       40,139     Investee with a controlling financial interest
    Emerging Alliance   Cayman Islands  
Investing in new start-up technology companies
    965,414       959,044             99       303,768       (6,475 )     (6,442 )   Subsidiary
(Note 3)
    TSMC Europe   Amsterdam, the Netherlands  
Marketing and engineering supporting activities
    15,749       15,749             100       158,190       11,014       11,014     Subsidiary
(Note 3)
    TSMC Japan   Yokohama, Japan  
Marketing activities
    83,760       83,760       6       100       133,420       (145 )     (145 )   Subsidiary
(Note 3)
    TSMC Korea   Seoul, Korea  
Customer service and technical supporting activities
    13,656       13,656       80       100       19,460       535       535     Subsidiary
(Note 3)
           
 
                                                           
TSMC Partners   TSMC Development   Delaware, U.S.A.  
Investment activities
  US$ 0.001     US$ 0.001       1       100     US$ 350,118     US$ 9,731     Note 2   Subsidiary
    VisEra Holding Company   Cayman Islands  
Investing in companies involved in the design, manufacturing, and other related businesses in the semiconductor industry
  US$ 43,000     US$ 43,000       43,000       49     US$ 72,445     US$ 2,246     Note 2   Investee accounted for using equity method
    ISDF II   Cayman Islands  
Investing in new start-up technology companies
  US$ 21,415     US$ 21,415       21,415       97     US$ 13,670     US$ 30     Note 2   Subsidiary
    TSMC Technology   Delaware, U.S.A.  
Engineering support activities
  US$ 0.001     US$ 0.001       1       100     US$ 9,431     US$ 360     Note 2   Subsidiary
(Note 3)
    ISDF   Cayman Islands  
Investing in new start-up technology companies
  US$ 7,680     US$ 7,680       7,680       97     US$ 7,188     US$ (30 )     Note 2   Subsidiary
    TSMC Canada   Ontario, Canada  
Engineering support activities
  US$ 2,300     US$ 2,300       2,300       100     US$ 3,555     US$ 256     Note 2   Subsidiary
(Note 3)
    Mcube Inc. (Common Stock)   Delaware, U.S.A.  
Research, development, and sale of micro-semiconductor device
  US$ 800     US$ 800       5,333       70     US$ 529     US$ (1,493 )     Note 2   Investee accounted for using equity method
(Note 3)
    Mcube Inc. (Preferred Stock)   Delaware, U.S.A.  
Research, development, and sale of micro-semiconductor device
  US$ 1,000     US$ 1,000       1,000       10     US$ 949     US$ (1,493 )     Note 2   Investee accounted for using equity method
(Note 3)
(Continued)

- 57 -


 

     
                                                                     
                                                                Equity in the    
                Original Investment Amount   Balance as of March 31, 2010   Net Income   Earnings    
                March 31,   December 31,                   Carrying   (Losses) of the   (Losses)    
                2010   2009                   Value   Investee   (Note 1)    
                (Foreign   (Foreign                   (Foreign   (Foreign   (Foreign    
                Currencies in   Currencies in   Shares (In   Percentage of   Currencies in   Currencies in   Currencies in    
Investor Company   Investee Company   Location   Main Businesses and Products   Thousands)   Thousands)   Thousands)   Ownership   Thousands)   Thousands)   Thousands)   Note
TSMC Development   WaferTech   Washington, U.S.A.  
Manufacturing, selling, testing and computer-aided designing of integrated circuits and other semiconductor devices
  US$ 330,000     US$ 330,000       293,637       100     US$ 164,246     US$ 9,814     Note 2   Subsidiary
           
 
                                                       
VTAF III   Mutual-Pak Technology Co., Ltd.   Taipei, Taiwan  
Manufacturing and selling of electronic parts and researching, developing, and testing of RFID
  US$ 3,088     US$ 3,088       9,180       59     US$ 1,962     US$ (272 )     Note 2   Subsidiary
(Note 3)
    Aiconn Technology Corp.   Taipei, Taiwan  
Wholesaling telecommunication equipments, and manufacturing wired and wireless communication equipments
  US$ 1,777     US$ 1,777       4,500       42     US$ 487     US$ (194 )     Note 2   Investee accounted for using equity method
(Note 3)
    Growth Fund   Cayman Islands  
Investing in new start-up technology companies
  US$ 1,650     US$ 1,550             100     US$ 892     US$ (31 )     Note 2   Subsidiary
(Note 3)
    VTA Holdings   Delaware, U.S.A.  
Investing in new start-up technology companies
                      62                 Note 2   Subsidiary
(Note 3)
           
 
                                                       
VTAF II   VTA Holdings   Delaware, U.S.A.  
Investing in new start-up technology companies
                      31                 Note 2   Subsidiary
(Note 3)
           
 
                                                       
