6-K 1 d6k.txt FORM 6-K ================================================================================ 1934 Act Registration No. 1-14700 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ---------- FORM 6-K REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 OF THE SECURITIES EXCHANGE ACT OF 1934 For the month of October 2003 ---------- Taiwan Semiconductor Manufacturing Company Ltd. (Translation of Registrant's Name Into English) No. 8, Li-Hsin Rd. 6, Science-Based Industrial Park, Hsin-Chu, Taiwan (Address of Principal Executive Offices) ---------- (Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.) Form 20-F [X] Form 40-F [_] (Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.) Yes [_] No [X] (If "Yes" is marked, indicated below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82: _______.) ================================================================================ SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Taiwan Semiconductor Manufacturing Company Ltd. Date: October 30,2003 By /s/ Lora Ho -------------------------------------- Lora Ho Vice President & Chief Financial Officer Taiwan Semiconductor Manufacturing Company Ltd. Financial Statements for the Nine Months Ended September 30, 2003 and 2002 Together with Independent Accountants' Report Readers are advised that the original version of these financial statements is in Chinese. This English translation is solely for the readers' convenience. If there is any conflict between these financial statements and the Chinese version or any difference in the interpretation of the two versions, the Chinese-language financial statements shall prevail. English Translation of a Report Originally Issued in Chinese ------------------------------------------------------------ INDEPENDENT ACCOUNTANTS' REPORT The Board of Directors and Shareholders Taiwan Semiconductor Manufacturing Company Ltd. We have reviewed the accompanying balance sheets of Taiwan Semiconductor Manufacturing Company Ltd. as of September 30, 2003 and 2002 and the related statements of income and cash flows for the nine months then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to issue a report on these financial statements based on our reviews. We conducted our reviews in accordance with Statement on of Auditing Standards No. 36 "Review of Financial Statements" issued by the Auditing Committee of the Accounting Research and Development Foundation of the Republic of China. A review consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in Republic of China, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with accounting principles generally accepted in the Republic of China. As disclosed in Note 3 to the financial statements, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 30, "Accounting for Treasury Stock" on January 1, 2002. SFAS No. 30 requires a parent company to record stock held by its subsidiary as treasury stock. Deloitte & Touche (T N Soong & Co and Deloitte & Touche (Taiwan) Established Deloitte & Touche Effective June 1, 2003) Taipei, Taiwan The Republic of China October 16, 2003 Notice to Readers ----------------- The accompanying financial statements are intended only to present the financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to review such financial statements are those generally accepted and applied in the Republic of China. -1- English Translation of Financial Statements Originally Issued in Chinese ------------------------------------------------------------------------ TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. BALANCE SHEETS (UNAUDITED) SEPTEMBER 30, 2003 AND 2002 (In Thousand New Taiwan Dollars, Except Par Value) --------------------------------------------------------------------------------
2003 2002 -------------------- -------------------- ASSETS Amount % Amount % -------------- ---- -------------- ---- CURRENT ASSETS Cash and cash equivalents (Notes 2 and 4) $ 82,730,782 22 $ 64,516,454 17 Short-term investments (Notes 2 and 5) 11,664,302 3 -- -- Receivables from related parties (Note 18) 15,295,065 4 11,221,381 3 Notes receivable 43,709 -- 30,889 -- Accounts receivable 12,704,943 3 10,539,193 3 Allowance for doubtful receivables (Note 2) ( 1,021,399) -- ( 1,149,973) -- Allowance for sales returns and others (Note 2) ( 2,055,142) ( 1) ( 2,736,996) ( 1) Other financial assets 1,192,351 -- 1,069,861 -- Inventories--net (Notes 2 and 6) 11,813,455 3 13,321,458 3 Deferred income taxes (Notes 2 and 13) 2,117,000 1 2,125,541 1 Prepaid expenses and other current assets (Notes 2 and 21) 688,212 -- 1,466,825 -- -------------- ---- -------------- ---- Total current assets 135,173,278 35 100,404,633 26 -------------- ---- -------------- ---- LONG-TERM INVESTMENTS (Notes 2, 3, 7 and 21) Equity method 33,932,303 9 35,292,167 9 Cost method 464,629 -- 915,750 1 Funds 272,024 -- 199,599 -- Allowance for losses -- -- ( 58,588) -- -------------- ---- -------------- ---- Total Long-term Investments 34,668,956 9 36,348,928 10 -------------- ---- -------------- ---- PROPERTY, PLANT AND EQUIPMENT (Notes 2, 8 and 18) Cost Buildings 70,767,593 18 67,640,598 18 Machinery and equipment 324,426,114 85 284,024,938 75 Office equipment 6,077,495 2 5,779,890 2 -------------- ---- -------------- ---- Total cost 401,271,202 105 357,445,426 95 Accumulated depreciation ( 233,609,935) ( 61) ( 177,804,640) ( 47) Advance payments and construction in progress 24,632,558 6 37,864,711 10 -------------- ---- -------------- ---- Net property, plant and equipment 192,293,825 50 217,505,497 58 -------------- ---- -------------- ---- GOODWILL (Note 2) 2,351,634 1 2,700,024 1 -------------- ---- -------------- ---- OTHER ASSETS Deferred income taxes (Notes 2 and 13) 8,841,310 3 11,428,625 3 Deferred charges--net (Notes 2 and 9) 8,415,357 2 8,378,661 2 Refundable deposits (Notes 18 and 20) 287,403 -- 579,147 -- Assets leased to others (Note 2) 85,072 -- 87,966 -- Idle asset (Note 2) 74,644 -- -- -- Miscellaneous -- -- 9,250 -- -------------- ---- -------------- ---- Total other assets 17,703,786 5 20,483,649 5 -------------- ---- -------------- ---- TOTAL ASSETS $ 382,191,479 100 $ 377,442,731 100 ============== ==== ============== ====
2003 2002 -------------------- -------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Amount % Amount % -------------- --- -------------- --- CURRENT LIABILITIES Payables to related parties (Note 18) $ 3,790,399 1 $ 2,830,264 1 Accounts payable 5,596,631 1 4,645,596 1 Payables to contractors and equipment suppliers 9,480,795 3 17,451,662 5 Accrued expenses and other current liabilities (Notes 2, 7, 11 and 21) 8,319,012 2 7,419,677 2 Current portion of bonds (Note 10) -- -- 9,000,000 2 -------------- --- -------------- --- Total current liabilities 27,186,837 7 41,347,199 11 -------------- --- -------------- --- LONG-TERM LIABILITIES Bonds payable (Note 10) 35,000,000 9 35,000,000 9 Other long-term payable (Notes 11 and 20) 3,660,493 1 3,648,931 1 -------------- --- -------------- --- Total long-term liabilities 38,660,493 10 38,648,931 10 -------------- --- -------------- --- OTHER LIABILITIES Accrued pension cost (Notes 2 and 12) 2,533,864 1 2,178,064 1 Guarantee deposits (Note 20) 838,864 -- 1,507,971 -- Deferred gain on sales and leaseback (Note 2) -- -- 153,237 -- -------------- --- -------------- --- Total other liabilities 3,372,728 1 3,839,272 1 -------------- --- -------------- --- Total liabilities 69,220,058 18 83,835,402 22 -------------- --- -------------- --- SHAREHOLDERS' EQUITY (Note 15) Capital stock--$10 par value Authorized: 24,600,000 thousand shares Issued: Preferred--1,300,000 thousand shares -- -- 13,000,000 4 Common--20,266,619 thousand shares in 2003 and 18,622,887 thousand shares in 2002 202,666,189 53 186,228,867 49 Capital surplus: Merger and others (Note 2) 56,797,280 15 56,961,753 15 Treasury stock (Note 3) 50,137 -- 43,036 -- Retained earnings: Appropriated as legal reserve 20,802,137 5 18,641,108 5 Appropriated as special reserve 68,945 -- -- -- Unappropriated earnings 34,226,657 9 19,598,315 5 Others: Unrealized loss on long-term investments (Note 2) ( 2,441) -- ( 68,960) -- Cumulative translation adjustments (Note 2) 5,921 -- 1,117,910 -- Treasury stock (at cost)--40,784 thousand shares in 2003 and 42,001 thousand shares in 2002 (Notes 2, 3 and 16) ( 1,643,404) -- ( 1,914,700) -- -------------- --- -------------- --- Total shareholders' equity 312,971,421 82 293,607,329 78 -------------- --- -------------- --- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 382,191,479 100 $ 377,442,731 100 ============== === ============== ===
The accompanying notes are an integral part of the financial statements. (With Deloitte & Touche report dated October 16, 2003) -2- English Translation of Financial Statements Originally Issued in Chinese ------------------------------------------------------------------------ TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. STATEMENTS OF INCOME (UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002 (In Thousand New Taiwan Dollars, Except Earnings Per Share) ================================================================================
2003 2002 --------------------- --------------------- Amount % Amount % -------------- ---- -------------- ---- GROSS SALES (Notes 2 and 18) $ 147,294,673 $ 122,717,952 SALES RETURNS AND ALLOWANCES (Note 2) ( 3,169,937) ( 2,910,766) -------------- -------------- NET SALES 144,124,736 100 119,807,186 100 COST OF SALES (Notes 14 and 18) 93,940,362 65 78,522,219 65 -------------- ---- -------------- ---- GROSS PROFIT 50,184,374 35 41,284,967 35 -------------- ---- -------------- ---- OPERATING EXPENSES (Notes 14 and 18) Research and development 8,657,300 6 7,902,586 7 General and administrative 4,572,503 3 3,984,151 3 Marketing 932,482 1 873,312 1 -------------- ---- -------------- ---- Total operating expenses 14,162,285 10 12,760,049 11 -------------- ---- -------------- ---- INCOME FROM OPERATIONS 36,022,089 25 28,524,918 24 -------------- ---- -------------- ---- NON-OPERATING INCOME AND GAIN Interest 580,879 1 770,208 1 Gain on sales of property, plant and equipment (Notes 2 and 18) 347,656 -- 255,480 -- Technical service income (Notes 18 and 20) 158,925 -- 142,729 -- Gain on sales of long-term investments (Note 2) 66,428 -- -- -- Other (Note 18) 273,013 -- 226,814 -- -------------- ---- -------------- ---- Total non-operating income and gain 1,426,901 1 1,395,231 1 -------------- ---- -------------- ---- NON-OPERATING EXPENSES AND LOSS Loss on property, plant and equipment and idle assets (Note 2) 1,430,763 1 -- -- Interest (Notes 2, 8 and 21) 1,323,510 1 1,633,817 2 Foreign exchange loss--net (Notes 2 and 21) 426,256 1 101,254 -- Investment loss recognized by equity method--net (Notes 2 and 7) 343,951 -- 3,554,173 3 Loss on disposal of property, plant and equipment (Note 2) 291,077 -- 119,109 -- Premium expense from option contracts--net (Notes 2 and 21) 153,783 -- 291,721 --
(Continued) -3- English Translation of Financial Statements Originally Issued in Chinese ------------------------------------------------------------------------
2003 2002 --------------------- --------------------- Amount % Amount % -------------- ---- -------------- ---- Casualty loss--net (Note 2) $ -- -- $ 117,470 -- Other 19,440 -- 67,863 -- -------------- ---- -------------- ---- Total non-operating expenses and loss 3,988,780 3 5,885,407 5 -------------- ---- -------------- ---- INCOME BEFORE INCOME TAX 33,460,210 23 24,034,742 20 INCOME TAX EXPENSE (Notes 2 and 13) 2,203,861 1 4,977,225 4 -------------- ---- -------------- ---- NET INCOME $ 31,256,349 22 $ 19,057,517 16 ============== ==== ============== ====
2003 2002 --------------------------- --------------------------- Before After Before After Income Income Income Income Tax Tax Tax Tax ------------ ------------ ------------ ------------ EARNINGS PER SHARE (Note 17) Basic earnings per share $ 1.65 $ 1.54 $ 1.17 $ 0.93 ============ ============ ============ ============ Diluted earnings per share $ 1.65 $ 1.54 $ 1.17 $ 0.93 ============ ============ ============ ============
The pro forma net income and earnings per share for the adoption of SFAS No. 30 "Accounting for Treasury Stock" is as follows (Notes 3 and 16):
2003 2002 --------------------------- --------------------------- Before After Before After Income Tax Income Tax Income Tax Income Tax ------------ ------------ ------------ ------------ NET INCOME $ 31,332,102 $ 19,100,553 ============ ============ EARNINGS PER SHARE Basic earnings per share $ 1.65 $ 1.54 $ 1.17 $ 0.93 ============ ============ ============ ============ Diluted earnings per share $ 1.65 $ 1.54 $ 1.17 $ 0.93 ============ ============ ============ ============
The accompanying notes are an integral part of the financial statements. (With Deloitte & Touche report dated October 16, 2003) (Concluded) -4- English Translation of Financial Statements Originally Issued in Chinese ------------------------------------------------------------------------ TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002 (In Thousand New Taiwan Dollars) ================================================================================
