Form 6K

1934 Act Registration No. 1-14700


SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 


 

FORM 6-K

 


 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF

THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of April 2004

 


 

Taiwan Semiconductor Manufacturing Company Ltd.

(Translation of Registrant’s Name Into English)

 


 

No. 8, Li-Hsin Rd. 6,

Hsinchu Science Park,

Taiwan

(Address of Principal Executive Offices)

 


 

(Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.)

 

Form 20-F  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: April 27, 2004

 

By

 

/s/ Lora Ho


           

Lora Ho

           

Vice President & Chief Financial Officer


Taiwan Semiconductor Manufacturing

Company Ltd.

 

Financial Statements for the Three Months Ended

March 31, 2004 and 2003

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 March 31, 2004 and 2003, and the related statements of income and cash flows for the three months then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to issue a report on these financial statements based on our reviews.

 

We conducted our reviews in accordance with Statement on Auditing Standards No. 36 “Review of Financial Statements” issued by the Auditing Committee of the Accounting Research and Development Foundation of the Republic of China. A review consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the Republic of China, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

 

Based on our review, 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 Guidelines Governing the Preparation of Financial Reports by Securities Issuers and accounting principles generally accepted in the Republic of China.

 

April 14, 2004

 

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)

MARCH 31, 2004 AND 2003

(In Thousand New Taiwan Dollars, Except Par Value)

 

     2004

    2003

 
     Amount

    %

    Amount

    %

 

ASSETS

                            

CURRENT ASSETS

                            

Cash and cash equivalents (Notes 2 and 3)

   $ 106,507,988     25     $ 67,449,389     18  

Short-term investments (Notes 2 and 4)

     19,829,168     5       —       —    

Receivables from related parties (Note 18)

     16,450,646     4       11,056,070     3  

Notes receivable

     57,225     —         4,120     —    

Accounts receivable

     14,649,792     3       9,358,733     3  

Allowance for doubtful receivables (Note 2)

     (1,014,509 )   —         (976,864 )   —    

Allowance for sales returns and others (Note 2)

     (2,893,814 )   (1 )     (1,834,097 )   (1 )

Other financial assets (Notes 2 and 21)

     1,851,305     1       749,584     —    

Inventories—net (Notes 2 and 5)

     11,014,523     3       10,178,043     3  

Deferred income taxes assets (Notes 2 and 12)

     8,212,000     2       5,371,000     2  

Prepaid expenses and other current assets

     1,052,581     —         1,629,391     —    
    


 

 


 

Total current assets

     175,716,905     42       102,985,369     28  
    


 

 


 

LONG-TERM INVESTMENTS (Notes 2, 6, 15, 18 and 20)

                            

Equity method

     37,275,028     9       33,119,011     9  

Cost method

     432,500     —         849,666     —    

Funds

     270,934     —         238,507     —    

Unrealized loss on long-term investments

     —       —         (60,566 )   —    
    


 

 


 

Total long-term investments

     37,978,462     9       34,146,618     9  
    


 

 


 

PROPERTY, PLANT, AND EQUIPMENT (Notes 2 and 7)

                            

Cost

                            

Buildings

     71,772,658     17       69,976,415     19  

Machinery and equipment

     341,494,302     81       314,492,740     87  

Office equipment

     6,340,506     1       5,812,295     2  
    


 

 


 

       419,607,466     99       390,281,450     108  

Accumulated depreciation

     (261,678,445 )   (62 )     (202,845,400 )   (56 )

Advance payments and construction in progress

     38,003,417     9       18,157,888     5  
    


 

 


 

Net property, plant, and equipment

     195,932,438     46       205,593,938     57  
    


 

 


 

GOODWILL (Note 2)

     2,177,439     1       2,525,829     1  
    


 

 


 

OTHER ASSETS

                            

Deferred charges—net (Notes 2, 8 and 20)

     7,502,506     2       9,198,057     3  

Deferred income taxes assets (Notes 2 and 12)

     1,534,457     —         7,968,768     2  

Idle assets (Note 2)

     85,463     —         270,152     —    

Assets leased to others (Note 2)

     83,622     —         86,526     —    

Refundable deposits (Notes 18 and 20)

     26,229     —         478,385     —    

Miscellaneous

     —       —         9,250     —    
    


 

 


 

Total other assets

     9,232,277     2       18,011,138     5  
    


 

 


 

TOTAL ASSETS

   $ 421,037,521     100     $ 363,262,892     100  
    


 

 


 

 

     2004

   2003

     Amount

    %

   Amount

    %

LIABILITIES AND SHAREHOLDERS’ EQUITY

                         

CURRENT LIABILITIES

                         

Payables to related parties (Note 18)

   $ 4,926,011     1    $ 2,632,038     1

Accounts payable

     7,697,360     2      4,497,685     1

Payable to contractors and equipment suppliers

     12,647,943     3      7,738,073     2

Accrued expenses and other current liabilities (Notes 2, 10 and 21)

     7,810,028     2      5,479,353     1

Current portion of long-term bonds payables (Note 9)

     5,000,000     1      —       —  
    


 
  


 

Total current liabilities

     38,081,342     9      20,347,149     5
    


 
  


 

LONG-TERM LIABILITIES

                         

Long-term bonds payable (Note 9)

     30,000,000     7      35,000,000     10

Other long-term payables (Notes 10 and 20)

     2,999,977     1      4,281,200     1
    


 
  


 

Total long-term liabilities

     32,999,977     8      39,281,200     11
    


 
  


 

OTHER LIABILITIES

                         

Guarantee deposits (Note 20)

     656,128     —        1,375,672     —  

Accrued pension cost (Notes 2 and 11)

     2,714,032     1      2,297,786     1

Deferred gain on sale and leaseback (Note 2)

     —       —        76,619     —  
    


 
  


 

Total other liabilities

     3,370,160     1      3,750,077     1
    


 
  


 

Total liabilities

     74,451,479     18      63,378,426     17
    


 
  


 

SHAREHOLDERS’ EQUITY (Notes 2, 14, 15 and 16)

                         

Capital stock—$10 par value

                         

Authorized: 24,600,000 thousand shares

                         

Issued: Common—20,266,619 thousand shares in 2004 and 18,622,887 thousand shares in 2003

     202,666,189     48      186,228,867     51

Preferred—1,300,000 thousand shares

     —       —        13,000,000     4

Capital surplus

     56,860,879     13      56,839,890     16

Retained earnings:

                         

Appropriated as legal reserve

     20,802,137     5      18,641,108     5

Appropriated as special reserve

     68,945     —        —       —  

Unappropriated earnings

     69,018,210     16      26,508,956     7

Others:

                         

Unrealized loss on long-term investments

     —       —        (293,612 )   —  

Cumulative translation adjustments

     (728,208 )   —        882,749     —  

Treasury stock (at cost)—48,518 thousand shares in 2004 and 42,001 thousand shares in 2003

     (2,102,110 )   —        (1,923,492 )   —  
    


 
  


 

Total shareholders’ equity

     346,586,042     82      299,884,466     83
    


 
  


 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

   $ 421,037,521     100    $ 363,262,892     100
    


 
  


 

 

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

 

- 2 -


English Translation of Financial Statements Originally Issued in Chinese

 

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD.

 

STATEMENTS OF INCOME

(UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003

(In Thousand New Taiwan Dollars, Except Earnings Per Share)

 

     2004

   2003

     Amount

    %

   Amount

    %

GROSS SALES (Notes 2 and 18)

   $ 58,785,691          $ 39,633,381      

SALES RETURNS AND ALLOWANCES (Note 2)

     (1,272,486 )          (308,068 )    
    


      


   

NET SALES

     57,513,205     100      39,325,313     100

COST OF SALES (Notes 13 and 18)

     34,783,992     60      28,939,421     73
    


 
  


 

GROSS PROFIT

     22,729,213     40      10,385,892     27
    


 
  


 

OPERATING EXPENSES (Notes 13 and 18)

                         

Research and development

     2,860,983     5      2,511,843     6

General and administrative

     2,031,122     4      1,395,451     4

Marketing

     296,459     —        283,933     1
    


 
  


 

Total operating expenses

     5,188,564     9      4,191,227     11
    


 
  


 

INCOME FROM OPERATIONS

     17,540,649     31      6,194,665     16
    


 
  


 

NON-OPERATING INCOME AND GAINS

                         

Investment income recognized by equity method—net (Notes 2 and 6)

     802,676     1      —       —  

Interest (Notes 2 and 21)

     256,296     1      188,929     1

Gain on sales of short-term investments (Note 2)

     94,477     —        7,894     —  

Insurance compensation—net

     79,797     —        52,562     —  

Gain on sales of property, plant, and equipment (Note 2)

     59,087     —        5,876     —  

Technical service income (Notes 18 and 20)

     56,983     —        21,153     —  

Other (Note 18)

     12,338     —        17,393     —  
    


 
  


 

Total non-operating income and gains

     1,361,654     2      293,807     1
    


 
  


 

NON-OPERATING EXPENSES AND LOSSES

                         

Interest (Notes 7 and 21)

     330,172     1      500,301     1

Foreign exchange loss—net (Notes 2 and 21)

     122,117     —        159,298     1

Loss on sales of property, plant, and equipment (Note 2)