GUC   GUC-NA   U.S.A.  
Consulting services in main products
  US$ 800     US$ 800       800       100     $ 39,313     $ 929     Note 2   Subsidiary
    GUC-BVI   British Virgin Islands  
Investment activities
  US$ 550     US$ 550       550       100       17,351       (13 )   Note 2   Subsidiary
(Note 3)
    GUC-Japan   Japan  
Consulting services in main products
  JPY 30,000     JPY 30,000       1       100       13,160       508     Note 2   Subsidiary
(Note 3)
    GUC-Europe   The Netherlands  
Consulting services in main products
  EUR 100     EUR 100             100       4,860       30     Note 2   Subsidiary
(Note 3)
           
 
                                                       
GUC-BVI   GUC-Shanghai   Shanghai, China  
Consulting services in main products
  US$ 500                   100       15,902           Note 2   Subsidiary
(Note 3)
           
 
                                                       
Emerging Alliance   VTA Holdings   Delaware, U.S.A.  
Investing in new start-up technology companies
                      7                 Note 2   Subsidiary
(Note 3)
 
Note 1: Equity in earnings/losses of investees include the effect of unrealized gross profit from affiliates.
 
Note 2: The equity in the earnings/losses of the investee company is not reflected herein as such amount is already included in the equity in the earnings/ losses of the investor company.
 
Note 3: Equity in earnings/losses was determined based on the unreviewed financial statements.
(Concluded)

- 58 -


 

TABLE 7
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
INFORMATION OF INVESTMENT IN MAINLAND CHINA
FOR THE THREE MONTHS ENDED MARCH 31, 2010
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)
                                                                                     
                                                Accumulated                            
                        Accumulated                   Outflow of                            
                        Outflow of                   Investment from                            
                        Investment from                   Taiwan                           Accumulated
                        Taiwan as of                   as of                           Inward
            Total Amount of       January 1, 2010                   March 31, 2010           Equity in the   Carrying Value   Remittance of
Investor   Investee   Main Businesses and   Paid-in Capital   Method of   (US$ in   Investment Flows   (US$ in   Percentage of   Earnings   as of   Earnings as of
Company   Company   Products   (Thousand)   Investment   Thousand)   Outflow   Inflow   Thousand)   Ownership   (Losses)   March 31, 2010   March 31, 2010
TSMC   TSMC  
Manufacturing and selling of
  $ 12,180,367     (Note 1)   $ 12,180,367     $     $     $ 12,180,367       100 %   $ (151,898 )   $ 2,787,558     $  
    China  
integrated circuits at the
order of and pursuant to
product design
specifications provided by
customers
  (RMB 3,070,623)       (US $371,000)                   (US $371,000)           (Note 3)                
       
 
                                                                           
GUC   GUC-Shanghai  
Consulting services in main products
    16,160     (Note 2)           16,160             16,160       100 %           15,902        
       
 
  (US $500)               (US$500)           (US$500)           (Note 4)                
                         
    Accumulated Investment in Mainland China   Investment Amounts Authorized by    
    as of March 31, 2010   Investment Commission, MOEA   Upper Limit on Investment
Investor Company   (US$ in Thousand)   (US$ in Thousand)   (US$ in Thousand)
TSMC
  $ 12,180,367     $ 12,180,367     $ 12,180,367  
 
  (US$371,000)   (US$371,000)   (US$371,000)
 
                       
GUC
    16,160       16,160       1,765,057  
 
      (US$500)       (US$500)       (Note 5)
 
Note 1: TSMC directly invested US$371,000 thousand in TSMC China.
 
Note 2: GUC, TSMC’s investee with a controlling financial interest, indirectly invested in GUC-Shanghai through GUC-BVI.
 
Note 3: Amount was recognized based on the reviewed financial statements.
 
Note 4: Equity in earnings/losses was determined based on the unreviewed financial statements.
 
Note 5: Subject to 60% of net asset value of GUC according to the revised “Guidelines Governing the Approval of Investment or Technical Cooperation in Mainland China” issued by the Investment Commission.

- 59 -


 

TABLE 8
Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries
INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS
(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Specified)
A. For the three months ended March 31, 2010
                                             
                    Intercompany Transactions
            Nature of                       Percentage of
            Relationship               Terms   Consolidated Total Gross
No.   Company Name   Counter Party   (Note 1)   Financial Statements Item   Amount   (Note 2)   Sales or Total Assets
    TSMC   TSMC North America     1    
Sales
  $ 48,676,679             51 %
                   
Receivables from related parties
    22,055,122             4 %
                   
Other receivables from related parties
    8,810              
                   
Payables to related parties
    8,667              
        TSMC China     1    
Sales
    1,409              
                   
Purchases
    1,557,962             2 %
                   
Marketing expenses — commission
    11,446              
                   
Sales of property, plant, and equipment
    11,224              
                   
Purchase of property, plant, and equipment
    14,498              
                   
Gain on disposal of property, plant and equipment, net
    23,866              
                   
Technical service income
    1,560                
                   
Other receivables from related parties
    123,354              
                   
Payables to related parties
    762,578              
                   
Deferred debits
    4,672              
        TSMC Japan     1    
Marketing expenses — commission
    59,644              
                   