2003 2002 -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 31,256,349 $ 19,057,517 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 46,290,739 41,540,962 Deferred income taxes 2,074,257 4,967,904 Investment loss recognized by equity method--net 343,951 3,554,173 Loss on property, plant, and equipment, and idle assets 1,430,763 -- Loss (gain) on sales of long-term investments--net ( 66,428) 2,509 Gain on disposal of property, plant and equipment--net ( 56,579) ( 136,371) Pension cost accrued 323,322 323,211 Allowance for doubtful receivables 91,535 49,481 Allowance for sales returns and others ( 307,925) 155,445 Changes in operating assets and liabilities: Decrease (increase) in: Receivables from related parties ( 5,111,577) ( 10,611,798) Notes receivable 16,531 145,693 Accounts receivable ( 3,209,496) 9,332,721 Inventories--net ( 1,473,119) ( 4,817,040) Other financial assets ( 222,682) ( 359,700) Prepaid expenses and other current assets 1,326,149 459,316 Increase (decrease) in: Payables to related parties 1,323,401 747,658 Accounts payable 747,397 3,521,702 Accrued expenses and other current liabilities 2,408,255 2,434,440 -------------- -------------- Net cash provided by operating activities 77,184,843 70,367,823 -------------- -------------- CASH FLOWS FROM INVESTING ACTIVITIES Increase in short-term investments--net ( 11,664,302) -- Acquisitions of: Long-term investments ( 1,050,942) ( 9,025,004) Property, plant and equipment ( 24,415,743) ( 36,580,635) Proceeds from disposal of: Property, plant and equipment 158,858 443,502 Long-term investments 458,308 938 Increase in deferred charges ( 1,792,664) ( 2,995,792) Decrease in refundable deposits 256,066 193,765 Decrease in other assets--miscellaneous 9,250 -- -------------- -------------- Net cash used in investing activities ( 38,041,169) ( 47,963,226) -------------- --------------
(Continued) -5- English Translation of Financial Statements Originally Issued in Chinese ------------------------------------------------------------------------
2003 2002 -------------- -------------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of (repayment on) bonds payable ($ 4,000,000) $ 15,000,000 Redemption of preferred stock ( 13,000,000) -- Decrease in guarantee deposits ( 556,202) ( 5,703,001) Remuneration to directors and supervisors ( 58,485) ( 133,848) Cash dividends paid for preferred stock ( 455,000) ( 455,000) -------------- -------------- Net cash provided by (used in) financing activities ( 18,069,687) 8,708,151 -------------- -------------- NET INCREASE IN CASH AND CASH EQUIVALENTS 21,073,987 31,112,748 CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD 61,656,795 33,403,706 -------------- -------------- CASH AND CASH EQUIVALENTS, END OF THE PERIOD $ 82,730,782 $ 64,516,454 ============== ============== SUPPLEMENTAL INFORMATION Interest paid (excluding the amounts capitalized of NT$4,020 thousand and NT$112,245 thousand in 2003 and 2002, respectively) (Note 8) $ 687,283 $ 383,213 ============== ============== Income tax paid $ 2,500 $ 74,551 ============== ============== Non-cash investing and financing activities: Reclassification of parent company stock held by subsidiaries from long-term investments to treasury stock $ -- $ 1,914,700 ============== ============== Credit balances of long-term investments reclassified as part of other current liabilities $ -- $ 63,568 ============== ============== Current portion of bonds $ -- $ 9,000,000 ============== ============== Current portion of other long-term payables $ 1,228,568 $ 531,774 ============== ==============
The accompanying notes are an integral part of the financial statements. (With Deloitte & Touche report dated October 16, 2003) (Concluded) -6- English Translation of Financial Statements Originally Issued in Chinese ------------------------------------------------------------------------ TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (Amounts in Thousand New Taiwan Dollars, Unless Specified Otherwise) ================================================================================ 1. GENERAL Taiwan Semiconductor Manufacturing Company Ltd. (The Company or TSMC), a Republic of China corporation, was incorporated as a venture among the Government of the Republic of China, acting through the Development Fund of the Executive Yuan; Koninklijke Philips Electronics N.V. and certain of its affiliates (Philips); and certain other private investors. In September 1994, its shares were listed on the Taiwan Stock Exchange (TSE). On October 8, 1997, TSMC listed its shares of stock on the New York Stock Exchange (NYSE) in the form of American Depositary Shares (ADSs). TSMC is engaged mainly in the manufacturing, selling, packaging, testing and designing of integrated circuits and other semiconductor devices, and the manufacturing of masks. 2. SIGNIFICANT ACCOUNTING POLICIES The financial statements are presented in conformity with the Guidelines for Securities Issuers' Financial Reporting and accounting principles generally accepted in the Republic of China. Significant accounting policies are summarized as follows: Classification of Current and Non-current Assets and Liabilities Current assets are those expected to be converted to cash, sold or consumed within one year from the balance sheet date. Current liabilities are obligations due on demand within one year from the balance sheet date. Assets and liabilities that are not classified as current are non-current assets and liabilities, respectively. Cash Equivalents Government bonds under repurchase agreements acquired with maturities less than three months from the date of purchase are classified as cash equivalents. Short-term Investments Short-term investments are carried at the lower of cost or market value. The market values of funds and government bonds are determined by the net asset value of the open-end funds and the daily-volume-weighted-average yield/price conversion of GreTai Securities Market, respectively. The costs of investments sold are determined by the specific identification method. Allowance for Doubtful Receivables Allowance for doubtful receivables are provided based on a review of the collectibility of accounts receivables. We determine the amount of allowance for doubtful accounts by examining our historical collection experience and current trends in the credit quality of our customers as well as our internal credit policies. -7- Revenue Recognition and Allowance for Sales Returns and Others The four criteria that we use to recognize revenue are the existence of evidence of a contractual arrangement, whether delivery or performance has occurred, whether the selling price is fixed or determinable and whether collectibility is reasonably assured. Allowance for sales returns and others is estimated based on historical experience and any known factors that would affect the allowance. Such provisions are deducted from sales in the year the products are sold and the estimated related costs are deducted from cost of sales. Sales are determined using the fair value taking into account related sales discounts agreed to by the Company and customers. Since the receivables from sales are collectible within one year and such transactions are frequent, the fair value of receivables is equivalent to the nominal amount of cash received. Inventories Inventories are stated at the lower of cost or market value. Inventories are recorded at standard cost and adjusted to approximate weighted-average cost at the end of each period. Market value represents net realizable value for finished goods and work in process, and replacement value for raw materials, supplies and spare parts. The scrap and slow-moving items are recognized as inventory reserve. Long-term Investments Investments in shares of stock of companies wherein the Company exercises significant influence on the operating and financial policy decisions are accounted for using the equity method. The Company's proportionate share in the net income or net loss of investee companies is recognized as components of the "investment income/loss recognized by equity method--net" account. When acquiring shares of stock, the difference between the cost of investment and the Company's proportionate share of investee's net book value is amortized using straight-line method over five years, and is also recorded as a components of the "investment income/loss recognized by equity method--net". The Company adopted Statements of Financial Accounting Standards (SFAS) No. 30, "Accounting for Treasury Stock" on January 1, 2002. SFAS No. 30 requires a parent company to reclassify its capital stock held by its subsidiaries from short/long-term investments to treasury stock. When the Company subscribes to additional investee shares at a percentage different from its existing equity interest, the resulting carrying amount of the investment in equity investee differs from the amount of Company's proportionate share in the investee's net equity. The Company records such difference as an adjustment to "capital surplus" as well as the "long-term investments" accounts. In the event an investee uses its capital surplus (excluding reserve for asset revaluation) to offset its accumulated deficit, the Company will also record a corresponding entry equivalent to its proportionate share of the investee's adjustment. If an investee's functional currency is a foreign currency, "cumulative translation adjustments" would result from the process of translating the investee's financial statements into the functional currency of the Company. Other stock investments are accounted for using the cost method. Cash dividends are recognized as income in the year received but are accounted for as reduction in the carrying values of the long-term investments if the dividends are received in the same year that the related investments are acquired. Stock dividends are recognized neither as investment income nor increase of long-term investments but recorded only as an increase in the number of shares held. An allowance is recognized for any decline in the market value of investments using quoted market prices with the corresponding amount debited to shareholders' equity. A reversal of the allowance will result from a subsequent recovery of the market value of such investments. The carrying values of investments with no quoted market price are reduced to reflect an other than temporary decline in their values with the related impairment loss charged to income. -8- Investments in foreign mutual funds are stated at the lower of aggregate cost or net asset value. An allowance is recognized when the cost of the funds is lower than their net asset values, with the corresponding amount debited to shareholders' equity. A reversal of the allowance will result from a subsequent recovery of the net asset value. The costs of investments sold are determined using the weighted-average method. If an investee company has an unrealized loss on a long-term investment evaluated using the lower-of-cost-or-market method, the Company recognizes a corresponding unrealized loss in proportion to its equity interest and records the amount as a component of its own shareholders' equity. Gains or losses on transactions with investee companies wherein the Company owns at least 20% of the outstanding common stock but less than a controlling interest are deferred in proportion to the Company's ownership percentage until realized through a transaction with a third party. The entire amount of the gains or losses on sales to majority-owned subsidiaries are deferred until such gains or losses are realized through the subsequent sale of the related products to third parties. Gains or losses from sales by investee companies to the Company are deferred in proportion to the ownership percentage until realized through transactions with third parties. Property, Plant and Equipment, Assets Leased to Others and Idle Assets Property, plant and equipment and assets leased to others are stated at cost less accumulated depreciation. When significant impairment loss occurs, the related assets are stated at the lower of fair value or the book value. Idle assets are stated at the lower of book value or net realizable value. Significant additions, renewals, betterments, and interest expense incurred during the construction period are capitalized. Maintenance and repairs are expensed in the period incurred. Depreciation is computed using the straight-line method over the following estimated service lives: buildings--10 to 20 years; machinery and equipment--5 years; and office equipment--3 to 5 years. Upon sale or disposal of property, plant and equipment, the related cost and accumulated depreciation are removed from the corresponding accounts, and with any gain or loss is charged to income in the period of disposal. Goodwill Goodwill represents the excess of the consideration paid for acquisitions over the fair market value of identifiable net assets acquired. Goodwill is amortized using the straight-line method over the estimated life of 10 years. Deferred Charges Deferred charges consist of software and system design costs, technology know-how, bond issuance costs and technology license fees. The amounts are amortized as follows: Software and system design costs--3 years, technology know-how--5 years, bond issuance costs--the term of the bonds, technology license fee--the shorter of the estimated life of the technology or the term of the technology transfer contract. Pension Costs Net periodic pension costs are recorded on the basis of actuarial calculations. Unrecognized net transition obligation and unrecognized net gain are amortized over 25 years. -9- Deferred Gain on Sale and Leaseback The gain on the sale of