     6,749     —        37,083     —  

Investment loss recognized by equity method—net (Notes 2 and 6)

     —       —        1,515,850     4

Loss on idle assets (Note 2)

     —       —        63,111     —  

Other

     7,832     —        32,559     —  
    


 
  


 

Total non-operating expenses and losses

     466,870     1      2,308,202     6
    


 
  


 

 

- 3 -


English Translation of Financial Statements Originally Issued in Chinese

 

     2004

   2003

     Amount

   %

   Amount

   %

INCOME BEFORE INCOME TAX

   $ 18,435,433    32    $ 4,180,270    11

INCOME TAX BENEFIT (Notes 2 and 12)

     353,769    1      177,597    —  
    

  
  

  

NET INCOME

   $ 18,789,202    33    $ 4,357,867    11
    

  
  

  

 

     Before
Income
Tax


   After
Income
Tax


   Before
Income
Tax


   After
Income
Tax


EARNINGS PER SHARE (Note 17)

                           

Basic earnings per share

   $ 0.91    $ 0.93    $ 0.20    $ 0.21
    

  

  

  

Diluted earnings per share

   $ 0.91    $ 0.93    $ 0.20    $ 0.21
    

  

  

  

 

The pro forma net income and earnings per share (after income tax) on the assumption that the stock of parent company held by its subsidiaries is treated as an investment instead of the treasury stock, are shown as follows (Note 16):

 

     2004

   2003

NET INCOME

   $ 18,790,578    $ 4,363,370
    

  

EARNINGS PER SHARE

             

Basic earnings per share

   $ 0.93    $ 0.21
    

  

Diluted earnings per share

   $ 0.93    $ 0.21
    

  

 

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

(Concluded)

 

- 4 -


English Translation of Financial Statements Originally Issued in Chinese

 

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD.

 

STATEMENTS OF CASH FLOWS

(UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003

(In Thousand New Taiwan Dollars)

 

     2004

    2003

 

CASH FLOWS FROM OPERATING ACTIVITIES

                

Net income

   $ 18,789,202     $ 4,357,867  

Adjustments to reconcile net income to net cash provided by operating activities:

                

Depreciation and amortization

     15,088,680       15,360,867  

Deferred income taxes

     (353,861 )     (307,201 )

Investment (income) loss recognized by equity method—net

     (802,676 )     1,515,850  

Loss on idle assets

     —         63,111  

Loss (gain) on sales of property, plant and equipment—net

     (52,338 )     31,207  

Accrued pension cost

     113,781       87,244  

Allowance for doubtful receivables

     (1,513 )     47,000  

Allowance for sales returns and others

     767,789       (528,970 )

Changes in operating assets and liabilities:

                

Decrease (increase) in:

                

Receivables from related parties

     (1,450,021 )     (872,582 )

Notes receivable

     (47,332 )     56,120  

Accounts receivable

     (741,878 )     136,714  

Inventories—net

     (107,365 )     162,293  

Other financial assets

     (769,563 )     220,085  

Prepaid expenses and other current assets

     539,385       384,970  

Increase (decrease) in:

                

Payables to related parties

     425,871       165,040  

Accounts payable

     1,613,484       (351,549 )

Accrued expenses and other current liabilities

     (310,038 )     (399,133 )
    


 


Net cash provided by operating activities

     32,701,607       20,128,933  
    


 


CASH FLOWS FROM INVESTING ACTIVITIES

                

Increase in short-term investments

     (7,270,149 )     —    

Acquisitions of:

                

Long-term investments

     (167,902 )     (1,010,581 )

Property, plant, and equipment

     (16,351,217 )     (9,052,961 )

Proceeds from sales of:

                

Property, plant, and equipment

     67,672       41,841  

Increase in deferred charges

     (326,944 )     (360,328 )

Decrease in refundable deposits

     151,150       65,084  
    


 


Net cash used in investing activities

     (23,897,390 )     (10,316,945 )
    


 


 

(Continued)

 

- 5 -


English Translation of Financial Statements Originally Issued in Chinese

 

     2004

    2003

 

CASH FLOWS FROM FINANCING ACTIVITIES

                

Purchase of treasury stock

   $ (476,870 )   $ —    

Decrease in guarantee deposits

     (107,361 )     (19,394 )

Payments on long-term bonds payable

     —         (4,000,000 )
    


 


Cash used in financing activities

     (584,231 )     (4,019,394 )
    


 


NET INCREASE IN CASH AND CASH EQUIVALENTS

     8,219,986       5,792,594  

CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD

     98,288,002       61,656,795  
    


 


CASH AND CASH EQUIVALENTS, END OF THE PERIOD

   $ 106,507,988     $ 67,449,389  
    


 


SUPPLEMENTAL INFORMATION

                

Interest paid (excluding the amounts capitalized of NT$51,978 thousand and NT$2,315 thousand in 2004 and 2003, respectively)

   $ 372,684     $ 608,040  
    


 


Income tax paid

   $ 92     $ 2,500  
    


 


Non-cash investing and financing activities:

                

Reclassification of a parent company stock held by subsidiaries from long-term investments to treasury stock

   $ —       $ 1,923,492  
    


 


Current portion of long-term bonds payable

   $ 5,000,000     $ —    
    


 


Current portion of other long-term payables (under accrued expenses and other current liabilities)

   $ 1,826,065     $ 1,157,175  
    


 


 

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

   (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 (R.O.C.) corporation, was incorporated as a venture among the Government of the R.O.C., 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 in the manufacturing, selling, packaging, testing and designing of integrated circuits and other semiconductor devices, and the manufacturing of masks.

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The financial statements are presented in conformity with Guidelines Governing the Preparation of Financial Reports by Securities Issuers and accounting principles generally accepted in the R.O.C. 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 consist of government bonds, bond funds, government bonds acquired under repurchase agreements and listed stocks. The investments are carried at the lower of cost or market value. Cash dividends are recorded as investment income in the current period. An allowance for decline in value is provided and is charged to current period earnings when the aggregate carrying value of the investments exceeds the aggregate market value. A reversal of the allowance is recorded for a subsequent recovery of the market value. The cost of the government bonds sold is accounted for using the specific identification method, whereas the cost of bond funds and listed stocks sold is accounted for using the weighted-average method.

 

The market values of government bonds are determined using the average of bid and ask prices of the government bonds. The market value of funds is determined using the net asset value of the funds, and the market value of listed stocks is determined using the average-closing price of the listed stocks for the last month of the period.

 

- 7 -


Allowance for Doubtful Receivables

 

Allowance for doubtful receivables are provided based on a review of the collectibility of accounts receivables. The Company determines the amount of allowance for doubtful accounts by examining the historical collection experience and current trends in the credit quality of its customers as well as its internal credit policies.

 

Revenue Recognition and Allowance for Sales Returns and Others

 

The Company recognizes net sales when the earnings process is complete, as evidenced by an agreement with the customer, transfer of title and acceptance, if applicable, have occurred, as well as the price is fixed or determinable and the collectibility is reasonably assured. An allowance is provided for any sales return and pricing discounts. Allowance for sales returns and pricing discounts 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 its customers. Sales agreements typically provide that payment is due 30 days from invoice date for majority of the customers and 30 to 45 days after the end of the month in which the sales occur for some 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 the approximate weighted-average cost at the end of each period. Market value represents net realizable value for finished goods and work in process. Replacement value represents net realizable value for raw materials, supplies and spare parts. The Company assesses the impact of changing technology on its inventory on-hand and write-off inventories that are considered obsolete. Ending inventories are evaluated for estimated excess quantities and obsolescence based on demand forecast within a specific time horizon, generally 180 days or less. Scrap and slow-moving items are recognized in the allowance for losses.

 

Long-term Investments

 

Investments in companies wherein the Company exercises significant influence on the operating and financial policy decisions are accounted for using the equity method of accounting. 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 equity investments are made, the difference, if any, between the cost of investment and the Company’s proportionate share of investee’s net book value is amortized using the straight-line method over five years and is recorded as a component of the “investment income/loss recognized by equity method—net” account. The Company reclassify its capital stock held by its subsidiaries from 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 the 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 long-term investments with the corresponding amount charged to capital surplus. If investee’s functional currency is a foreign currency, “cumulative translation adjustments” will result from the process of translating the investee’s financial statements into the reporting currency of the Company.

 

- 8 -


Investments in companies wherein the Company does not exercise significant influence are recorded at historical cost. 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 recorded as an increase in the number of shares held and do not affect investment income or the carrying amount of the investment. An allowance is recognized for any decline in the market value of investments with readily ascertainable fair market value with the corresponding amount recorded as an unrealized loss, a component of shareholders’ equity. A reversal of the allowance will result from a subsequent recovery of the market value of such investments. The market value of such investment is determined using the average-closing price of the listed stocks for the last month of the period. The carrying values of investments whose fair market values are not readily ascertainable are reduced to reflect an other-than-temporary decline in their values, with the related impairment loss charged to income.

 

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 recorded as a reduction 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 recognizes an unrealized loss on its long-term investment using the lower-of-cost-or-market method, the Company also recognizes a corresponding unrealized loss in proportion to its equity interest in the investee company and records the amount as a component of its shareholders’ equity.