Payables to related parties
    22,869              
0       TSMC Europe     1    
Marketing expenses — commission
    98,913              
                   
Research and development expenses
    6,352              
                   
Payables to related parties
    35,186              
        TSMC Korea     1    
Marketing expenses — commission
    4,285              
                   
Payables to related parties
    1,333              
        GUC     1    
Sales
    320,263              
                   
Receivables from related parties
    205,381              
        TSMC Technology     1    
Research and development expenses
    131,169              
                   
Payables to related parties
    129,058              
        WaferTech     1    
Sales
    1,648              
                   
Purchases
    1,636,493             2 %
                   
Purchase of property, plant, and equipment
    9,624              
                   
Other receivables from related parties
    4,703              
                   
Payables to related parties
    647,205              
        TSMC Canada     1    
Research and development expenses
    45,209              
                   
Payables to related parties
    15,983              
        Xintec     1    
Manufacturing overhead
    45,546              
                   
Payables to related parties
    27,979              
(Continued)

- 60 -


 

                                             
                    Intercompany Transactions
            Nature of                       Percentage of
            Relationship               Terms   Consolidated Total Gross
No.   Company Name   Counter Party   (Note 1)   Financial Statements Item   Amount   (Note 2)   Sales or Total Assets
    GUC   TSMC North America     3    
Purchases
  $ 181,144              
                   
Manufacturing overhead
    61,478              
                   
Payables to related parties
    107,527              
1       GUC-NA     3    
Operating expenses
    44,847              
                   
Accrued Expense
    13,917              
        GUC-Japan     3    
Operating expenses
    10,706              
                   
Accrued Expense
    3,472              
        GUC-Shanghai     3    
Other receivables from related parties
    5,960              
 
Note 1: No. 1 represents the transactions from parent company to subsidiary.
 
No. 3 represents the transactions between subsidiaries.
 
Note 2: The sales prices and payment terms of intercompany sales are not significantly different from those to third parties. For other intercompany transactions, prices and terms are determined in accordance with mutual agreements.
(Continued)

- 61 -


 

B.   For the three months ended March 31, 2009
                                             
                    Intercompany Transactions
            Nature of                       Percentage of
            Relationship               Terms   Consolidated Total Gross
No.   Company Name   Counter Party   (Note 1)   Financial Statements Item   Amount   (Note 2)   Sales or Total Assets
    TSMC   TSMC North America     1    
Sales
  $ 22,964,954             56 %
                   
Receivables from related parties
    10,033,427             2 %
                   
Other receivables from related parties
    3,041              
                   
Payables to related parties
    11,104              
        TSMC China     1    
Purchases
    447,631             1 %
                   
Gain on disposal of property, plant and equipment
    46,722              
                   
Technical service income
    1,077              
                   
Other receivables from related parties
    107,608              
                   
Payables to related parties
    193,560              
                   
Deferred credits
    137,174              
        TSMC Japan     1    
Marketing expenses — commission
    49,114              
                   
Payables to related parties
    16,573              
0       TSMC Europe     1    
Marketing expenses — commission
    71,736              
                   
Research and development expenses
    1,808              
                   
Payables to related parties
    27,311              
        TSMC Korea     1    
Marketing expenses — commission
    3,375              
        GUC     1    
Sales
    282,542             1 %
                   
Research and development expenses
    17,970              
                   
Receivables from related parties
    148,475              
        TSMC Technology     1    
Research and development expenses
    85,917              
                   
Payables to related parties
    97,970              
        WaferTech     1    
Sales
    2,237              
                   
Purchases
    739,712             2 %
                   
Other receivables from related parties
    2,220              
                   
Payables to related parties
    237,033              
        TSMC Canada     1    
Research and development expenses
    37,632              
                   
Payables to related parties
    12,417              
        Xintec     1    
Other receivables from related parties
    59,862              
        Emerging Alliance     1    
Other receivables from related parties
    5,314              
1   TSMC Partners   TSMC International     3    
Other receivables
    8,411,416             2 %
                   
Deferred revenue
    8,411,416             2 %
2   GUC   TSMC North America     3    
Purchases
    124,079              
                   
Manufacturing expenses
    88,628              
                   
Payables to related parties
    161,756              
        GUC-NA     3    
Operating expenses
    35,321              
                   
Accrued Expenses
    12,240              
        GUC-Japan     3    
Operating expenses
    10,187              
                   
Accrued expenses
    3,145              
        GUC-Europe     3    
Operating expenses
    2,561              
                   
Accrued expenses
    2,014              
 
Note 1: No. 1 represents the transactions from parent company to subsidiary.
 
              No. 3 represents the transactions between subsidiaries.
 
Note 2: The sales prices and payment terms of intercompany sales are not significantly different from those to third parties. For other intercompany transactions, prices and terms are determined in accordance with mutual agreements.
(Concluded)

- 62 -


 

SIGNATURES
     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
         
  Taiwan Semiconductor Manufacturing Company Ltd.
 
 
Date: April 27, 2010  By   /s/ Lora Ho    
    Lora Ho   
    Vice President & Chief Financial Officer