property that is simultaneously leased back is deferred by the Company. This deferred gain on sales and leaseback transactions is amortized as follows: operating leases--adjustment of rental expenses over the term of the leases. Casualty Loss Casualty losses mainly caused from the March 31, 2002 earthquake are recorded when incurred and any insurance recoveries are recorded when probable up to the amount of the loss. Recoveries in excess of the amount of the loss are recorded when realized. Income Tax The Company uses an inter-period tax allocation method for income tax. Deferred income tax assets and liabilities are recognized for the tax effects of temporary differences, unused tax credits and net operating loss carryforwards. Valuation allowances are provided to the extent, if any, that it is more likely than not that deferred income tax assets will not be realized. A deferred tax asset or liability is, according to the classification of its related asset or liability, classified as current or non-current. However, if a deferred asset or liability does not relate to an asset or liability in the financial statements, then it is classified as either current or non-current based on the expected length of time before it is realized. Any tax credit arising from the purchase of machinery, equipment and technology, research and development expenditures, personnel training, marketing expenses for international branding, investments in important technology-based enterprise are recognized using the current method. Adjustments of prior years' tax liabilities are added to or deducted from the current year's tax provision. As of January 1, 1998, income taxes on unappropriated earnings of 10% are expensed in the year of shareholder approval which is the year subsequent to the year incurred. Foreign Currency Transactions Foreign currency transactions are recorded in New Taiwan dollars at the current rate of exchange in effect when the transaction occurs. Exchange gains or losses derived from foreign currency transactions or monetary assets and liabilities denominated in a foreign currency are recognized in current operations. At the end of each period, foreign-currency assets and liabilities are revalued at the prevailing exchange rate with the resulting gains or losses recognized in current operations. Derivative Financial Instruments The Company enters into foreign currency forward contracts to manage currency exposures in cash flow and in foreign currency-denominated assets and liabilities. The differences in the New Taiwan dollar amounts translated using the spot rate and the amounts translated using the contracted forward rates on the contract date are amortized over the terms of the forward contracts using the straight-line method. At the balance sheet dates, the receivables or payables arising from forward contracts are restated using the prevailing spot rate and the resulting differences are charged to income. Also, the receivables and payables related to the forward contract are netted with the resulting amount presented as either an asset or a liability. Any resulting gain or loss upon settlement is charged to income in the period of settlement. The Company enters into interest rate swap transactions to manage exposures to changes in interest rates on existing liabilities. These transactions are accounted for on an accrual basis, in which the cash settlement receivable or payable is recorded as an adjustment to interest income or expense. -10- The notional amount of foreign currency option contracts entered into for hedging purposes are not recognized as an asset or liability on the contract dates. The premiums paid or received for the call or put options are amortized and charged to income on a straight-line basis over the term of the related contract. Any resulting gain or loss upon settlement is charged to income in the period of settlement. Reclassification Certain accounts in the financial statements as of and for the nine months ended September 30, 2002 have been reclassified to conform to the financial statements as of and for the nine months ended September 30, 2003. 3. NEW ACCOUNTING PRONOUNCEMENTS In accordance with the SFAS No. 30, "Accounting for Treasury Stock" and other relevant regulations from Securities and Futures Commission (SFC), the Company is required to reclassify its common stock held by its subsidiaries from long-term investments to treasury stock. The reclassification is based on the carrying value recorded by the Company's subsidiaries as of January 1, 2002. The adoption of SFAS No. 30 resulted in the decrease of long-term investments and the increase of treasury stock by NT$1,914,700 thousand as of September 30, 2002, and the decrease in net income for the nine months ended September 30, 2002 by NT$43,036 thousand. 4. CASH AND CASH EQUIVALENTS September 30 ----------------------------- 2003 2002 ------------- ------------- Cash and bank deposits $ 79,403,491 $ 60,877,986 Government bonds acquired under repurchase agreements 3,327,291 3,638,468 ------------- ------------- $ 82,730,782 $ 64,516,454 ============= ============= 5. SHORT-TERM INVESTMENTS September 30, 2003 ------------- Government bonds $ 7,437,502 Money market funds 2,026,800 Government bonds acquired under repurchase agreements 1,200,000 Bond funds 1,000,000 ------------- $ 11,664,302 ============= Market value $ 11,664,302 ============= 6. INVENTORIES--NET September 30 ------------------------------- 2003 2002 -------------- -------------- Finished goods $ 2,535,207 $ 4,237,870 Work in process 9,891,487 9,394,591 Raw materials 373,404 365,558 Supplies and spare parts 712,492 809,486 -------------- -------------- 13,512,590 14,807,505 Less--inventory reserve ( 1,699,135) ( 1,486,047) -------------- -------------- $ 11,813,455 $ 13,321,458 ============== ============== -11-
7. LONG-TERM INVESTMENTS September 30 ----------------------------------------------------- 2003 2002 -------------------------- ------------------------- % of % of Carrying Owner- Carrying Owner- Value ship Value ship ------------- ---------- -------------- -------- Shares of stock --------------------------------------------------- Equity method: TSMC International Investment Ltd. (TSMC International) $ 21,646,213 100 $ 24,352,833 100 TSMC Partners Ltd. (TSMC Partners) 4,089,066 100 3,621,330 100 Vanguard International Semiconductor Corporation (VIS) 3,968,395 28 2,803,855 25 Systems on Silicon Manufacturing Company Pte Ltd. (SSMC) 2,616,143 32 3,308,020 32 Emerging Alliance Fund LLP (Emerging Alliance) 755,364 99 787,482 99 Global UniChip Corp. (GUC) 377,758 47 -- -- TSMC North America (TSMC--North America) 286,061 100 170,252 100 TSMC Japan K. K. (TSMC--Japan) 97,567 100 90,537 100 Chi Cherng Investment Ltd. (Chi Cherng) 43,028 36 62,379 25 Hsin Ruey Investment Ltd. (Hsin Ruey) 41,787 36 62,779 25 Taiwan Semiconductor Manufacturing Company Europe B.V. (TSMC--Europe) 10,921 100 9,536 100 Chi Hsin Investment Ltd. (Chi Hsin) -- -- 23,164 25 ------------- -------------- 33,932,303 35,292,167 ------------- -------------- Cost method: Publicly traded stock Taiwan Mask Corp. 32,129 2 32,129 2 Amkor Technology -- -- 280,748 -- Monolithic System Tech. -- -- 104,289 2 Non-publicly traded stock United Gas Co., Ltd. 193,584 11 193,584 11 Shin-Etsu Handotai Taiwan Company Ltd. 105,000 7 105,000 7 Hon Tung Venture Capital 83,916 10 150,000 10 W.K. Technology Fund IV 50,000 2 50,000 2 ------------- -------------- 464,629 915,750 ------------- -------------- Funds --------------------------------------------------- Horizon Ventures 229,669 -- 160,599 -- Crimson Asia Capital 42,355 -- 39,000 -- ------------- -------------- 272,024 199,599 ------------- -------------- 34,668,956 36,407,516 Less--allowance for losses -- ( 58,588) ------------- -------------- $ 34,668,956 $ 36,348,928 ============= ============== Credit balances of long-term investments --------------------------------------------------- Presented as part of other current liabilities: Kung Cherng Investment Ltd. (Kung Cherng) $ -- -- $ 44,043 25 Cherng Huei Investment Ltd. (Cherng Huei) -- -- 15,008 25 Po Cherng Investment Ltd. (Po Cherng) -- -- 4,517 25 ------------- -------------- $ -- $ 63,568 ============= ==============
-12- On January 8, 2003, the Company's investee company, VIS, issued 600,000 thousand shares of common stock at a price of NT$7 per share. In this round of equity offering, the Company purchased a total of 230,882 thousand shares. As a result, its ownership in VIS increased from 25% to 28%. The Company's investees, Hsin Ruey, Chi Hsin and Kung Cherng were merged on October 30, 2002, with Hsin Ruey as the surviving company. In addition, The Company's investees, Chi Cherng, Cherng Huei and Po Cherng were merged on October 30, 2002 with Chi Cherng as the surviving company. The mergers were accounted for as a pooling of interest. The Company's ownership is approximately 36% in Hsin Ruey and approximately 36% in Chi Cherng subsequent to the merger. The Company established Ya Xin Technology (Ya Xin) in November 2002 and subsequently signed a merger agreement with GUC in December 2002. The merger was effective on January 4, 2003 and GUC is the surviving company. The carrying value of investments accounted for using the equity method and the related investment gains or losses were determined based on the reviewed financial statements of the investees in the same periods. The investment gains or (losses) of investee companies consisted of the following: Nine Months Ended September 30 ------------------------------ 2003 2002 ------------- ------------- SSMC ($ 442,182) ($ 995,619) Emerging Alliance (162,985) ( 124,625) TSMC Partners 194,235 832,608 TSMC-North America 113,249 124,116 TSMC International 21,128 ( 2,807,426) Others ( 67,396) ( 583,227) ------------- ------------- ($ 343,951) ($ 3,554,173) ============= ============= The market values of publicly traded stocks accounted for the cost method were $157,995 thousand and $359,217 thousand as of September 30, 2003 and 2002, respectively. 8. PROPERTY, PLANT AND EQUIPMENT Accumulated depreciation consisted of the following: September 30 ------------------------------- 2003 2002 -------------- -------------- Buildings $ 27,881,029 $ 20,544,762 Machinery and equipment 202,126,641 154,332,010 Office equipment 3,602,265 2,927,868 -------------- -------------- $ 233,609,935 $ 177,804,640 ============== ============== -13- Information on the status of the expansion or construction plans of the Company's manufacturing facilities as of September 30, 2003 is as follows:
Estimated Actual Date Construction/ Complete Accumulated of Starting Expected Date of Expansion Plan Cost Expenditures Operations Starting Operations --------------- ------------- ------------- ----------- ---------------------------------- Fab 12--Phase 1 $ 80,318,400 $ 72,466,500 March 2002 -- Fab 14--Phase 1 30,411,000 10,586,900 -- 2/nd/ half of 2004 at the earliest
Interest expenses (before deducting capitalized amounts of NT$4,020 thousand and NT$112,245 thousand for the nine months ended September 30, 2003 and 2002, respectively) were NT$1,327,530 thousand and NT$1,746,062 thousand for the nine months ended September 30, 2003 and 2002, respectively. The interest rate used for calculating the capitalized amount was 5.283% for the nine months ended September 30, 2003 and 2002, respectively. 9. DEFERRED CHARGES--NET September 30 --------------------------- 2003 2002 ------------ ------------ Technology license fees $ 5,396,897 $ 5,404,989 Software and system design costs 2,844,212 2,845,705 Others 174,248 127,967 ------------ ------------ $ 8,415,357 $ 8,378,661 ============ ============
10. BONDS September 30 ----------------------------- 2003 2002 ------------- ------------- Domestic unsecured bonds: Issued in March 1998 and payable in March 2003 in one lump sum payment, 7.71% annual interest payable semi-annually $ -- $ 4,000,000 Issued in October 1999 and payable in October 2002 and 2004 in two equal payments, 5.67% and 5.95% annual interest payable annually, respectively 5,000,000 10,000,000 Issued in December 2000 and payable in December 2005 and 2007 in two installments, 5.25% and 5.36% annual interest payable annually, respectively 15,000,000 15,000,000 Issued in January 2002 and payable in January 2007, 2009 and 2012 in three installments, 2.60%, 2.75% and 3.00% annual interest payable annually, respectively 15,000,000 15,000,000 ------------- ------------- $ 35,000,000 $ 44,000,000 ============= =============