 

Gains or losses on sales from the Company to investee companies accounted for using the equity method are deferred in proportion to the Company’s ownership percentage in the investee companies until realized through a transaction with a third party. The entire amount of the gains or losses on sales to majority-owned subsidiaries is deferred until such gains or losses are realized through the subsequent sale of the related products to third parties.

 

Gains or losses on sales by investee companies to the Company are deferred in proportion to the Company’s ownership percentages in the investee companies 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 an impairment is determined, the related assets are stated at the lower of fair value or 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. Interest expense incurred for the project during the purchase and construction period is also capitalized.

 

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, with any gain or loss charged to income in the period of disposal.

 

Goodwill

 

Goodwill represents the excess of the consideration paid for acquisition over the fair market value of identifiable net assets acquired and acquisition costs. Goodwill is amortized using the straight-line method over the estimated life of 10 years.

 

- 9 -


Deferred Charges

 

Deferred charges consist of technology license fees, software and system design costs and other charges. The amounts are amortized as follows: software and system design costs—3 or 5 years, technology license fees—the shorter of the estimated life of the technology or the term of the technology transfer contract.

 

Pension Costs

 

The Company records net periodic pension costs on the basis of actuarial calculations. Unrecognized net transition obligation and unrecognized net gains or losses are amortized over 25 years.

 

Deferred Gain on Sale and Leaseback

 

The gain on the sale of property that is simultaneously leased back is deferred by the Company and amortized as an adjustment of rental expenses over the term of the lease.

 

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 classified as current or non-current in accordance with the classification of its related asset or liability. 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 purchases of machinery, equipment and technology, research and development expenditures, personnel training, and investments in important technology-based enterprise are recognized using the current method.

 

Adjustments to 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 usually 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, assets and liabilities denominated in foreign currency 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 end of each period, the receivables or payables arising from forward contracts are restated using the prevailing spot rate at the balance sheet date with the resulting differences charged to income. In addition, the receivables and payables related to the forward contracts are netted with the resulting amount presented as either an asset or a liability. Any resulting gains or losses upon settlement are charged to income in the period of settlement.

 

- 10 -


The Company enters into interest rate swap transactions to manage its 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.

 

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 gains or losses upon settlement are charged to income in the period of settlement.

 

3. CASH AND CASH EQUIVALENTS

 

     March 31

     2004

   2003

Cash and bank deposits

   $ 96,498,092    $ 63,593,271

Government bonds acquired under repurchase agreements

     10,009,896      3,856,118
    

  

     $ 106,507,988    $ 67,449,389
    

  

 

4. SHORT-TERM INVESTMENTS

 

    

March 31,

2004


    

Government bonds

   $ 9,762,665     

Bond funds

     6,700,000     

Government bonds acquired under repurchase agreements

     3,355,145     

Listed stocks

     11,358     
    

    
     $ 19,829,168     
    

    

Market value

   $ 19,905,368     
    

    

 

5. INVENTORIES—NET

 

     March 31

 
     2004

    2003

 

Finished goods

   $ 2,259,236     $ 1,748,237  

Work in process

     8,896,651       8,636,827  

Raw materials

     632,825       384,315  

Supplies and spare parts

     782,487       656,082  
    


 


       12,571,199       11,425,461  

Allowance for losses

     (1,556,676 )     (1,247,418 )
    


 


     $ 11,014,523     $ 10,178,043  
    


 


 

- 11 -


6. LONG-TERM INVESTMENTS

 

     March 31

     2004

   2003

    

Carrying

Value


  

% of

Owner-

ship


  

Carrying

Value


   

% of

Owner-

ship


          
          

Shares of stock

                        

Equity method:

                        

TSMC International Investment Ltd. (TSMC International)

   $ 22,383,406    100    $ 21,019,823     100

Vanguard International Semiconductor Corporation (VIS)

     4,375,675    28      3,588,892     28

TSMC Partners Ltd. (TSMC Partners)

     4,011,311    100      3,938,938     100

Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)

     2,824,776    32      2,859,712     32

TSMC Shanghai Company Ltd. (TSMC Shanghai)

     1,819,487    100      —       —  

Emerging Alliance Fund L.P. (Emerging Alliance)

     824,793    99      933,010     99

TSMC North America (TSMC—North America)

     412,786    100      201,573     100

Global UniChip Corp. (GUC)

     359,454    47      388,177     47

TSMC Japan K. K. (TSMC—Japan)

     104,186    100      94,062     100

VisEra Technology Company Ltd. (VisEra)

     50,499    25      —       —  

Chi Cherng Investment Ltd. (Chi Cherng)

     43,138    36      42,636     36

Hsin Ruey Investment Ltd. (Hsin Ruey)

     42,083    36      41,666     36

Taiwan Semiconductor Manufacturing Company Europe B. V (TSMC—Europe)

     23,434    100      10,522     100
    

       


   
       37,275,028           33,119,011      
    

       


   

Cost method:

                        

Publicly traded stock

                        

Amkor Technology

     —      —        280,748     —  

Monolithic System Technology Inc.

     —      —        104,289     2

Taiwan Mask Corp.

     —      —        32,129     2

Non-publicly traded stock

                        

United Gas Co., Ltd.

     193,584    11      193,584     11

Shin-Etsu Handotai Taiwan Co., Ltd.

     105,000    7      105,000     7

Hon Tung Venture Capital

     83,916    10      83,916     10

W.K. Technology Fund IV

     50,000    2      50,000     2
    

       


   
       432,500           849,666      
    

       


   

Funds

                        

Horizon Ventures

     229,669    —        195,452     —  

Crimson Asia Capital

     41,265    —        43,055     —  
    

       


   
       270,934           238,507      
    

       


   

Unrealized loss on long-term investments

     —             (60,566 )    
    

       


   
     $ 37,978,462         $ 34,146,618      
    

       


   

 

In August 2003, the Company established TSMC Shanghai which is wholly owned by the Company.

 

In November 2003, the Company invested a 25% ownership in VisEra.

 

- 12 -


The carrying value of the investments accounted for using the equity method and the related investment income (losses) were determined based on the reviewed financial statements of the investees for the same period as the Company. The investment income (losses) of the investee companies consisted of the following:

 

    

Three Months Ended

March 31


 
     2004

    2003

 

TSMC International

   $ 365,435     $ (1,229,388 )

VIS

     323,110       (207,875 )

SSMC

     145,147       (275,997 )

TSMC Partners

     10,596       185,361  

Others

     (41,612 )     12,049  
    


 


     $ 802,676     $ (1,515,850 )
    


 


 

The aggregate market value of the publicly traded stocks accounted for using the cost method was $356,597 thousand as of March 31, 2003.

 

7. PROPERTY, PLANT AND EQUIPMENT

 

Accumulated depreciation consisted of the following:

 

     March 31

     2004

   2003

Buildings

   $ 30,913,778    $ 23,790,274

Machinery and equipment

     226,723,846      175,906,546

Office equipment

     4,040,821      3,148,580
    

  

     $ 261,678,445    $ 202,845,400
    

  

 

Information on the status of the expansion or construction plans of the Company’s manufacturing facilities as of March 31, 2004, is as follows:

 

Construction/Expansion Plan


  

Estimated

Complete

Cost


  

Accumulated

Expenditures


  

Expected Date of
Commencement


        
        

Fab 14 Phase 1

   $ 67,047,200    $ 28,671,700    Fourth quarter of 2004

 

Interest expenses for the three months ended March 31, 2004 and 2003 were NT$382,150 thousand and NT$502,616 thousand, respectively (before deducting capitalized amounts of NT$51,978 thousand and NT$2,315 thousand for the three months ended March 31, 2004 and 2003, respectively). The interest rate used for purposes of calculating the capitalized amount was 2.80% and 5.283% for the three months ended March 31, 2004 and 2003, respectively

 

- 13 -


8. DEFERRED CHARGES—NET

 

     March 31

     2004

   2003

Technology license fee

   $ 4,789,827    $ 6,037,579

Software and system design costs

     2,589,038      3,076,319

Others

     123,641      84,159
    

  

     $ 7,502,506    $ 9,198,057
    

  

 

9. BONDS

 

     March 31

     2004

   2003

Domestic unsecured bonds:

             

Issued in October 1999 and payable in October 2002 and 2004 in two equal payments, 5.67% and 5.95% interest payable annually, respectively

     5,000,000    $ 5,000,000

Issued in December 2000 and payable in December 2005 and 2007 in two equal payments, 5.25% and 5.36% interest payable annually, respectively

     15,000,000      15,000,000

Issued in January 2002 and payable in January 2007, 2009 and 2012 in three equal payments, 2.60%, 2.75% and 3% interest payable annually, respectively

     15,000,000      15,000,000
    

  

     $ 35,000,000    $ 35,000,000
    

  

 

As of March 31, 2004, future principal payments for the Company’s bond arrangements are as follows:

 

Year of Repayment


   Amount

 

2004 (2nd to 4th quarter)

   $ 5,000,000  

2005

     10,500,000  

2007

     7,000,000  

2008 and thereafter

     12,500,000  
    


       35,000,000  

Less: Current portion

     (5,000,000 )
    


     $ 30,000,000  
    


 

- 14 -


10. OTHER LONG-TERM PAYABLES

 

The Company entered into several license arrangements for certain semiconductor-related patents. Future payments under the agreements as of March 31, 2004 are as follows:

 

Year


   Amount

 

2004 (2nd to 4th quarter)

   $ 1,528,025  

2005

     1,243,072  

2006

     536,025  

2007

     462,280  

2008

     264,160  

2009 and thereafter

     792,480  
    


       4,826,042  

Less: current portion (under accrued expenses and other current liabilities)

     (1,826,065 )
    


     $ 2,999,977  
    


 

11. PENSION PLAN

 

The Company has a defined benefit 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 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 the amounts in the Fund are deposited in the Committee’s name in the Central Trust of China.