As of September 30, 2003, future principal payments for the Company's bonds are as follows: Year of Repayment Amount ------------------- ------------- 2004 $ 5,000,000 2005 10,500,000 2007 7,000,000 2008 and thereafter 12,500,000 ------------- $ 35,000,000 ============= -14- 11. OTHER LONG-TERM PAYABLES The Company entered into several license arrangements for certain semiconductor-related patents. Future payments under the agreements as of September 30, 2003 are as follows: Year Amount ------------------------- ------------ October to December, 2003 $ 631,594 2004 1,257,373 2005 990,184 2006 456,030 2007 472,920 2008 and thereafter 1,080,960 ------------ $ 4,889,061 ============ 12. PENSION PLAN The Company has a pension plan for all regular employees that provides benefits based on length of service and average monthly salary for the six-month period prior to retirement. The Company contributes at an amount equal to 2% of salaries paid every month to a pension fund (the Fund). The Fund is administered by a pension fund monitoring committee (the Committee) and deposited in the Committee's name in the Central Trust of China. The changes in the plan assets and unfunded accrued pension cost for the nine months ended September 30, 2003 and 2002 are summarized as follows: Nine Months Ended September 30 ------------------------------- 2003 2002 -------------- -------------- Plan assets Balance, beginning of the period $ 993,404 $ 804,437 Contribution 136,240 128,981 Interest 20,682 29,606 Payment ( 3,473) ( 5,360) -------------- -------------- Balance, end of the period $ 1,146,853 $ 957,664 ============== ============== Unfunded accrued pension cost Balance, beginning of the period $ 2,210,542 $ 1,854,853 Accruals 323,322 326,461 Payment -- ( 3,250) -------------- -------------- Balance, end of the period $ 2,533,864 $ 2,178,064 ============== ============== -15- 13. INCOME TAX a. A reconciliation of income tax expense on income before income tax at the statutory rate and current income tax expense before income tax credits is shown below: Nine Months Ended September 30 --------------------------- 2003 2002 ------------ ------------ Income tax expense based on income before income tax at statutory rate (25%) $ 8,365,053 $ 6,008,686 Tax-exempt income ( 3,598,750) ( 1,818,250) Temporary and permanent differences ( 334,828) 231,984 ------------ ------------ Current income tax expense before income tax credits $ 4,431,475 $ 4,422,420 ============ ============ b. Income tax expense consists of: Current income tax expense before income tax credits $ 4,431,475 $ 4,422,420 Additional 10% tax on the unappropriated earnings 1,271,759 162,938 Income tax credits ( 5,703,234) ( 4,585,358) Other income tax 2,500 9,321 ------------ ------------ Income tax expense 2,500 9,321 Net change in deferred income tax liabilities (assets) Investment tax credits ( 1,351,106) ( 2,643,301) Temporary differences 340,310 315,247 Valuation allowance 3,212,157 7,295,958 ------------ ------------ $ 2,203,861 $ 4,977,225 ============ ============ c. Deferred income tax assets (liabilities) consist of the following: September 30 ----------------------------- 2003 2002 ------------- ------------- Current: Investment tax credits $ 2,117,000 $ 2,125,541 ============= ============= Noncurrent: Investment tax credits $ 25,801,759 $ 24,575,221 Temporary differences ( 3,906,151) ( 2,809,002) Valuation allowances ( 13,054,298) ( 10,337,594) ------------- ------------- $ 8,841,310 $ 11,428,625 ============= ============= d. Integrated income tax information: The balances of the imputation credit account as of September 30, 2003 and 2002 were NT$14,748 thousand and NT$8,809 thousand, respectively. The expected and actual creditable ratio for 2002 and 2001 were 0.08% and 0.04%, respectively. The imputation credits allocated to the shareholders are based on its balance as of the date of dividend distribution. The expected creditable ratio for 2002 may be adjusted when the distribution of the imputation credits are made. -16- e. All retained earnings generated prior to December 31, 1997 were appropriated as of September 30, 2003 and 2002. f. As of September 30, 2003, investment tax credits consisted of the following:
Total Remaining Creditable Creditable Expire Regulation Items Amounts Amounts Year --------------------- ----------------------------- ------------- ------------- ------ Statute for Upgrading Purchase of machinery and $ 4,754,787 $ 1,798,490 2003 Industries equipment 8,203,530 5,955,336 2004 3,806,346 3,806,346 2005 4,884,533 4,884,533 2006 975,381 975,381 2007 ------------- ------------- $ 22,624,577 $ 17,420,086 ============= ============= Statute for Upgrading Research and development $ 671,545 $ 190,359 2003 Industries expenditures 1,974,321 1,974,321 2004 3,111,472 3,111,472 2005 3,322,453 3,322,453 2006 1,454,138 1,454,138 2007 ------------- ------------- $ 10,533,929 $ 10,052,743 ============= ============= Statute for Upgrading Personnel training $ 16,104 $ 4,285 2003 Industries 43,265 43,265 2004 28,886 28,886 2005 27,311 27,311 2006 ------------- ------------- $ 115,566 $ 103,747 ============= ============= Statute for Upgrading Marketing expenses for Industries international branding $ 318 $ -- 2003 ============= ============= Statute for Upgrading Investments in important $ 5,420 $ -- 2003 Industries technology-based enterprise 203,319 203,319 2004 138,864 138,864 2005 ------------- ------------- $ 347,603 $ 342,183 ============= =============
g. The sales generated from the following expansion and construction of the Company's manufacturing plants are exempt from income tax: Tax-Exemption Period -------------------- Construction of Fab 6 2001 to 2004 Construction of Fab 8--module B 2002 to 2005 Expansion of Fab 2--modules A and B, Fab 3, Fab 4, Fab 5 and Fab 6 2003 to 2006 h. The tax authorities have examined income tax returns of the Company through 1999. However, the Company is contesting the assessment by the tax authority for 1992, 1993, 1997 and 1998. -17- 14. LABOR COST, DEPRECIATION AND Nine Months Ended September 30, 2003 AMORTIZATION EXPENSE --------------------------------------------- Classified as Classified as Operating Cost of Sales Expense Total ------------- ------------- ------------- Labor cost Salary $ 5,437,931 $ 2,273,059 $ 7,710,990 Labor and health insurance 349,560 174,175 523,735 Pension 306,331 152,956 459,287 Other 160,399 84,203 244,602 Depreciation 41,815,245 1,735,170 43,550,415 Amortization 1,074,049 1,807,137 2,881,186 ------------- ------------- ------------- $ 49,143,515 $ 6,226,700 $ 55,370,215 ============= ============= ============= Nine Months Ended September 30, 2002 --------------------------------------------- Classified as Classified as Operating Cost of Sales Expense Total ------------- ------------- ------------- Labor cost Salary $ 4,902,475 $ 2,274,317 $ 7,176,792 Labor and health insurance 307,148 155,196 462,344 Pension 303,724 153,427 457,151 Other 134,976 105,576 240,552 Depreciation 37,617,233 1,836,251 39,453,484 Amortization 574,379 1,472,699 2,047,078 ------------- ------------- ------------- $ 43,839,935 $ 5,997,466 $ 49,837,401 ============= ============= ============= 15. SHAREHOLDERS' EQUITY Capital, Capital Surplus and Retained Earnings The Company has issued a total of 485,898 thousand ADSs which were traded on the NYSE as of September 30, 2003. The total number of common shares represented by all issued ADSs is 2,429,491 thousand shares (one ADS represents five common shares). On October 8, 2003, the Board of Director approved the Company's sponsorship of the offering by certain existing shareholders of up to 500,000 thousand common shares in the form of ADSs. As of October 16, 2003, the offering was not effective as of SFC's approval. Capital surplus can only be used to offset a deficit under the ROC Company Law. However, the components of capital surplus generated from donated capital and the excess of the issue price over the par value of capital stock (including the stock issued for new capital, mergers, and the purchase of treasury stock) can be transferred to capital stock as stock dividends. The Company's Articles of Incorporation provide that the following shall be appropriated from annual earnings if in excess of any cumulative deficit: a. 10% legal reserve; until the accumulated legal reserve has equaled the total paid-in capital of the Company; b. Special reserve in accordance with relevant laws or regulations; -18- c. Remuneration to directors and supervisors and bonus to employees equals to 0.3% and at least 1% of the remainder, respectively. Individuals eligible for the employee bonus may include employees of affiliated companies as approved by the board of directors or a representative of the board of directors; d. Dividends to holders of preferred shares at a 3.5% annual rate, based on the period which the preferred shares have been outstanding. Following the redemption of all of its issued and outstanding preferred shares in May 2003, the Company amended its Articles of Incorporation on June 3, 2003, to remove the provision for issuance of any future dividends to preferred shareholders as of that date; e. The appropriation of any remaining balance shall be approved by the shareholders. Dividends are distributed in shares of common stock or a combination of cash and common stock. Since the Company is in a capital-intensive industry and is currently in the growth stage of its operation, distributions of profits is made preferably in the form of stock dividend. The total of cash dividends paid in any given year may not exceed 50% of total dividends distributed in that year. Any appropriations of net income are recorded in the financial statement in the year of shareholder approval. The appropriation for legal reserve is made until the reserve equals the aggregate par value of the Company's outstanding capital stock. The reserve can only be used to offset a deficit or be distributed to capital stock as a stock dividend up to half of the reserve balance when the reserve balance has reached 50% of the aggregate par value of the outstanding capital stock of the Company. A special reserve equivalent to the debit balance of any account shown in the shareholder's equity section of the balance sheet (except for the recorded cost of treasury stock held by subsidiaries), other than the deficit, shall be made from unappropriated retained earnings pursuant to existing regulations promulgated by the SFC. The special reserve is allowed to be appropriated when the debit balance of such accounts is reversed. The appropriations of the earnings of 2002 and 2001 were approved in the shareholders' meeting on June 3, 2003 and May 7, 2002, respectively. The appropriations and dividend per share are as follows:
Appropriation of Earnings Dividend Per Share (NT$) ------------------------------- ------------------------------- For Fiscal For Fiscal For Fiscal For Fiscal Year 2002 Year 2001 Year 2002 Year 2001 -------------- -------------- -------------- -------------- Legal reserve $ 2,161,029 $ 1,448,317 $ -- $ -- Special reserve 68,945 ( 349,941) -- -- Bonus paid to employees--in stock 1,539,013 1,070,783 -- -- Preferred stock dividend--in cash 455,000 455,000 0.35 0.35 Common stock dividend--in stock 14,898,309 16,832,553 0.80 1.00 Remuneration to directors and supervisors-- in cash 58,485 133,848 -- -- -------------- -------------- $ 19,180,781 $ 19,590,560 ============== ==============
The above appropriation of the earnings in fiscal year 2002 and 2001 is consistent with the resolution of the meetings of board of directors on March 4, 2003 and March 26, 2002, respectively. If the above employee bonus and remuneration to directors and supervisors were paid in cash and charged against income for 2002 and 2001, the basic earnings per share for the years ended December 31, 2002 and 2001 would decrease from NT$1.14 to NT$1.05 and NT$0.83 to NT$0.76, respectively. The shares distributed as a bonus to employees represented 0.83% and 0.64% of the Company's total outstanding common shares as of December 31, 2002 and 2001, respectively. -19- The above information associated with the appropriations of bonus to employees and remuneration to directors and supervisors is available at Market Observation System website. Under the Integrated Income Tax System that became effective on January 1, 1998, ROC resident shareholders are allowed a tax credit for their proportionate share of the income tax paid by the Company on earnings generated as of January 1, 1998. An imputation credit account is maintained by the Company for such income tax and the tax credit allocated to each shareholder. Employee Stock Option Plans On June 25, 2002, the SFC approved the Company's Employee Stock Option Plan (the Plan). The Plan provides qualified employees with 100,000 thousand units of option rights with each unit representing one common share of stock. The option rights are valid for ten years and exercisable at certain percentages subsequent to the second anniversary of issuance. Under the terms of the Plan, stock options are granted at an exercise price equal to the closing price of the Company's common shares listed on the TSE on the date of grant. Under the Plan, there were 50,378 thousand option rights that had never been granted, or had been granted but cancelled. These un-granted or cancelled option rights expired on September 30, 2003. Information as of September 30, 2003 with respect to stock option rights activities under the Plan is as follows: Outstanding Option Rights ----------------------------- Number of Range of Option Rights Exercise (in Thousand) Price (NT$) ------------- ------------- Balance, January 1, 2003 19,369 46.86-48.70 Options granted 32,031 38.23-53.76 Options cancelled ( 1,778) 38.23-53.76 ------------- Balance, September 30, 2003 49,622 ============= The aforementioned number of outstanding option rights and exercise prices have been adjusted, taken stock dividends into consideration, in accordance with the Plan. On September 2, 2003, the Board of Directors approved the 2003 employee stock option plan (the 2003 Plan). The maximum number of shares authorized to be granted is 120,000 thousand option rights. As of October 16, 2003, the 2003 Plan is in the process of SFC's approval. Preferred Stock The Company issued 1,300,000 thousand shares of unlisted Series A--preferred stock to certain investors on November 29, 2000. All of the preferred stock was redeemed at par value and retired on May 29, 2003. Under the Company's Articles of Incorporation, as amended on June 3, 2003, the Company is no longer authorized to issue preferred stock. The following are the rights of the preferred shareholders and the related terms and conditions prior to redemption: Preferred shareholders a. are entitled to receive cumulative cash dividends at an annual rate of 3.5%. b. are not entitled to receive any common stock dividends (whether declared out of unappropriated earnings or capital surplus). -20- c. have priority over the holders of common shares to the assets of the Company available for distribution to shareholders upon liquidation or dissolution; however, the pre-emptive rights to the assets shall not exceed the issue value of the shares. d. have voting rights similar to that of the holders of common shares. e. have no right to convert their shares into common shares. The preferred shares are to be redeemed within thirty months from their issuance. The preferred shareholders have the aforementioned rights and the Company's related obligations remain the same until the preferred shares are redeemed by the Company. 16. TREASURY STOCK (COMMON STOCK)
(Shares in Thousand) Beginning Ending Purpose Shares Dividend Sell Shares ------------------------------------------------ --------- -------- -------- --------- Nine months ended September 30, 2003 ------------------------------------ Reclassification of parent company stock held by subsidiaries from long-term investment 42,001 3,357 4,574 40,784 ========= ======== ======== ========= Nine months ended September 30, 2002 ------------------------------------ Reclassification of parent company stock held by subsidiaries from long-term investment 39,270 3,818 1,087 42,001 ========= ======== ======== =========
Proceeds from the sale of treasury stock for the nine months ended September 30, 2003 and 2002 were NT$318,850 thousand and NT$96,501 thousand, respectively. As of September 30, 2003 and 2002, the book value of the treasury stock was NT$1,643,404 thousand and NT$1,914,700 thousand, respectively; the market value was NT$2,776,198 thousand and NT$1,956,454 thousand, respectively. Capital stock held by a subsidiary as an investment is recorded as treasury stock, with the holder having the same rights as other common shareholders. 17. EARNINGS PER SHARE Earnings per share (EPS) is computed as follows:
EPS (NT$) Amounts (Numerator) ------------------------------- ------------------------------- Shares Before After Before After (Denominator) Income Income Income Tax Income Tax (Thousand) Tax Tax -------------- -------------- -------------- -------------- -------------- Nine months ended September 30, 2003 ------------------------------------ Net income $ 33,460,210 $ 31,256,349 Less--preferred stock dividends ( 184,493) ( 184,493) -------------- -------------- Basic earnings per share Income available to common shareholders $ 33,275,717 $ 31,071,856 20,222,602 $ 1.65 $ 1.54 ============== ============== Effect of diluted securities--stock options -- -- 4,246 -------------- -------------- -------------- Diluted earnings per share Income available to common shareholders $ 33,275,717 $ 31,071,856 20,226,848 $ 1.65 $ 1.54 ============== ============== ============== ============== ============== Nine months ended September 30, 2002 ------------------------------------ Net income $ 24,034,742 $ 19,057,517 Less--preferred stock dividends ( 340,315) ( 340,315) -------------- -------------- Basic and diluted earnings per share Income available to common shareholders $ 23,694,427 $ 18,717,202 20,220,989 $ 1.17 $ 0.93 ============== ============== ============== ============== ==============
-21- The potential common shares issuable under the employee stock option plan (see Note 15) are included in the denominator of the diluted EPS computation by using the treasury stock method under the SFAS No. 24, "Earnings Per Share", but such shares resulted in a non-dilutive per share amount for the nine months ended September 30, 2002. The average number of shares outstanding for the EPS calculation has been adjusted retroactively for issuance of stock dividends and stock bonuses. The retroactive adjustment caused the basic EPS before income tax and after income tax for the nine months ended September 30, 2002 to decrease from NT$1.28 to NT$1.17 and NT$1.01 to NT$0.93, respectively. 18. RELATED PARTY TRANSACTIONS The Company engages in business transactions with the following related parties: a. Industrial Technology Research Institute (ITRI); one of whose directors is the Chairman of the Company b. Koninklijke Philips Electronics N.V. (Philips); a major shareholder of the Company c. Subsidiaries TSMC--North America TSMC--Europe TSMC--Japan d. Investees VIS SSMC GUC e. Indirect subsidiaries WaferTech, LLC (WaferTech) TSMC Technology -22- The transactions with the aforementioned parties in addition to those disclosed in other notes, are summarized as follows: Nine Months Ended September 30 -------------------------------------------- 2003 2002 --------------------- -------------------- During the period Amount % Amount % --------------------------------- ------------ ------ ------------ ----- Sales TSMC--North America $ 84,777,377 58 $ 69,807,307 57 Philips and its affiliates 2,370,142 2 2,005,606 2 GUC 465,626 -- 334,171 -- ITRI 29,856 -- 55,854 -- SSMC 1,151 -- 7,018 -- VIS 19 -- 92,119 -- WaferTech -- -- 1,152 -- ------------ ------ ------------ ----- $ 87,644,171 60 $ 72,303,227 59 ============ ====== ============ ===== Purchases WaferTech $ 7,815,373 35 $ 7,782,809 42 SSMC 3,805,999 17 1,832,217 10 VIS 3,454,704 16 2,500,777 13 ------------ ------ ------------ ----- $ 15,076,076 68 $ 12,115,803 65 ============ ====== ============ ===== Operating expense--rental ITRI $ -- -- $ 40,401 4 ============ ====== ============ ===== Manufacturing expenses--technical assistance fee Philips $ 2,250,285 3 $ 2,174,810 3 ============ ====== ============ ===== Marketing expenses--commission TSMC--Japan $ 158,717 17 $ 158,855 18 TSMC--Europe 111,780 12 89,396 10 ------------ ------ ------------ ----- $ 270,497 29 $ 248,251 28 ============ ====== ============ ===== Sale of property, plant, and equipment VIS $ 8,098 5 $ -- -- ============ ====== ============ ===== Non-operating income and gain SSMC (technical service income mainly) $ 119,041 8 $ 85,159 6 WaferTech 1,528 -- 1,226 -- VIS 271 -- -- -- ------------ ------ ------------ ----- $ 120,840 8 $ 86,385 6 ============ ====== ============ ===== (Continued) -23- September 30 -------------------------------------------- 2003 2002 --------------------- -------------------- At end of the period Amount % Amount % ----------------------------- ------------ ------ ------------ ----- Receivables TSMC--North America $ 14,337,121 94 $ 10,780,498 97 Philips and its affiliates 752,568 5 278,788 2 VIS 95,111 1 41,848 -- GUC 86,093 -- 85,722 1 TSMC Technology 12,103 -- 10,517 -- SSMC 11,176 -- 7,176 -- ITRI 893 -- 16,636 -- WaferTech -- -- 196 -- ------------ ------ ------------ ----- $ 15,295,065 100 $ 11,221,381 100 ============ ====== ============ ===== Payables Philips and its affiliates $ 1,481,653 39 $ 1,370,101 49 WaferTech 964,659 26 569,778 20 VIS 796,865 21 648,203 23 SSMC 501,281 14 168,729 6 TSMC--Japan 16,860 -- 24,636 1 TSMC--Europe 16,076 -- 27,519 1 TSMC Technology 7,027 -- 10,821 -- TSMC--North America 5,978 -- 10,477 -- ------------ ------ ------------ ----- $ 3,790,399 100 $ 2,830,264 100 ============ ====== ============ ===== Refundable deposits--VIS $ 260,992 91 $ 550,660 95 ============ ====== ============ ===== Except for WaferTech and TSMC--North America, sales to related parties are based on normal selling prices and collection terms. The payables to WaferTech represent the purchase of finished goods. The purchase prices of finished goods were determined in accordance with the related contractual agreements. The selling prices to TSMC--North America are approximately 99% of the comparable selling prices to third parties and the payment terms are thirty days from the date of invoice, which is not significantly different from payment terms with third parties. 19. SIGNIFICANT LONG-TERM OPERATING LEASES The Company leases land from the Science-Based Industrial Park (SBIP) Administration where its Fab 2 through Fab 14 manufacturing facilities reside. These agreements expire on various dates from March 2008 to December 2020 and have annual rent payments aggregating NT$230,449 thousand. The agreements can be renewed upon their expiration. -24- Future remaining lease payments are as follows: Year Amount ------------------------- ------------ October to December, 2003 $ 57,612 2004 230,449 2005 230,449 2006 230,449 2007 230,449 2008 206,406 2009 and thereafter 1,586,359 ------------ $ 2,772,173 ============ 20. SIGNIFICANT COMMITMENTS AND CONTINGENCIES The significant commitments and contingencies as of September 30, 2003 are as follows: a. Under a Technical Cooperation Agreement with Philips, as amended on May 12, 1997, the Company shall pay technical assistance fees at a percentage of net sales (as defined in the agreement) with respect to certain products. The agreement shall remain in force through July 8, 2007 and may be automatically renewed for successive periods of three years thereafter. Under the amended agreement, starting from the fifth anniversary date of the amended agreement, the fees are subject to reduction by the amounts the Company pays to any third party for settling any licensing/infringement disputes, provided that the fees to be paid after reduction will not be below a certain percentage of the net sales. b. Subject to certain equity ownership and notification requirements, Philips and its affiliates can avail themselves each year of up to 30% of the Company's production capacity. c. Under a technical cooperation agreement with ITRI, the Company shall reserve and allocate up to 35% of certain of its production capacity for use by the Ministry of Economic Affairs (MOEA) or any other party designated by the MOEA. d. Under several foundry agreements, the Company shall reserve a portion of its production capacity for certain major customers who have made guarantee deposits to the Company. As of September 30, 2003, the Company has a total of US$24,929 thousand of guarantee deposits. e. Under a Shareholders Agreement entered into with Philips and EDB Investments Pte Ltd. on March 30, 1999, the parties formed a joint venture company, SSMC, for the purpose of constructing an integrated circuit foundry in Singapore, and allowed the Company to invest in 32% of SSMC's capital. The Company and Philips committed to buy a specific percentage of the production capacity of SSMC. If any party defaults on the commitment and the capacity utilization of SSMC falls below a specific percentage of its total capacity, the defaulting party is required to compensate SSMC for all related unavoidable costs. f. The Company provides technical services to SSMC under a Technical Cooperation Agreement (the Agreement) entered into on May 12, 1999. The Company receives compensation for such services computed at a specific percentage of net selling prices of certain products sold by SSMC. The Agreement shall remain in force for ten years and may be automatically renewed for successive periods of five years unless pre-terminated by either party under certain conditions. g. The Company provided guarantees on loans amounting to US$200,000 thousand, US$40,000 thousand and US$440,000 thousand for TSMC Development, Inc. (TSMC Development), TSMC--North America and WaferTech, respectively. -25- h. Under a Technology Transfer Agreement (TTA) with National Semiconductor Corporation (National) entered into on June 27, 2000, the Company shall receive payments for license of certain technology to National. The agreement will remain in force for ten years and will be automatically renewed for successive periods of two years thereafter unless either party gives notice for early termination under certain conditions. In January 2003, the Company and National entered into a Termination Agreement whereby the TTA was terminated for convenience. Under the termination agreement, the Company will be relieved of any further obligation to transfer any additional technology. In addition, the Company granted National an option to request additional technology transfers under the same terms and conditions as the terminated TTA through January 2008. i. The Company entered into a Manufacturing Agreement with VIS. VIS agrees to reserve certain production capacity for the Company to manufacture certain logic devices or other technologies required by the Company's customers at selling prices agreed upon by the parties. The Company paid NT$1,200,000 thousand to VIS as a guarantee deposit. VIS shall return portions of the guarantee deposit without any interest to the Company upon reaching certain levels of purchase commitment by the Company. The contract will remain in force for five years. As of September 30, 2003, the refundable deposit was NT$260,992 thousand. j. Starting from 2001, the Company entered into several license arrangements for certain semiconductor patents. The terms of the contracts range from five to ten years with payments to be paid in the form of royalties over the term of the related contracts. The Company has recorded the related amounts as a liability and deferred charges which is amortized and charged to cost of sales on a straight-line basis over the estimated life of the technology or the term of the contract, whichever is shorter. k. In November 2002, the Company entered into an Amended and Restated Joint Technology Cooperation Agreement with Philips, Motorola, Inc. and STMicroelectronics to jointly develop 90-nanometer to 65-nanometer advanced CMOS Logic and e-DRAM technologies. The Company also agreed to align 0.12 micron CMOS Logic technology to enhance its foundry business opportunities. The Company will contribute process technologies and share a portion of the costs associated with this joint development project. l. Amounts available under unused letter of credits as of September 30, 2003 were NT$6,480 thousand, EUR36 thousand and Singapore dollar $85 thousand. m. As of September 30, 2003, unused credit lines for short-term loans were NT$8,730,000 thousand and US$327,000 thousand. n. As of September 30, 2003, unused credit lines for long-term loans were NT$27,500 thousand. 