 

For the three months ended March 31, 2004 and 2003, the changes in the Fund and accrued pension cost are summarized as follows:

 

    

Three Months Ended

March 31


     2004

   2003

Pension fund

             

Balance, beginning of period

   $ 1,191,702    $ 993,404

Contribution

     68,041      55,376

Interest

     15,562      20,682
    

  

Balance, end of period

   $ 1,275,305    $ 1,069,462
    

  

Accrued pension cost

             

Balance, beginning of period

   $ 2,600,251    $ 2,210,542

Accruals

     113,781      87,244
    

  

Balance, end of period

   $ 2,714,032    $ 2,297,786
    

  

 

- 15 -


12. 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 as follows:

 

    

Three Months Ended

March 31


 
     2004

    2003

 

Income tax expense based on income before income tax at statutory rate (25%)

   $ (4,608,858 )   $ (1,045,068 )

Tax-exempt income

     2,774,533       648,750  

Temporary and permanent differences

     (137,367 )     (298,137 )
    


 


Current income tax expense before income tax credits

   $ (1,971,692 )   $ (694,455 )
    


 


 

b. Income tax benefit consists of the following:

 

    

Three Months Ended

March 31


 
     2004

    2003

 

Current income tax expense before tax credits

   $ (1,971,692 )   $ (694,455 )

Income tax credits

     1,971,692       694,455  

Other income tax

     (92 )     (2,500 )

Net change in deferred income tax assets and liabilities

                

Investment tax credits

     960,679       1,192,419  

Temporary differences

     807,088       (457,260 )

Valuation allowance

     (1,413,906 )     (555,062 )
    


 


Income tax benefit

   $ 353,769     $ 177,597  
    


 


 

c. Deferred income tax assets consist of the following:

 

     March 31

 
     2004

    2003

 

Current

                

Investment tax credits

   $ 8,212,000     $ 5,371,000  
    


 


Noncurrent:

                

Investment tax credits

   $ 18,398,573     $ 22,389,072  

Temporary differences

     (2,678,363 )     (4,023,101 )

Valuation allowance

     (14,185,753 )     (10,397,203 )
    


 


     $ 1,534,457     $ 7,968,768  
    


 


 

d. Integrated income tax information:

 

     The balances of the imputation credit account (ICA) as of March 31, 2004 and 2003 were NT$2,932 thousand and NT$98,238 thousand, respectively.

 

     The expected and actual creditable ratio for 2003 and 2002 was 0.01% and 0.08%, respectively.

 

- 16 -


The imputation credit allocated to the shareholders is based on its balance as of the date of dividend distribution. The expected creditable ratio may be adjusted when the actual distribution of the imputation credits are made.

 

e. All retained earnings generated prior to December 31, 1997 had been appropriated.

 

f. As of March 31, 2004, investment tax credits consisted of the following:

 

Regulation


  

Items


   Total
Creditable
Amounts


   Remaining
Creditable
Amounts


   Expiry
Year


Statute for Upgrading Industries

   Purchase of machinery and equipment    $
 
 
 
 
3,938,319
3,790,845
4,823,691
3,559,190
597,230
   $
 
 
 
 
1,966,627
3,790,845
4,823,691
3,559,190
597,230
   2004
2005
2006
2007
2008
         

  

    
          $ 16,709,275    $ 14,737,583     
         

  

    

Statute for Upgrading Industries

   Research and development expenditures    $
 
 
 
 
2,258,828
3,110,922
3,322,453
2,275,560
458,750
   $
 
 
 
 
2,258,828
3,110,922
3,322,453
2,275,560
458,750
   2004
2005
2006
2007
2008
         

  

    
          $ 11,426,513    $ 11,426,513     
         

  

    

Statute for Upgrading Industries

   Personnel training    $
 
 
48,097
28,886
27,311
   $
 
 
48,097
28,886
27,311
   2004
2005
2006
         

  

    
          $ 104,294    $ 104,294     
         

  

    

Statute for Upgrading Industries

   Investments in important technology based enterprise    $
 
203,319
138,864
   $
 
203,319
138,864
   2004
2005
         

  

    
          $ 342,183    $ 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 and Fab 4, Fab 5 and Fab 6

   2003 to 2006

 

h. The tax authorities have examined income tax returns of the Company through 2000. However, the Company is contesting the assessment by the tax authority for 1992, 1997 and 1998. The Company believes that any additional assessment will not have a material adverse effect on the Company.

 

- 17 -


13. LABOR COST, DEPRECIATION AND AMORTIZATION EXPENSE

 

     Three Months Ended March 31, 2004

    

Classified as

Cost of Sales


  

Classified as

Operating

Expense


   Total

Labor cost

                    

Salary

   $ 2,083,760    $ 939,102    $ 3,022,862

Labor and health insurance

     130,952      72,039      202,991

Pension

     118,317      65,074      183,391

Other

     80,493      32,324      112,817

Depreciation

     13,654,587      574,503      14,229,090

Amortization

     287,314      571,552      858,866
    

  

  

     $ 16,355,423    $ 2,254,594    $ 18,610,017
    

  

  

 

     Three Months Ended March 31, 2003

     Classified as
Cost of Sales


   Classified as
Operating
Expense


   Total

Labor cost

                    

Salary

   $ 1,573,461    $ 674,624    $ 2,248,085

Labor and health insurance

     113,659      56,704      170,363

Pension

     94,370      47,156      141,526

Other

     34,413      19,524      53,937

Depreciation

     13,744,774      573,515      14,318,289

Amortization

     451,184      590,674      1,041,858
    

  

  

     $ 16,011,861    $ 1,962,197    $ 17,974,058
    

  

  

 

14. SHAREHOLDERS’ EQUITY

 

The Company has issued 585,865 thousand ADSs which are traded on the NYSE as of March 31, 2004. The number of common shares represented by all issued ADSs is 2,929,327 thousand shares (one ADS represents five common shares).

 

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, convertible bonds and the purchase of treasury stock) can be transferred to capital as stock dividends.

 

As of March 31, 2004 and 2003, the capital surplus consisted of the following:

 

     2004

   2003

From merger

   $ 24,132,297    $ 24,132,297

Additional paid-in capital

     23,172,550      23,172,550

From long-term investments

     90,913      81,320

From convertible bonds

     9,410,632      9,410,632

Donation

     55      55

Treasury stock

     54,432      43,036
    

  

Total

   $ 56,860,879    $ 56,839,890
    

  

 

- 18 -


The Company’s Articles of Incorporation provide that the following shall be appropriated from annual earnings to the extent that the annual earnings exceed any accumulated deficit:

 

a. 10% legal reserve; until the amount of total legal reserve equals the Company’s total paid-in capital;

 

b. Special reserve in accordance with relevant laws or regulations;

 

c. Remunerations to directors and supervisors and bonuses to employees equal to 0.3% and at least 1% of the remainder, respectively. Individuals eligible for the employee bonuses 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; and

 

e. The appropriation of any remaining balance shall be approved by the shareholders.

 

Dividends may be distributed in shares of common stock or a combination of cash and common stock. Distributions of profits are usually made in the form of a 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 an accumulated deficit or be distributed as a stock dividend up to 50% 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) shall be made from unappropriated retained earnings pursuant to existing regulations promulgated by the ROC Securities and Futures Commission (SFC). The special reserve is allowed to be appropriated when the debit balance of such account is reversed.

 

The appropriations of earnings for 2003 and 2002 were approved in the board of directors’ meeting and the shareholders’ meeting on February 17, 2004 and June3, 2003, respectively. The appropriations and dividends per share are as follows:

 

     Appropriation of Earnings

   Dividend Per Share
(NT$)


     For Fiscal
Year 2003


    For Fiscal
Year 2002


   For Fiscal
Year 2003


   For Fiscal
Year 2002


Legal reserve

   $ 4,725,870     $ 2,161,029    —      —  

Special reserve

     (68,945 )     68,945    —      —  

Bonus paid to employees—in cash

     681,628       —      —      —  

Bonus paid to employees—in stock

     2,726,514       1,539,013    —      —  

Preferred stock dividend—in cash

     184,493       455,000    0.35    0.35

Common stock dividend—in cash

     12,159,971       —      0.60    —  

Common stock dividend—in stock

     28,373,267       14,898,309    1.40    0.80

Remuneration to directors and supervisors—in cash

     127,805       58,485    —      —  
    


 

         
     $ 48,910,603     $ 19,180,781          
    


 

         

 

- 19 -


The above appropriation of earnings for 2002 is consistent with the resolution of the meetings of board of directors on March 4, 2003. The appropriation of earnings for 2003 has not get been resolved by the shareholders. If the above employee bonus and remuneration to directors and supervisors had been paid in cash and charged against income for 2003 and 2002, the basic earnings per share for the years ended December 31, 2003 and 2002 would decrease from NT$2.33 to NT$2.15 and NT$1.14 to NT$1.05, respectively. The shares distributed as a bonus to employees represented 1.35% and 0.83% of TSMC’s total outstanding common shares as of December 31, 2003 and 2002, respectively.