21. ADDITIONAL DISCLOSURES Following are the additional disclosures required by the SFC for TSMC and investees: a. Financing provided: Please see Table 1 attached; b. Endorsement/guarantee provided: Please see Table 2 attached; c. Marketable securities held: Please see Table 3 attached; d. Marketable securities acquired and disposed of at costs or prices of at least NT$100 million or 20% of the paid-in capital: Please see Table 4 attached; e. Acquisition of individual real estate at costs of at least NT$100 million or 20% of the paid-in capital: Please see Table 5 attached; -26- f. Disposal of individual real estate at prices of at least NT$100 million or 20% of the paid-in capital: None; g. Total purchase from or sale to related parties amounting to at least NT$100 million or 20% of the capital: Please see Table 6 attached; h. Receivables from related parties amounting to at least NT$100 million or 20% of the capital: Please see Table 7 attached; i. Names, locations, and related information of investees on which the Company exercises significant influence: Please see Table 8 attached; j. Financial instrument transactions: 1) Derivative financial instruments The Company entered into derivative financial instrument transactions for the nine months ended September 30, 2003 to manage exposures related to foreign-currency denominated receivables or payables, and interest rate fluctuations. Certain information on these contracts is as follows: a) Outstanding forward exchange contracts as of September 30, 2003: Financial Contract Amount (Nominal) Instruments Maturity Period Amount) (in Thousand) ----------- ----------------------------- ---------------------------- Sell October 2003 to March 2004 US$ 1,430,000(US$/NT$) Buy October 2003 to November 2003 EUR 38,000(EUR/US$) As of September 30, 2003, receivables from forward exchange contracts (included in the "other financial assets" account) aggregate approximately NT$458,902 thousand, and payables from forward exchange contracts (included in the "other current liabilities" account) aggregate approximately NT$79,306 thousand. Net exchange gain for the nine months ended September 30, 2003 was NT$902,549 thousand. The assets and liabilities related to the above forward exchange contracts are as follows: As of September 30, Assets and liabilities 2003 (in Thousand) ----------------------------- ------------------- Time Deposit US$ 845,544 Notes and accounts receivable US$ 731,587 Accounts payable EUR 87,261 b) Interest rate swaps The Company has entered into interest rate swap contracts to manage exposures to rising interest rates on its floating rate long-term loans. Interest expense on these transactions for the nine months ended September 30, 2003 was NT$141,097 thousand. Outstanding contracts as of September 30, 2003 were as follows: Contract Amount Contract Date Period (in Thousand) ------------------ --------------------------------------- ----------------- July 1, 1999 July 1, 1999 to June 28, 2004 US$ 5,714 September 19, 2003 September 19, 2003 to December 15, 2005 NT$ 500,000 -27- c) Option contracts The Company entered into foreign currency option contracts to manage exchange rate fluctuations arising from its anticipated US dollar cash receipts on export sales or its Yen currency obligations for purchases of machinery and equipment. As of September 30, 2003, there were no outstanding option contracts. For the nine months ended September 30, 2003, the Company realized premium income of NT$50,273 thousand and premium expense of NT$204,056 thousand. d) Transaction risk i) Credit risk. Credit risk represents the positive net settlement amount of those contracts with positive fair values at the balance sheet date. The positive net settlement amount represents the loss incurred by the Company if the counter-parties breached the contracts. The banks, which are the counter-parties to the foregoing derivative financial instruments, are reputable financial institutions. Management believes its exposures related to the potential default by those counter-parties are low. ii) Market price risk. All derivative financial instruments are intended as hedges for fluctuations in currency exchange rates on the Company's foreign currency denominated receivables or payables and interest rate fluctuations on its floating rate long-term loans. Gains or losses from forward exchange contracts are likely to be offset by gains or losses from the hedged receivables and payables. Interest rate risks are also controlled as the expected cost of capital is fixed. Thus, market price risks are believed to be minimal. iii) Liquidity and cash flow risk and uncertainty of amount and term of future cash demand. As of September 30, 2003, the Company's future cash demand for outstanding forward exchange contracts, interest rate swaps and option contracts are as follows: Forward Exchange Contracts ----------------------------------------- Term Inflow Outflow --------------- -------------------- ------------------ (In Thousand) (In Thousand) Within one year NT$ 48,639,807 US$ 1,472,647 EUR 38,000 The Company has sufficient operating capital to meet the above cash demand. The interest rate of the interest rate swaps has taken the Company's cost of capital into account. In addition, the exchange rates of forward foreign exchange contracts and option contracts are fixed. Therefore, there is no material fund raising risk and cash flow risk. 2) Fair value of financial instruments:
September 30, 2003 September 30, 2002 --------------------------- ---------------------------- Carrying Carrying Non-derivative financial instruments Amount Fair Value Amount Fair Value ------------------------------------ ------------ ------------ ------------ ------------ Assets Cash and cash equivalents $ 82,730,782 $ 82,730,782 $ 64,516,454 $ 64,516,454 Short-term investments 11,664,302 11,664,302 -- -- Receivables from related parties 15,295,065 15,295,065 11,221,381 11, 221,381 Notes and accounts receivable 12,748,652 12,748,652 10,570,082 10,570,082
(Continued) -28-
September 30, 2003 September 30, 2002 ---------------------------- ----------------------------- Carrying Carrying Amount Fair Value Amount Fair Value ------------ ------------- ------------- ------------- Other financial assets $ 1,192,351 $ 1,192,351 $ 1,069,861 $ 1,069,861 Long-term investments (including credit balances of long-term investments) 34,668,956 39,200,246 36,285,360 41,579,910 Refundable deposits 287,403 287,403 579,147 579,147 Liabilities Payables to related parties 3,790,399 3,790,399 2,830,264 2,830,264 Accounts payable 5,596,631 5,596,631 4,645,596 4,645,596 Payables to contractors and equipment suppliers 9,480,795 9,480,795 17,451,662 17,451,662 Bonds payable (includes current portion) 35,000,000 35,641,304 44,000,000 44,168,116 Other long-term payable (including current portion) 4,889,061 4,889,061 4,184,705 4,184,705 Guarantee deposits 838,864 838,864 1,507,971 1,507,971 Derivative financial instruments -------------------------------- Forward exchange contracts (buy) 45,189 52,376 ( 7,314) ( 19,182) Forward exchange contracts (sell) 334,407 540,975 ( 251,607) ( 109,275) Interest rate swaps -- ( 5,812) 25,425 ( 230,675) Option -- -- -- ( 493,758)
Fair values of financial instruments were determined as follows: a) The carrying amounts reported in the balance sheets for cash and cash equivalents, notes and accounts receivable, other financial assets, accounts payable, payables to contractors and equipment suppliers are approximate to their fair values. b) Fair value of short-term and long-term investments is based on quoted market prices. If quoted market prices are unavailable, fair value is based on net asset value or book value of investment. c) Fair value of refundable deposits and guarantee deposits is based on carrying values. d) The fair value of bonds payable is the quoted market value. Fair value of other long-term payable is approximate to its carrying value. e) Fair value of derivative financial instruments is the estimated net receivable or (payable) if the contracts are terminated on the relevant balance sheet date. The fair values of some financial and non-financial instruments were not included in the fair values disclosed above. Accordingly, the sum of the fair values of the financial instruments listed above does not represent the fair value of the Company as a whole. 3) Investment in Mainland China: The Company filed an investment project with the Investment Commission of MOEA to establish a foundry in Mainland China. On February 27, 2003, the authority approved phase one of the foregoing project and permitted direct investment in establishing TSMC-Shanghai. The Company entered into an investment related agreement with Shanghai Songjiang District People's Government on June 8, 2003. On August 4, 2003, TSMC-Shanghai has been established and is 100% held by the Company. TSMC-Shanghai is engaged mainly in the manufacturing and selling of integrated circuits. The Company invested US$56,000 thousand on October 8, 2003. -29- TABLE 1 ------- TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. FINANCING PROVIDED FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 (Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified) ================================================================================
-------------------------------------------------------------------------------------------------------------- Maximum Balance for the Ending Period Balance Financing Financial (US$ in (US$ in Interest Reasons No. Financing Name Counter-party Statement Account Thousand) Thousand) Rate (Note 1) -------------------------------------------------------------------------------------------------------------- 1 TSMC International TSMC Technology Other receivables $ 542,278 $ 542,278 4.25% 2 (US$ 16,049) (US$ 16,049) --------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------- Collateral Financing ---------------- Financing Company's Limit Financing Reasons For for Each Amount Limits Transaction Short-term Allowance for Borrowing (US$ in Amounts Financing Bad Debt Item Value Company Thousand) ----------------------------------------------------------------------------------------- $ -- Operating capital $ -- $ -- $ -- N/A $ 33,384,427 (US$ 987,968) (Note 2) ----------------------------------------------------------------------------------------- Note 1: The No. 2 represents that the short-term financing is necessary for the business. Note 2: Not exceeding the issued capital of the Company.
-30- TABLE 2 ------- TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. ENDORSEMENT/GUARANTEE PROVIDED FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 (Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified) ================================================================================
----------------------------------------------------------------------------------------------------------------------------------- Counter-party Ratio of ----------------------------- Accumulated Amount of Maximum Maximum Value of Collateral to Collateral/ Endors- Nature of Limits on Each Balance for Ending Collateral Net Equity of Guarantee ement/ Relati- Counter-party's the Period Balance Property, the Latest Amounts Guarantee onship Endorsement/ (US$ in (US$ in Plant and Financial Allowable No. Provider Name (Note 2) Guarantee Amounts Thousand) Thousand) Equipment Statement (Note 1) ----------------------------------------------------------------------------------------------------------------------------------- 0 TSMC TSMC Development 3 Not exceed 10% $ 6,758,200 $ 6,758,200 $ -- 2.16% $ 78,242,856 of the net worth (US$ 200,000) (US$ 200,000) of TSMC, and also limiting to TSMC--North America 2 the total paid- 1,351,640 1,351,640 -- 0.43% in-capital of (US$ 40,000) (US$ 40,000) the endorsement/ WaferTech 3 guarantee 14,868,040 14,868,040 -- 4.75% company, unless (US$ 440,000) (US$ 440,000) otherwise approved by Board of Directors. ----------------------------------------------------------------------------------------------------------------------------------- Note 1: 25% of the net worth of TSMC as of September 30, 2003. Note 2: The No. 2 represents a subsidiary in which TSMC holds directly over 50% of the equity interest. The No. 3 represents an investee in which TSMC holds directly and indirectly over 50% of the equity interest.
-31- TABLE 3 ------- TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. MARKETABLE SECURITIES HELD SEPTEMBER 30, 2003 (Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified) ================================================================================
------------------------------------------------------------------------------------------------------------------------------------ September 30, 2003 --------------------------------------------- Relati- Shares/ Carrying Market Value Marketable onship Units Value Percentage or Net Asset Held Company Securities with the Financial Statement (Thou- (US$ in of Value (US$ Name Type and Name Company Account sand) Thousand) Ownership in Thousand) Note ------------------------------------------------------------------------------------------------------------------------------------ TSMC Liquidity fund -------------- BOA Funds -- Short-term investment 40,000 $ 1,351,200 N/A $ 1,351,200 (US$ 40,000) (US$ 40,000) GS Funds -- Short-term investment 20,000 675,600 N/A 675,600 (US$ 20,000) (US$ 20,000) Bond fund --------- JF Taiwan Bond Fund -- Short-term investment 34,343 500,000 N/A 501,494 ABN AMRO Bond Fund -- Short-term investment 34,794 500,000 N/A 501,597 Bond ---- 2002 Government Bond Series A -- Short-term investment -- 2,902,238 N/A 2,909,857 2002 Government Bond Series E -- Short-term investment -- 3,113,067 N/A 3,122,577 1994 Government Bond Series C -- Short-term investment -- 1,422,197 N/A 1,401,949 Chung Shing Bond with Repurchase Agreement -- Short-term investment -- 1,200,000 N/A 1,200,028 Stock ----- TSMC--North America Subsidiary Long-term investment 11,000 286,061 100 1,011,390 The treasury stocks in amounts of NT$725,329 thousand are deducted from the carrying value. TSMC--Europe Subsidiary Long-term investment -- 10,921 100 10,921 TSMC--Japan Subsidiary Long-term investment 6 97,567 100 97,567 VIS Investee Long-term investment 787,016 3,968,395 28 6,582,824 TSMC International Subsidiary Long-term investment 987,968 21,646,213 100 21,646,213 TSMC Partners Subsidiary Long-term investment 300 4,089,066 100 4,089,066 SSMC Investee Long-term investment 382 2,616,143 32 2,616,143 Emerging Alliance Subsidiary Long-term investment -- 755,364 99 755,364 GUC Investee Long-term investment 39,040 377,758 47 415,507 Taiwan Mask Corp. -- Long-term investment 8,794 32,129 2 157,995 United Gas Co., Ltd. -- Long-term investment 16,783 193,584 11 274,697 Shin-Etsu Handotai Taiwan Co., Ltd. -- Long-term investment 10,500 105,000 7 140,845 W.K. Technology Fund IV -- Long-term investment 5,000 50,000 2 56,904 Hon Tung Ventures Capital -- Long-term investment 8,392 83,916 10 69,896 ------------------------------------------------------------------------------------------------------------------------------------ (Continued)
-32-
------------------------------------------------------------------------------------------------------------------------------------ September 30, 2003 --------------------------------------------- Relati- Shares/ Carrying Market Value Marketable onship Units Value Percentage or Net Asset Held Company Securities with the Financial Statement (Thou- (US$ in of Value (US$ Name Type and Name Company Account sand) Thousand) Ownership in Thousand) Note ------------------------------------------------------------------------------------------------------------------------------------ Certificate ----------- Chi Cherng Investment Investee Long-term investment -- $ 43,028 36 $ 501,592 The treasury stocks in amounts of NT$458,564 thousand are deducted from the carrying value. Hsin Ruey Investment Investee Long-term investment -- 41,787 36 501,298 The treasury stocks in amounts of NT$459,511 thousand are deducted from the carrying value. Equity ------ Crimson Asia Capital -- Long-term investment N/A 42,355 N/A 42,355 Horizon Ventures -- Long-term investment N/A 229,669 N/A 229,669 TSMC--North Stock America ----- TSMC Parent Long-term investment 13,287 725,329 -- 904,471 company Chi Cherng Investment Stock ----- TSMC Parent Short-term investment 13,735 458,564 -- 934,987 company Certificate ----------- Hsin Ruey Investment Major Long-term investment -- 902,017 64 902,017 shareholder Hsin Ruey Stock Investment ----- TSMC Parent Short-term investment 13,761 459,511 -- 936,740 company Certificate ----------- Chi Cherng Investment Major Long-term investment -- 902,888 64 902,888 shareholder TSMC Inter- national Stock ----- Subsidiary Long-term investment 45,000 US$ 42,233 97 US$ 42,233 InveStar Subsidiary Long-term investment 51,300 US$ 38,432 97 US$ 38,432 InveStar II Subsidiary Long-term investment 1 US$ 537,248 100 US$ 537,248 TSMC Development Subsidiary Long-term investment 1 (US$ 7,886) 100 (US$ 7,886) TSMC Technology -- Long-term investment 68 -- -- - 3DFX Interactive Inc. -- Short-term investment 558 US$ 547 -- US$ 22,175 Marvell Liquidity fund -------------- BOA Fund -- Short-term investment 67,100 US$ 67,100 N/A US$ 67,100 VIS Stock ----- VIS Associates Inc. Subsidiary Long-term investment 41,070 1,248,569 100 1,248,569 The book value is net of allowance for valuation loss of long-term investments, $8,684 thousand. PowerChip Semiconductor, Inc. Investee Long-term investment 121,005 1,586,946 4 1,950,603 Etron Technology, Inc. Investee Long-term investment 4,859 216,852 2 106,650 Walsin Technology, Inc. Investee Long-term investment 34,551 302,559 8 267,235 MEGIC Corporation Investee Long-term investment 16,500 177,000 8 143,013 FormFactor, Inc. Investee Long-term investment 267 64,360 1 193,712 United Gas Co., Ltd. Investee Long-term investment 3,357 38,716 2 55,044 ------------------------------------------------------------------------------------------------------------------------------------ (Continued)
-33-
------------------------------------------------------------------------------------------------------------------------------------ September 30, 2003 ---------------------------------------------- Relati- Shares/ Carrying Market Value Marketable onship Units Value Percentage or Net Asset Held Company Securities with the Financial Statement (Thou- (US$ in of Value (US$ Name Type and Name Company Account sand) Thousand) Ownership in Thousand) Note ------------------------------------------------------------------------------------------------------------------------------------ Bond fund --------- Yuan Da Duo Li #2 -- Short-term investment 58,069 $ 800,703 -- $ 811,835 Jihsun -- Short-term investment 61,365 790,000 -- 799,659 Fu Hua -- Short-term investment 4,015 50,000 -- 50,817 Well Pool Bond Fund -- Short-term investment 106,372 1,268,000 -- 1,275,881 VIS Assoc- iates Inc. Stock ----- VIS Investment Holding, Inc. Subsidiary Long-term investment 63 US$ 418 100 US$ 418 Equity ------ Silicon Valley Equity Fund -- Long-term investment -- US$ 4,360 34 US$ 4,360 Silicon Valley Equity Fund II -- Long-term investment -- US$ 5,333 14 US$ 5,333 Equity certificate ------------------ ABN AMRO Bank -- Long-term investment 38,648 US$ 17,604 -- US$ 17,604 Fund ---- Grand Palace Trust -- Long-term investment -- US$ 3,584 100 US$ 3,584 VIS Investment Holding, Inc. Stock ----- VIS Micro, Inc. Subsidiary Long-term investment 200 US$ 294 100 US$ 294 TSMC Development Stock ----- WaferTech Subsidiary Long-term investment -- US$ 321,076 99 US$ 321,076 InveStar Stock ----- PLX Technology, Inc. -- Short-term investment 357 US$ 693 -- US$ 2,269 Formfactor, Inc. -- Short-term investment 267 US$ 2,000 -- US$ 5,742 WGRD -- Short-term investment 86 US$ 514 -- US$ 437 Programmable Microelectronics (Taiwan), Inc. -- Long-term investment 575 US$ 204 4 US$ 204 Global Testing Corp. -- Long-term investment 13,268 US$ 5,329 12 US$ 5,329 Chipstrate Technologies, Inc. -- Long-term investment 1,332 US$ 310 1 US$ 310 Richtek Technology Corp. -- Long-term investment 1,800 US$ 356 1 US$ 356 Advanced Power Electronics, Corp. -- Long-term investment 2,750 US$ 1,385 3 US$ 1,385 Capella Microsystems, Inc. -- Long-term investment 530 US$ 157 -- US$ 157 Preferred stock --------------- Integrated Memory Logic, Inc. -- Long-term investment 1,831 US$ 1,221 -- US$ 1,221 SiRF Technology Holdings, Inc. -- Long-term investment 306 US$ 1,333 -- US$ 1,333 Sensory, Inc. -- Long-term investment 1,404 US$ 312 -- US$ 312 LightSpeed Semiconductor Corporation -- Long-term investment 2,252 US$ 329 -- US$ 329 Tropian, Inc. -- Long-term investment 1,758 US$ 2,334 -- US$ 2,334 Sonics, Inc. -- Long-term investment 2,686 US$ 3,530 -- US$ 3,530 Atheros, Inc. -- Long-term investment 1,607 US$ 3,593 -- US$ 3,593 NanoAmp Solutions, Inc. -- Long-term investment 541 US$ 853 -- US$ 853 Monolithic Power Systems, Inc. -- Long-term investment 2,521 US$ 2,000 -- US$ 2,000 ------------------------------------------------------------------------------------------------------------------------------------ (Continued)
-34-
------------------------------------------------------------------------------------------------------------------------------------ September 30, 2003 ---------------------------------------------- Relati- Shares/ Carrying Market Value Marketable onship Units Value Percentage or Net Asset Held Company Securities with the Financial Statement (Thou- (US$ in of Value (US$ Name Type and Name Company Account sand) Thousand) Ownership in Thousand) Note ------------------------------------------------------------------------------------------------------------------------------------ Memsic, Inc. -- Long-term investment 2,727 US$ 1,500 -- US$ 1,500 Reflectivity, Inc. -- Long-term investment 1,064 US$ 1,192 -- US$ 1,192 Signia Technologies, Inc. -- Long-term investment 3,000 US$ 208 -- US$ 208 Match Lab, Inc. -- Long-term investment 1,875 US$ 375 -- US$ 375 Oridus, Inc. (Creosys, Inc.) -- Long-term investment 1,500 US$ 300 -- US$ 300 Incentia Design Systems, Inc. -- Long-term investment 286 US$ 180 -- US$ 180 IP Unity -- Long-term investment 1,008 US$ 494 -- US$ 494 InveStar II Stock ----- WGRD -- Short-term investment 87 US$ 520 -- US$ 443 eChannel Option Holding, Inc. -- Long-term investment 358 US$ 251 -- US$ 251 Elcos Microdisplay Technology, Ltd. -- Long-term investment 270 US$ 27 -- US$ 27 Signia Technologies, Inc. -- Long-term investment 351 US$ 104 -- US$ 104 Procoat Technology -- Long-term investment 4,165 US$ 2,000 4 US$ 2,000 Richtek Technology Corp. -- Long-term investment 845 US$ 1,036 2 US$ 1,036 Programmable Microelectronics (Taiwan), Inc. -- Long-term investment 177 US$ 52 -- US$ 52 Auden Technology MFG Co., Ltd. -- Long-term investment 953 US$ 1,151 2 US$ 1,151 GeoVision, Inc. -- Long-term investment 180 US$ 133 -- US$ 133 EoNex Technologies, Inc. -- Long-term investment 55 US$ 3,096 -- US$ 3,096 Conwise Technology Co., Ltd. -- Long-term investment 2,800 US$ 996 -- US$ 996 Eon Technology, Inc. -- Long-term investment 2,800 US$ 996 -- US$ 996 Goyatek Technology, Inc. -- Long-term investment 2,088 US$ 1,380 -- US$ 1,380 TrendChip Technologies Corp. -- Long-term investment 2,000 US$ 889 -- US$ 889 Capella Microsystems, Inc. -- Long-term investment 419 US$ 124 -- US$ 124 Preferred stock --------------- Memsic, Inc. -- Long-term investment 2,289 US$ 1,560 -- US$ 1,560 Oepic, Inc. -- Long-term investment 4,997 US$ 1,317 -- US$ 1,317 NanoAmp Solutions, Inc. -- Long-term investment 250 US$ 1,000 -- US$ 1,000 Advanced Analogic Technology, Inc. -- Long-term investment 948 US$ 1,261 -- US$ 1,261 Monolithic Power Systems, Inc. -- Long-term investment 804 US$ 1,946 -- US$ 1,946 Ralink Technologies, Inc. -- Long-term investment 1,833 US$ 815 -- US$ 815 Sonics, Inc. -- Long-term investment 3,082 US$ 3,082 -- US$ 3,082 Newport Opticom, Inc. -- Long-term investment 1,157 US$ 402 -- US$ 402 Silicon Data, Inc. -- Long-term investment 2,000 US$ 750 -- US$ 750 Reflectivity, Inc. -- Long-term investment 1,596 US$ 1,500 -- US$ 1,500 Angstron Systems, Inc. -- Long-term investment 1,567 US$ 500 -- US$ 500 Tropian, Inc. -- Long-term investment 1,464 US$ 2,000 -- US$ 2,000 SiRF Technology Holdings, Inc. -- Long-term investment 20 US$ 131 -- US$ 131 LeadTONE Wireless, Inc. -- Long-term investment 680 US$ 131 -- US$ 131 Match Lab, Inc. -- Long-term investment 313 US$ 63 -- US$ 63 eBest!, Inc. -- Long-term investment 201 US$ 41 -- US$ 41 Kilopass Technology, Inc. -- Long-term investment 3,887 US$ 2,000 -- US$ 2,000 Elcos Microdisplay Technology, Ltd. -- Long-term investment 2,667 US$ 3,500 -- US$ 3,500 Fang Tek, Inc. -- Long-term investment 5,556 US$ 2,000 -- US$ 2,000 Alchip Technologies Ltd. -- Long-term investment 2,125 US$ 1,700 -- US$ 1,700 ------------------------------------------------------------------------------------------------------------------------------------ (Continued)
-35-