 

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.

 

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 preferred shareholders had the following rights and 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).

 

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.

 

- 20 -


15. STOCK-BASED COMPENSATION PLANS

 

On October 29, 2003 and June 25, 2002, the SFC approved The Company’s Employee Stock Option Plans (the 2003 Plan and the 2002 Plan, respectively). The maximum number of units authorized to be granted under the 2003 Plan and the 2002 Plan was 120,000 thousand and 100,000 thousand, respectively, with each unit representing one common share of stock. The option rights may be granted to qualified employees of the Company, TSMC—North America, and WaferTech, LLC, (WaferTech, an indirectly owned subsidiary of the Company). The option rights of both plans are valid for ten years and exercisable at certain percentages subsequent to the second anniversary of the grant date. Under the terms of both plans, stock option rights 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 2002 Plan, there were 52,835 thousand option rights that were never been granted, or had been granted and subsequently cancelled. These un-granted or cancelled option rights expired as of March 31, 2004.

 

Information of outstanding stock option rights for the three months ended March 31, 2004 and 2003 under the 2003 Plan and the 2002 Plan is as follows:

 

Three Months Ended March 31, 2004

 

     2003 Plan

   2002 Plan

    

Number of
Outstanding
Stock Option
Rights

(In Thousands)


   

Weighted-

Average
Exercise
Prices
(NT$)


  

Number of
Outstanding
Stock Option
Rights

(In Thousands)


   

Weighted-

Average
Exercise
Price
(NT$)


Beginning Balance

   842     66.50    48,515     49.73

Options granted

   16     63.50    —       —  

Options cancelled

   (24 )   66.44    (1,350 )   51.33
    

      

   

Ending balance

   834          47,165      
    

      

   

 

Three Months Ended March 31, 2003

 

     2002 Plan

    

Number of
Outstanding
Stock Option
Rights

(In Thousands)


   

Weighted-

Average
Exercise
Prices

(NT$)


    

Beginning Balance

   19,369     48.60

Options granted

   318     38.23

Options cancelled

   (471 )   48.67
    

   

Ending balance

   19,216      
    

   

 

The number of outstanding option rights and exercise prices have been adjusted to reflect the issuance of stock dividends in accordance with the plans.

 

- 21 -


As of March 31, 2004, there are no vested stock option rights. Information on outstanding option rights is as follows:

 

     Option Outstanding

Range of Exercise Prices (NT$)


  

Number of
Outstanding
Options

(In Thousands)


   Weighted-Average
Remaining
Contractual Life
(Years)


   Weighted-Average
Exercise Price
(NT$)


2003 Plan (63.50-66.50)

   834    9.89    63.55

2002 plan (38.23-53.76)

   47,165    8.84    49.67
    
         

Total (39.23-66.50)

   47,999    8.86    49.91
    
         

 

The Company uses the intrinsic value based method to evaluate compensation cost for option rights granted from January 1, 2004 subsequently. The compensation cost recognized for the three months ended March 31, 2004 was zero. If the Company had applied the Black-Scholes model to estimate the fair value of the options granted, the assumptions and pro forma results of the Company for the three months ended March 31, 2004 would be as follows:

 

Assumptions:

        

Expected dividend yield

     1.00 %

Expected volatility

     43.25 %

Risk free interest rate

     3.07 %

Expected life

     5 years  

Net income:

        

Net income as reported

   $ 18,789,202  

Pro forma net income

     18,789,189  

Earnings per share (EPS) (NT$):

        

Basic EPS as reported

     0.93  

Pro forma basic EPS

     0.93  

Diluted EPS as reported

     0.93  

Pro forma diluted EPS

     0.93  

 

The estimated weighted average fair value for the options granted under the 2003 Plan during the three-month period ended March 31, 2004 was NT$24.49 per option.

 

16. TREASURY STOCK (COMMON STOCK)

 

     (Shares in Thousand)

Purpose


   Beginning
Shares


   Increase

   Decrease

   Ending
Shares


Three months ended March 31, 2004

                   

Reclassification of parent company stock held by subsidiaries from long-term investment

   40,597    —      146    40,451

Maintain the shareholders’ equity

   —      8,067    —      8,067
    
  
  
  

Total

   40,597    8,067    146    48,518
    
  
  
  

Three months ended March 31, 2003

                   

Reclassification of parent company stock held by subsidiaries from long-term investment

   42,001    —      —      42,001
    
  
  
  

 

- 22 -


Proceeds from the sale of treasury stock for the three months ended March 31, 2004 and 2003 were NT$9,364 thousand and NT$0, respectively. As of March 31, 2004 and 2003, the book value of the treasury stock was NT$1,625,240 thousand and NT$1,923,492 thousand; the market value was NT$2,512,417 thousand and NT$1,796,615 thousand, respectively. Capital stock held by a subsidiary as an investment is recorded as treasury stock with the holder having the same right as other common shareholders.

 

In order to maintain shareholders’ equity, the Company held a special meeting of the Board of Directors and approved a share buyback plan to purchase the Company’s common shares listed on the TSE from its shareholders during the period from March 24, 2004 to May 23, 2004. The purchased shares will be cancelled and deducted from the Company’s current outstanding common shares. The Company plans to buy back up to 300,000 thousand shares at the prices of the range from NT$38.5 to NT$95 per share. As of March 31, 2004, the Company purchased 8,067 thousand shares for a total of NT$476,870 thousand.

 

17. EARNINGS PER SHARE

 

EPS is computed as follows:

 

     Amounts (Numerator)

   

Share

(Denominator)

(Thousand)


   EPS (NT$)

    

Before

Income

Tax


   

After

Income

Tax


       Before
Income
Tax


   After
Income
Tax


Three months ended March 31, 2004

                                  

Basic EPS

                                  

Income available to common shareholders

   $ 18,435,433     $ 18,789,202     20,225,806    $ 0.91    $ 0.93
                         

  

Effect of diluted securities—stock option

     —         —       10,383              
    


 


 
             

Diluted EPS

                                  

Income available to common shareholders

   $ 18,435,433     $ 18,789,202     20,236,189    $ 0.91    $ 0.93
    


 


 
  

  

Three months ended March 31, 2003

                                  

Net income

   $ 4,180,270     $ 4,357,867                    

Less—preferred stock dividends

     (113,750 )     (113,750 )                  
    


 


                 

Basic and diluted EPS

                                  

Income available to common shareholders

   $ 4,066,520     $ 4,244,117     20,221,257    $ 0.20    $ 0.21
    


 


 
  

  

 

The potential common shares issuable under the employee stock option plans (see Note 15) are included in the denominator of the diluted EPS computation by using the treasury stock method under the Statement of Financial Accounting Statement No. 24 “Earning Per Share”, however, such shares resulted in a non-dilutive per share amount for the three months ended March 31, 2003. The average number of shares outstanding for 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 three months ended March 31, 2003 to decrease from NT$0.22 to NT$0.20 and NT$0.23 to NT$0.21, respectively.

 

18. RELATED PARTY TRANSACTIONS

 

The Company engages in business transactions with the following related parities:

 

a. Industrial Technology Research Institute (ITRI), the Chairman of the Company is one of its directors

 

b. Philips, a major shareholder of the Company

 

- 23 -


c. Subsidiaries

 

TSMC—North America

TSMC—Europe

TSMC—Japan

 

d. Investees

 

VIS

SSMC

GUC

 

e. Indirect subsidiaries

 

WaferTech

TSMC Technology Inc. (TSMC Technology)

 

The transactions with the aforementioned parties in addition to those disclosed in other notes, are summarized as follows:

 

     Three Months Ended March 31

     2004

   2003

     Amount

   %

   Amount

   %

For the period

                       

Sales

                       

TSMC—North America

   $ 31,648,127    54    $ 22,632,645    57

Philips and its affiliates

     1,344,714    2      690,945    2

Others

     76,108    —        149,433    —  
    

  
  

  
     $ 33,068,949    56    $ 23,473,023    59
    

  
  

  

Purchases

                       

WaferTech

   $ 3,505,826    35    $ 1,685,740    27

VIS

     1,873,410    19      919,470    15

SSMC

     1,390,078    14      1,335,511    22
    

  
  

  
     $ 6,769,314    68    $ 3,940,721    64
    

  
  

  

Manufacturing expenses—technical assistance fees

                       

Philips

   $ 796,251    3    $ 758,824    3
    

  
  

  

Marketing expenses—commission

                       

TSMC—Japan

   $ 57,523    19    $ 46,385    16

TSMC—Europe

     39,849    13      36,450    13
    

  
  

  
     $ 97,372    32    $ 82,835    29
    

  
  

  

Sales of property, plant and equipment

                       

VIS

   $ 29,399    43    $ —      —  
    

  
  

  

 

(Continued)

 

- 24 -


     Three Months Ended March 31

     2004

   2003

     Amount

   %

   Amount

   %

Non-operating income and gains

                       

SSMC (primarily technical service income, see Note 20e)

   $ 56,983    4    $ 26,569    9

VIS

     27,757    2      —      —  

Others

     409    —        409    —  
    

  
  

  
     $ 85,149    6    $ 26,978    9
    

  
  

  

At end of the period

                       

Receivables

                       

TSMC—North America

   $ 15,195,321    93    $ 10,492,134    95

Philips and its affiliates

     1,021,009    6      435,739    4

Others

     234,316    1      128,197    1
    

  
  

  
     $ 16,450,646    100    $ 11,056,070    100
    

  
  

  

Guarantee deposits—VIS (see Note 20h)

   $ —      —      $ 450,666    94
    

  
  

  

Payables

                       

Philips and its affiliates

   $ 1,892,900    39    $ 1,137,937    43

VIS

     1,294,952    26      642,212    25

WaferTech

     1,154,689    24      443,209    17

SSMC

     528,454    11      345,825    13

Others

     55,016    —        62,855    2
    

  
  

  
     $ 4,926,011    100    $ 2,632,038    100
    

  
  

  

 

Sales to related parties are not significantly different from sales to third parties. For other related parties transactions, since no other similar transactions to follow, the prices are determined in accordance with the related contractual agreements.