------------------------------------------------------------------------------------------------------------------------------------ September 30, 2003 ---------------------------------------------- Relati- Shares/ Carrying Market Value Marketable onship Units Value Percentage or Net Asset Held Company Securities with the Financial Statement (Thou- (US$ in of Value (US$ Name Type and Name Company Account sand) Thousand) Ownership in Thousand) Note ------------------------------------------------------------------------------------------------------------------------------------ Emerging Alliance Stock ----- Global Investment Holding, Inc. Investee Long-term investment 10,000 $ 100,000 6 $ 100,000 Preferred stock --------------- Quake Technologies, Inc. -- Long-term investment 467 US$ 617 1 US$ 617 Pixim, Inc. -- Long-term investment 1,924 US$ 2,382 3 US$ 2,382 Newport Opticom, Inc. -- Long-term investment 962 US$ 250 6 US$ 250 NetLogic Microsystems, Inc. -- Long-term investment 602 US$ 1,850 1 US$ 1,850 Ikanos Communication, Inc. -- Long-term investment 5,116 US$ 2,572 3 US$ 2,572 Quicksilver Technology, Inc. -- Long-term investment 902 US$ 2,488 4 US$ 2,488 Litchfield Communications -- Long-term investment 3,799 US$ 57 6 US$ 57 Mosaic Systems, Inc. -- Long-term investment 2,481 US$ 12 6 US$ 12 Accelerant Networks, Inc. -- Long-term investment 440 US$ 640 1 US$ 640 Zenesis Technologies, Inc. -- Long-term investment 861 US$ 500 4 US$ 500 Reflectivity, Inc. -- Long-term investment 1,596 US$ 1,500 5 US$ 1,500 Iridigm Display, Co. -- Long-term investment 254 US$ 502 2 US$ 502 XHP Microsystems, Inc. -- Long-term investment 2,280 US$ 750 6 US$ 750 Axiom Microdevices, Inc. -- Long-term investment 1,000 US$ 1,000 5 US$ 1,000 Optichron, Inc. -- Long-term investment 714 US$ 1,000 6 US$ 1,000 ------------------------------------------------------------------------------------------------------------------------------------
-36- TABLE 4 TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 (Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified) ================================================================================
------------------------------------------------------------------------------------------------------------------- Company Name Marketable Financial Statement Counter-Party Nature of Beginning Balance Securities Account Relationship --------------------- Type and Name Shares/ Amount Units (US$ in (Thousand) Thousand) ------------------------------------------------------------------------------------------------------------------- TSMC Liquidity fund -------------- BOA Funds Short-term investment BOA - - $ - GS Funds Short-term investment Goldman Sachs - - - Bond fund --------- JF Taiwan Bond Fund Short-term investment JF Asset Management - - - (Taiwan) Ltd. ABN AMRO Bond Fund Short-term investment ABN AMRO - - - ABN AMRO Select Bond Fund Short-term investment ABN AMRO - - - Bond ---- Chung Shing Bond with Repurchase Chung Shing Bills - - - Agreement Short-term investment Finance Corp. 2002 Government BNP and several - - - Bond Series A Short-term investment financial institutions 2002 Government BNP and several - - - Bond Series E Short-term investment financial institutions 1994 Government Chung Shing Bills - - - Bond Series C Short-term investment Finance Corp. and several financial institutions Stock ----- Emerging Alliance Long-term investment Emerging Alliance Subsidiary - 767,239 VIS Long-term investment VIS Investee 677,471 3,264,657 Amkor Technology Long-term investment - - 505 280,748 Monolithic System Tech. Long-term investment - - 470 104,289 TSMC Partners ADR --- TSMC Short-term investment - - 762 US$ 7,357 InveStar II Preferred stock --------------- Elcos Microdisplay Elcos Microdisplay - - - Technology,Ltd. Long-term investment Technology,Ltd. TSMC Liquidity fund International -------------- BOA Fund Short-term investment BOA - - - VIS Bond fund --------- Kai Chi Kai Xuan Short-term investment - - - - NITC Short-term investment - - - - NT$ High Yield Fund Short-term investment - - - - Ta-Hua Short-term investment - - - - Jihsun Short-term investment - - - - Yuan Da Duo Li #2 Short-term investment - - - - Stock ----- Powerchip Semiconductor Corporation Long-term investment - - 191,671 2,513,378 -------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------- Acquisition Disposal Ending Balance ----------------------------------------------------------------------------------------------------------- Amount (US$ in Shares/Units (US$ in Shares/Units Carrying Gain (Loss) Shares/Units Thousand) (Thousand) Thousand) (Thousand) Amount Value on Disposal (Thousand) (Note 1) ----------------------------------------------------------------------------------------------------------- 120,000 $ 4,161,760 80,000 $ 2,785,760 $ 2,785,760 $ - 40,000 $ 1,376,000 (US$ 120,000) (US$ 80,000) (US$ 40,000) 140,000 4,852,300 120,000 4,165,140 4,165,140 - 20,000 687,160 (US$140,000) (US$120,000) (US$ 20,000) 34,343 500,000 - - - - 34,343 500,000 97,782 1,400,000 62,988 902,881 900,000 2,881 34,794 500,000 81,744 879,000 81,744 881,719 879,000 2,719 - - - 1,200,000 - - - - - 1,200,000 - 2,902,238 - - - - - 2,902,238 - 3,113,067 - - - - - 3,113,067 - 1,422,197 - - - - - 1,422,197 - 174,030 - - - - - 755,364 109,545 766,815 - - - - 787,016 3,968,395 - - 505 301,209 280,748 20,461 - - - - 470 152,681 104,289 48,392 - - - - 823 US$ 8,407 US$ 7,357 US$ 1,050 - - (Note 2) 2,667 US$ 3,500 - - - - 2,667 US$ 3,500 67,100 US$ 67,100 - - - - 67,100 US$ 67,100 64,113 650,000 64,113 654,231 650,000 4,231 - - 3,225 500,000 3,225 500,164 500,000 164 - - 15,871 250,000 15,871 250,202 250,000 202 - - 40,946 500,000 40,946 500,586 500,000 586 - - 61,365 790,000 - - - - 61,365 790,000 65,271 900,000 7,202 100,011 99,297 714 58,069 800,703 - - 70,666 1,217,382 926,432 290,950 121,005 1,586,946 ------------------------------------------------------------------------------------------------------------ Note 1: The ending balance included the recognition of the investment income (loss) by the equity method, the cumulative translation adjustments and unrealized loss on long-term investments recognized in proportion to the Company's ownership percentage in investees. Note 2: Including stock dividend of 61 thousand units.
-37- TABLE 5 ------- TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. ACQUISITION OF INDIVIDUAL REAL ESTATE AT COSTS OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 (Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified) ================================================================================
-------------------------------------------------------------------------------------------------------------------------- Company Types of Transaction Nature of Name Property Transaction Date Amount Payment Term Counter-party Relationship -------------------------------------------------------------------------------------------------------------------------- TSMC Fab 14 January 20, 2003 $ 180,665 By the construction progress United Integrated Services -- Fab 12 May 6, 2003 119,000 By the construction progress United Integrated Services -- Fab 12 June 17, 2003 134,500 By the construction progress United Integrated Services -- Fab 12 June 18, 2003 110,055 By the construction progress Liquid Air Far East Co. Ltd. -- --------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------- Prior Transaction of Related Counter-party ------------------------------------------ Transfer Price Purpose of Other Owner Relationship Date Amount Reference Acquisition Terms ----------------------------------------------------------------------------- N/A N/A N/A N/A Public Manufacturing None bidding purpose N/A N/A N/A N/A Public Manufacturing None bidding purpose N/A N/A N/A N/A Public Manufacturing None bidding purpose N/A N/A N/A N/A Public Manufacturing None bidding purpose ----------------------------------------------------------------------------- -38- TABLE 6 ------- TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. TOTAL PURCHASE FROM OR SALE TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE CAPITAL FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 (Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified) ================================================================================
--------------------------------------------------------------------------------------------------------------------- Transaction Details -------------------------------------------------------------- Company Nature of Purchase/ % to Name Related Party Relationship Sale Amount Total Payment Terms --------------------------------------------------------------------------------------------------------------------- TSMC TSMC--North America Subsidiary Sales $ 84,777,377 58 Net 30 days from invoice date Philips and its affiliates Major shareholder Sales 2,370,142 2 Net 30 days from invoice date GUC Investee Sales 465,626 -- Net 30 days from invoice date WaferTech Subsidiary Purchases 7,815,373 35 Net 30 days from invoice date SSMC Investee Purchases 3,805,999 17 Net 30 days from invoice date VIS Investee Purchases 3,454,704 16 Net 30 days from invoice date ---------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------- Note/Accounts Payable or Abnormal Transaction Receivable ------------------------------------------------------ Note Unit Price Payment Terms Ending Balance % to Total -------------------------------------------------------------- Note 1 Note 1 $ 14,337,121 94 -- None None 752,568 5 -- None None 86,093 -- -- Note 1 Note 1 964,659 26 -- None None 501,281 14 -- None None 796,865 21 -- -------------------------------------------------------------- Note 1: Please refer to footnote 18 in the financial statements. -39- TABLE 7 ------- TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE CAPITAL SEPTEMBER 30, 2003 (Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified) ================================================================================
---------------------------------------------------------------------------------------------------------------------------------- Amounts Received Allowance Company Nature of Ending Turnover in Subsequent for Name Related Party Relationship Balance Rate Overdue Period Bad Debts ---------------------------------------------------------------------------------------------------------------------------------- Amount Action Taken ---------------------------------------------------------------------------------------------------------------------------------- TSMC TSMC--North America Subsidiary $ 14,337,121 39 days $ 3,548,863 Accelerate demand $ 2,855,719 $ -- on account receivables Philips and its Major Accelerate demand on affiliates shareholder 752,568 64 days 82,648 account receivables 21,204 -- ----------------------------------------------------------------------------------------------------------------------------------
-40- TABLE 8 ------- TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD. NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES ON WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE SEPTEMBER 30, 2003 (Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified) ================================================================================
----------------------------------------------------------------------------------------------------------------------- Investor Company Investee Company Location Main Businesses and Products ----------------------------------------------------------------------------------------------------------------------- TSMC TSMC--North America San Jose, California, U.S.A. Marketing and engineering support TSMC--Europe Amsterdam, The Netherlands Marketing and engineering support TSMC--Japan Yokohama, Japan Marketing and engineering support VIS Hsin-Chu, Taiwan IC design and manufacturing TSMC International Tortola, British Virgin Islands Investment Chi Cherng Investment Taipei, Taiwan Investment Hsin Ruey Investment Taipei, Taiwan Investment TSMC Partners Tortola, British Virgin Islands Investment SSMC Singapore Manufacturing wafer Emerging Alliance Cayman Islands Investment GUC Hsin-Chu, Taiwan IC research, development, manufacturing, testing and marketing -----------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------- Original Investment Amount Balance as of September 30, 2003 ----------------------------- ---------------------------------------------- Net Income Investment September 30, December 31, Shares Percentage Carrying (Loss) of Gain (Loss) Note 2003 2002 (Thousand) of Ownership Value (Note 1) the Investee (Note 2) ----------------------------------------------------------------------------------------------------------------------------- $ 333,178 $ 333,178 11,000 100 $ 286,061 $ 117,908 $ 113,249 Subsidiary 2,960 2,960 -- 100 10,921 54 54 Subsidiary 83,760 83,760 6 100 97,567 3,473 3,473 Subsidiary 8,119,816 6,503,640 787,016 28 3,968,395 ( 172,445) ( 48,470) Investee 31,445,780 31,445,780 987,968 100 21,646,213 21,128 21,128 Subsidiary 300,000 300,000 -- 36 43,028 ( 598) 195 Investee 300,000 300,000 -- 36 41,787 ( 1,903) 1,033 Investee 10,350 10,350 300 100 4,089,066 196,242 194,235 Subsidiary 6,408,190 6,408,190 382 32 2,616,143 ( 1,381,819) ( 442,182) Investee 1,179,690 1,005,660 -- 99 755,364 ( 163,804) ( 162,985) Subsidiary 409,920 341,250 39,040 47 377,758 ( 64,120) ( 23,681) Investee (Note 3) Note 1: The treasury stock is deducted from the carrying value. Note 2: The unrealized gain or loss and the gain or loss on disposal of the stocks held by subsidiaries are excluded. Note 3: TSMC's investee, Ya Xin, merged with GUC in January 2003. GUC is the surviving company.
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