 

19. SIGNIFICANT LONG-TERM LEASES

 

The Company leases land from the Science-Based Industrial Park Administration (SBIP) 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.

 

As of March 31, 2004, future remaining lease payments are as follows:

 

Year


   Amount

2004 (2nd to 4th quarter)

   $ 172,836

2005

     230,449

2006

     230,449

2007

     230,449

2008

     206,406

2009 and thereafter

     1,586,361
    

     $ 2,656,950
    

 

- 25 -


20. SIGNIFICANT COMMITMENTS AND CONTINGENCIES

 

The significant commitments and contingencies of the Company as of March 31, 2004 are as follows:

 

a. Under a Technical Cooperation Agreement with Philips, as amended on May 12, 1997, the Company shall pay technical assistance fees as 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 of certain products.

 

b. 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.

 

c. Under several foundry agreements, the Company shall reserve a portion of its production capacity for certain major customers that have guarantee deposits with the Company. As of March 31, 2004, the Company has a total of US$19,970 thousand of guarantee deposits.

 

d. Under a Shareholders Agreement entered into with Philips and EDB Investments Pte Ltd. on March 30, 1999, the parties formed a joint venture company, SSMC, for the purpose of constructing an integrated circuit foundry in Singapore. As of March 31, 2004, the Company’s interest in SSMC was 32%. The Company and Philips are committed to buy specific percentages 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.

 

e. 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 price 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.

 

f. The Company provided guarantees on loans amounting to US$60,000 thousand, US$40,000 thousand and US$440,000 thousand for TSMC Development, Inc. (TSMC Development), TSMC - North America and WaferTech, respectively.

 

g. Under a Technology Transfer Agreement (TTA) with National Semiconductor Corporation (National) entered into on June 27, 2000, the Company shall receive payments for the licensing of certain technology to National. The agreement was to remain in force for ten years and could 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 is relieved of further obligation to transfer additional technology. In addition, the Company granted National an option to request the transfer of certain technologies under the same terms and conditions as the terminated TTA. The option will expire in January 2008.

 

h. The Company entered into a Manufacturing Agreement with VIS. VIS agreed to reserve certain production capacity for the Company and agreed to manufacture certain logic devices or other products for 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 March 31, 2004, the total guarantee deposits held by VIS had been fully refunded.

 

- 26 -


i. Beginning in 2001, the Company entered into several licensing arrangements for certain semiconductor patents. The terms of the contracts range from five to ten years with payments to be made in the form of royalties over the term of the related contracts. The Company has recorded the related amounts as a liability with the corresponding amounts recorded as deferred charges which are 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.

 

j. 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.

 

k. In December 2003, the Company entered into a Technology Development and License Agreement with Motorola Inc. to jointly develop 65nm SOI (silicon on insulator) technology. The Company will also license related 90nm SOI technology from Motorola. Any intellectual properties arising out of the co-development project shall be jointly owned by the parties. In accordance with the agreement, the Company will pay royalty to Motorola, Inc. and will share a portion of the costs associated with the joint development project.

 

l. In December 2003, the Company filed a lawsuit in the US District Court of Northern California against Semiconductor Manufacturing International Corporation and certain of its subsidiaries for patent infringement and trade secret misappropriation. The suit also asks for injunctive relief along with monetary damages. The case is in the process of being reviewed by the court. The probable outcome cannot be reasonably estimated.

 

m. Amounts available under unused letters of credit as of March 31, 2004 were NT$6,480 thousand, EUR21 thousand and SGD 85 thousand.

 

21. ADDITIONAL DISCLOSURES

 

Following are the additional disclosures required by the SFC for the Company and its 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 or 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 properties at costs of at least NT$100 million or 20% of the paid-in capital: None;

 

f. Disposal of individual real estate properties at prices of at least NT$100 million or 20% of the paid-in capital: None;

 

g. Total purchases from or sales to related parties of at least NT$100 million or 20% of the capital: Please see Table 5 attached;

 

h. Receivable from related parties amounting to at least NT$100 million or 20% of the capital: Please see Table 6 attached;

 

- 27 -


i. Names, locations, and related information of investee on which the Company exercises significant influence: Please see Table 7 attached;

 

j. Financial instrument transactions:

 

  1) Derivative financial instruments

 

       The Company entered into derivative financial instrument transactions in the first quarter of 2004 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 March 31, 2004

 

Financial
Instruments

  

Maturity Period


  

Contract Amount (Nominal)

(In Thousand)


Sell

   April 2004 to September 2004    US$ 1,755,000    (US$/NT$)

Buy

   April 2004    EUR     16,000    (EUR/US$)

Buy

   April 2004    JPY     528,225    (JPYUS$)

 

       As of March 31, 2004, receivables from forward exchange contracts (included in the “other financial assets” account) aggregate to NT$ 906,882 thousand. Net exchange gains for the three months ended March 31, 2004 was NT$1,586,064 thousand.

 

  b) Interest rate swaps

 

       The Company entered into interest rate swap contracts to manage related interest rates on its long-term loans. Net interest income on these transactions for the three months ended March 31, 2004 was NT$9,292 thousand.

 

       Outstanding contracts as of March 31, 2004 were as follows:

 

Contract Date

  

Period


  

Contract
Amount
(Nominal)

(In Thousand)


July 1, 1999

   July 1, 1999 to June 28, 2004    US$ 2,857

September 19, 2003

   September 22, 2003 to December 15, 2005    NT$  500,000

October 16, 2003

   October 20, 2003 to December 15, 2005    NT$  500,000

October 16, 2003

   October 20, 2003 to December 15, 2005    NT$  500,000

October 17, 2003

   October 21, 2003 to December 15, 2005    NT$  500,000

October 17, 2003

   October 20, 2003 to December 15, 2005    NT$  500,000

November 7, 2003

   November 11, 2003 to December 15, 2005    NT$  500,000

 

  c) 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.

 

- 28 -


  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 March 31, 2004, the Company’s future cash demands 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$  58,850,211    US$  1,779,510
     EUR 16,000      —  
     JPY 528,225      —  

 

The Company has sufficient operating capital to meet the above cash demands. The interest rate of the interest rate swaps has taken the Company’s cost of capital into account. In addition, the exchange rate of forward foreign exchange contracts and option contracts have been fixed. Therefore, there is no material fund raising risk and cash flow risk.

 

2) Fair value of financial instruments:

 

     March 31, 2004

   March 31, 2003

 
     Carrying
Amount


   Fair Value

   Carrying
Amount


    Fair Value

 

Non-derivative financial instruments

                              

Assets

                              

Cash and cash equivalents

   $ 106,507,988    $ 106,507,988    $ 67,449,389     $ 67,449,389  

Short-term investments

     19,829,168      19,905,368      —         —    

Receivables from related parties

     16,450,646      16,450,646      11,056,070       11,056,070  

Notes and accounts receivable

     14,707,017      14,707,017      9,362,853       9,362,853  

Other financial assets

     1,851,305      1,851,305      749,584       749,584  

Long-term investments

     37,978,462      46,364,420      34,146,618       38,497,568  

Refundable deposits

     26,229      26,229      478,385       478,385  

Liabilities

                              

Payable to related parties

     4,926,011      4,926,011      2,632,038       2,632,038  

Accounts payable

     7,697,360      7,697,360      4,497,685       4,497,685  

Payables to contractors and equipment suppliers

     12,647,943      12,647,943      7,738,073       7,738,073  

Bonds payable (including current portion)

     35,000,000      35,758,784      35,000,000       35,568,192  

Other long-term payables (including current portion)

     4,826,042      4,826,042      5,438,375       5,438,375  

Guarantee deposits

     656,128      656,128      1,375,672       1,375,672  

Derivative financial instruments

                              

Forward exchange contracts (sell)

     900,111      961,743      (65,342 )     (52,840 )

Forward exchange contracts (buy)

     6,771      318      (9,006 )     (26,791 )

Interest rate swaps

     13,954      36,038      (11,009 )     (101,640 )

Option

     —        —        —         (298,144 )

 

- 29 -


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 worth or book value.

 

  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 payables approximates the carrying value.

 

  e) Fair value of derivative financial instruments is the estimated net receivable or (payable) if those contracts are terminated on the relevant balance sheet date.

 

The fair values of some financial and non-financial instruments are 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 aforementioned project and permitted direct investment in mainland China. Subsequently, 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, a wholly-owned subsidiary of the Company, was established. TSMC Shanghai is engaged mainly in the manufacturing and selling of integrated circuits. The Company made a capital investment in TSMC Shanghai in the amount of US$56,000 thousand on October 8, 2003.

 

- 30 -


TABLE 1

 

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD.

 

FINANCING PROVIDED

FOR THE THREE MONTHS ENDED MARCH 31, 2004

(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)

 

No.


 

Financing

Name


  Counter-party

 

Financial

Statement
Account


  

Maximum
Balance for
the Period

(US$ in
Thousand)


   

Ending
Balance

(US$ in
Thousand)


   

Interest

Rate


    Transaction
Amounts


 

Reasons

for

Short-term
Financing


 

Allowance

for Bad
Debt


  Collateral

  Financing
Limit for
Each
Borrowing
Company


 

Financing
Company’s
Financing
Amount
Limits

(US$ in
Thousand)


 
                     Item

  Value

   

1

  TSMC International   TSMC Technology   Other receivables    $
US$
330,200
(10,000
 
)
  $
US$
330,200
(10,000
 
)
  4.00 %   $ —     Operating capital   $  —     —     $  —     N/A   $
US$
 
32,622,711
(987,968
(Note 1
 
)
)
        TSMC Development   Other receivables     
US$
1,981,200
(60,000
 
)
   
US$
1,981,200
(60,000
 
)
  1.50 %     —     Operating capital     —     —       —              

2

  TSMC Partners   TSMC Development   Other receivables     
US$
2,641,600
(80,000
 
)
   
US$
2,641,600
(80,000
 
)
  1.50 %     —     Operating capital     —     —       —     N/A     (Note 2 )

Note 1: Not exceeding the issued capital of the Company.

Note 2: Generally not exceeding the issued capital of the Company, unless approved by all members of the board.

 

- 31 -


TABLE 2

 

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD.

 

ENDORSEMENT/GUARANTEE PROVIDED

FOR THE THREE MONTHS ENDED MARCH 31, 2004

(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)

 

No.


  

Endorsement/

Guarantee
Provider


   Counter-party

  

Limits

on

Each

Counter-party’s
Endorsement/

Guarantee
Amounts


  

Maximum

Balance

for

the

Period

(US$ in
Thousand)


   

Ending

Balance

(US$

in

Thousand)


   

Value

of

Collateral
Property,

Plant

and
Equipment


  

Ratio of

Accumulated
Amount of

Collateral

to Net

Equity

of the

Latest

Financial
Statement


   

Maximum
Collateral/

Guarantee
Amounts
Allowable

(Note 1)


      Name

  

Nature of
Relationship

(Note 2)


              

0

   The Company    TSMC Development
TSMC—North America
WaferTech
   3
2
3
  

Not exceed 10% of the net worth of the Company, and also limiting to the total capital issued of the endorsement/guarantee company, unless otherwise approved by Board of Directors.

   $
US$
 
US$
 
US$
1,981,200
(600,000
1,320,800
(40,000
14,528,800
(440,000
 
)
 
)
 
)
  $
US$
 
US$
 
US$
1,981,200
(60,000
1,320,800
(40,000
14,528,800
(440,000
 
)
 
)
 
)
  $
 
 
 —  
—  
—  
   0.57
0.38
4.19
%
%
%
  $ 86,646,511

Note 1: 25% of the net worth of the Company as of March 31, 2004.
Note 2: The No. 2 represents a subsidiary in which the Company holds directly over 50% of the equity interest.

The No. 3 represents an investee in which the Company holds directly and indirectly over 50% of the equity interest.

 

- 32 -


TABLE 3

 

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD.

 

MARKETABLE SECURITIES HELD

MARCH 31, 2004

(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)

 

Held

Company

Name


 

Marketable Securities

Type and Name


 

Relationship

with

the Company


 

Financial

Statement

Account


  March 31, 2004

  Note

       

Shares/Units

(In Thousand)


 

Carrying

Value

(US$ in
Thousand)


 

Percentage

of
Ownership


 

Market

Value or

Net Asset
Value

(US$ in
Thousand)


 

The Company

  Government bonds                                
    2003 Government Bond Series A     Short-term investment   —     $ 1,207,409   N/A   $ 1,209,443    
    2003 Government Bond Series I     Short-term investment   —       3,418,984   N/A     3,400,604    
    2002 Government Bond Series E     Short-term investment   —       3,113,066   N/A     3,130,913    
    2002 Government Bond Series J     Short-terminvestment   —       2,023,206   N/A     2,027,586    
    Bonds with Repurchase Agreement     Short-term investment   —       3,355,145   N/A     3,366,815    
    Bond funds                                
    JF Taiwan Bond Fund     Short-term investment   102,364     1,500,000   N/A     1,505,672    
    ABN AMRO Bond Fund     Short-term investment   186,363     2,700,000   N/A     2,706,156    
    JF First Bond Fund     Short-term investment   110,580     1,500,000   N/A     1,500,264    
    INVESCO GT Bond A Fund     Short-term investment   69,692     1,000,000   N/A     1,000,216    
    Stock                                
    Taiwan Mask Corp.     Short-term investment   3,109     11,358   1     57,699    
    TSMC—North America   Subsidiary   Long-term investment   11,000     412,786   100     1,119,950   Treasury stock of NT$ 707,164
thousand is deducted from the
carrying value.
    TSMC—Europe   Subsidiary   Long-term investment   —       23,434   100     23,434    
    TSMC—Japan   Subsidiary   Long-term investment   6     104,186   100     104,186    
    VIS   Investee   Long-term investment   787,016     4,375,675   28     10,963,129    
    TSMC International   Subsidiary   Long-term investment   987,968     22,383,406   100     22,383,406    
    TSMC Partners   Subsidiary   Long-term investment   300     4,011,311   100     4,011,311    
    SSMC   Investee   Long-term investment   382     2,824,776   32     2,824,776    
    Emerging Alliance   Subsidiary   Long-term investment   —       824,793   99     824,793    
    GUC   Investee   Long-term investment   39,040     359,454   47     392,762    
    VisEra   Investee   Long-term investment   5,100     50,499   25     50,499    
    United Gas Co., Ltd.     Long-term investment   16,783     193,584   11     297,292    
    Shin-Etsu Handotai Taiwan Co., Ltd.     Long-term investment   10,500     105,000   7     155,001    
    W.K. Technology Fund IV     Long-term investment   5,000     50,000   2     57,794    
    Hon Tung Ventures Capital     Long-term investment   8,392     83,916   10     62,369    

 

(Continued)

 

- 33 -


Held Company Name


 

Marketable

Securities Type

and

Name


 

Relationship with

the Company


  Financial Statement
Account


  March 31, 2004

    Note

       

Shares/Units

(In Thousand)


 

Carrying Value

(US$ in
Thousand)


    Percentage of
Ownership


 

Market
Value or Net
Asset Value

(US$ in
Thousand)


   
    Certificate                                    
    Chi Cherng   Investee   Long-term investment   —     $ 43,138     36   $ 501,702     Treasury stock of
NT$458,564 thousand is
deducted from the
carrying value.
    Hsin Ruey   Investee   Long-term investment   —       42,083     36     501,595     Treasury stock of
NT$459,512 thousand is
deducted from the
carrying value.
    Equity                                    
    Crimson Asia
  Capital
    Long-term investment   N/A     41,265     N/A     41,265      
    Horizon
  Ventures
    Long-term investment   N/A     229,669     N/A     229,669      

TSMC—North America

  Stock                                    
    TSMC   Parent company   Short-term investment   12,955     707,164     —       804,598      

Chi Cherng

  Stock                                    
    TSMC   Parent company   Short-term investment   13,735     458,564     —       853,110      
    Certificate                                    
    Hsin Ruey   Major shareholder   Long-term investment   —       902,549     64     902,549      

Hsin Ruey

  Stock                                    
    TSMC   Parent company   Short-term investment   13,761     459,512     —       854,709      
    Certificate                                    
    Chi Cherng   Major shareholder   Long-term investment   —       903,087     64     903,087      

TSMC International

  Stock                                    
    InveStar   Subsidiary   Long-term investment   45,000   US$ 50,803     97   US$ 50,803      
    InveStar II   Subsidiary   Long-term investment   51,300   US$ 37,415     97   US$ 37,415      
    TSMC
  Development
  Subsidiary   Long-term investment   1   US$  543,674     100   US$  543,674      
    TSMC
  Technology
  Subsidiary   Long-term investment   1   US$ (7,966 )   100   US$ (7,966 )    
    3DFX Interactive
  Inc.
    Long-term investment   68     —       —       —        
    Money market
  fund
                                   
    BOA Fund     Short-term investment   30,300   US$ 30,300     N/A   US$ 30,300      

TSMC Development

  Stock                                    
    WaferTech   Subsidiary   Long-term investment   —     US$  366,728     99   US$  366,728      

InveStar

  Common stock                                    
    PLX
  Technology, Inc.
    Short-term investment   43   US$ 117     —     US$ 445      
    RichTek
  Technology
  Corp.
    Short-term investment   839   US$ 107     2   US$ 5,076      
    Atheros
  Communications,
  Inc.
    Short-term investment   1,205   US$ 3,593     —     US$ 20,907      
    Incentia Design
  Systems, Inc.
    Long-term investment   365   US$ 92     1   US$ 92      
    Programmable
  Microelectronics
  (Taiwan), Corp.
    Long-term investment   575   US$ 208     1   US$ 208      
    Global Testing
  Corp.
    Long-term investment   13,268   US$ 5,446     9   US$ 5,446      

 

(Continued)

 

- 34 -


Held
Company

Name


  

Marketable
Securities

Type

and Name


  

Relationship with
the Company


  

Financial Statement
Account


   March 31, 2004

  

Note


           

Shares/Units

(In Thousand)


  

Carrying Value

(US$in
Thousand)


   Percentage of
Ownership


  

Market Value or
Net Asset Value

(US$in
Thousand)


  
    

Chipstrate Technology, Inc.

      Long-term investment    1,332    US$ 316    9    US$ 316     
    

Signia Technologies, Inc.

      Long-term investment    701    US$ 212    4    US$ 212     
    

Advanced Power Electronics Corp.

      Long-term investment    2,915    US$  1,416    5    US$  1,416     
    

RichTek Technology Corp.

      Long-term investment    1,053    US$ 132    —      US$  6,367     
    

Capella Microsystems (Taiwan), Inc.

      Long-term investment    530    US$ 161    4    US$ 161     
     Preferred stock                                       
    

Integrated Memory Logic, Inc.

      Long-term investment    1,831    US$  1,221    12    US$  1,221     
    

SiRF Technology Holdings, Inc.

      Long-term investment    306    US$  1,333    1    US$  1,333     
    

Sensory, Inc.

      Long-term investment    1,404    US$ 312    5    US$ 312     
    

LightSpeed Semiconductor Corp.

      Long-term investment    2,252    US$ 329    2    US$ 329     
    

Tropian, Inc.

      Long-term investment    1,758    US$  1,418    3    US$  1,418     
    

Sonics, Inc.

      Long-term investment    2,686    US$  3,530    4    US$  3,530     
    

NanoAmp Solutions, Inc.

      Long-term investment    541    US$ 853    3    US$ 853     
    

Monolithic Power Systems, Inc.

      Long-term investment    2,521    US$  2,000    11    US$  2,000     
    

Memsic, Inc.

      Long-term investment    2,727    US$  1,500    12    US$  1,500     
    

Reflectivity, Inc.

      Long-term investment    1,064    US$ 741    3    US$ 741     
    

Match Lab, Inc.

      Long-term investment    1,875    US$ 375    9    US$ 375     
    

Oridus, Inc. (CreOsys, Inc.)

      Long-term investment    1,500    US$ 300    8    US$ 300     
    

IP Unity, Inc.

      Long-term investment    1,008    US$ 494    2    US$ 494     

InveStar II

   Common stock                                       
    

RichTek Technology Corp.

      Short-term investment    300    US$ 223    1    US$  1,817     
    

eChannel Option Holding, Inc.

      Long-term investment    358    US$ 251    6    US$ 251     
    

eLCOS Microdisplay Technology, Ltd.

      Long-term investment    270    US$ 27    2    US$ 27     
    

Procoat Technology, Inc.

      Long-term investment    4,165    US$  1,940    10    US$  1,940     
    

Programmable Microelectronics (Taiwan), Inc.

      Long-term investment    177    US$ 50    —      US$ 50     
    

Auden Technology MFG. Co., Ltd.

      Long-term investment    953    US$ 738    4    US$ 738     
    

GeoVision, Inc.

      Long-term investment    287    US$ 132    1    US$ 132     
    

EoNEX Technologies, Inc.

      Long-term investment    55    US$  3,048    6    US$  3,048     
    

Conwise Technology Corporation, Ltd.

      Long-term investment    2,800    US$ 979    14    US$ 979     
    

EON Technology, Corp.

      Long-term investment    3,276    US$  1,179    8    US$  1,179     
    

Goya Technology, Corp.

      Long-term investment    2,088    US$ 545    8    US$ 545     
    

Trendchip Technologies Corp.

      Long-term investment    2,000    US$ 861    5    US$ 861     
    

Ralink Technology (Taiwan), Inc.

      Long-term investment    1,833    US$ 791    4    US$ 791     
    

Signia Technologies (Taiwan), Inc.

      Long-term investment    351    US$ 101    2    US$ 101     
    

RichTek Technology Corp.

      Long-term investment    494    US$ 367    1    US$  2,988     
    

Silicon Data, Inc.

      Long-term investment    2,000    US$ 500    5    US$ 500     
    

Capella Microsystems (Taiwan), Inc.

      Long-term investment    419    US$ 122    3    US$ 122     
     Preferred stock                                       
    

Memsic, Inc.

      Long-term investment    2,289    US$  1,560    10    US$  1,560     
    

OEpic, Inc.

      Long-term investment    4,997    US$  1,317    8    US$  1,317     
    

NanoAmp Solutions, Inc.

      Long-term investment    250    US$  1,000    1    US$  1,000     
    

Advanced Analogic Technology, Inc.

      Long-term investment    948    US$  1,261    2    US$  1,261     

 

(Continued)

 

- 35 -


Held Company

Name


  

Marketable Securities
Type and Name


  Relationship with
the Company


 

Financial Statement Account


  March 31, 2004

 

Note


        

Shares/Units

(In Thousand)


 

Carrying Value

(US$ in Thousand)


  Percentage of
Ownership


 

Market Value or
Net Asset Value

(US$ in
Thousand)


 
     Monolithic Power   Systems, Inc.     Long-term investment   804   US$ 1,946   4   US$ 1,946    
     Sonics, Inc.     Long-term investment   3,082   US$ 3,082   5   US$ 3,082    
     Newport Opticom, Inc.     Long-term investment   1,157   US$ 241   9   US$ 241    
     Reflectivity, Inc.     Long-term investment   4,255   US$ 2,205   9   US$ 2,205    
     Angstron Systems, Inc.     Long-term investment   1,567   US$ 500   6   US$ 500    
     Tropian, Inc.     Long-term investment   1,464   US$ 1,181   2   US$ 1,181    
     SiRF Technology   Holdings, Inc.     Long-term investment   20   US$ 131   —     US$ 131    
     LeadTONE Wireless,   Inc.     Long-term investment   434   US$ 65   6   US$ 65    
     Match Lab, Inc.     Long-term investment   313   US$ 63   2   US$ 63    
     Kilopass Technology,   Inc.     Long-term investment   3,887   US$ 2,000   19   US$ 2,000    
     FangTek, Inc.     Long-term investment   5,556   US$ 2,000   44   US$ 2,000    
     Alchip Technologies,   Ltd.     Long-term investment   2,125   US$ 1,700   23   US$ 1,700    
     eLCOS Microdisplay   Technology, Ltd.     Long-term investment   2,667   US$ 3,500   16   US$ 3,500    

Emerging Alliance

   Stock                                
     Global Investment   Holding, Inc.     Long-term investment   10,000     100,000   6     100,000    
     RichWave Technology   Corp.     Long-term investment   2,340   US$ 704   12   US$ 704    
     Preferred stock                                
     Quake Technologies,   Inc.     Long-term investment   601   US$ 450   1   US$ 450    
     Pixim, Inc.     Long-term investment   1,721   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   7,446   US$ 3,125   3   US$ 3,125    
     Quicksilver   Technology, Inc.     Long-term investment   1,049   US$ 2,699   4   US$ 2,699    
     Mosaic Systems, Inc.     Long-term investment   2,481   US$ 12   6   US$ 12    
     Accelerant Networks,   Inc.     Long-term investment   441   US$ 460   1   US$ 460    
     Zenesis Technologies,   Inc.     Long-term investment   861   US$ 500   4   US$ 500    
     Reflectivity, Inc.     Long-term investment   4,848   US$ 2,479   6   US$ 2,479    
     Iridigm Display, Co.     Long-term investment   254   US$ 500   1   US$ 500    
     Miriadia, Inc.   (formerly 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    
     Audience, Inc.     Long-term investment   1,654   US$ 250   2   US$ 250    
     Next IO, Inc.     Long-term investment   800   US$ 500   3   US$ 500    
     NuCORE Technology   Inc.     Long-term investment   1,821   US$ 1,000   2   US$ 1,000    
     Centrality   Communications, Inc.     Long-term investment   809   US$ 1,000   2   US$ 1,000    

GUC

   Bond funds                                
     Entrust KIRIN     Short-term investment   2,106     22,324   N/A     22,429    
     Entrust Phoenix     Short-term investment   1,399     20,207   N/A     20,302    
     TISC     Short-term investment   2,210     30,000   N/A     30,132    
     Ta-Hua     Short-term investment   2,412     30,003   N/A     30,128    
     E. Sun New Era     Short-term investment   1,920     20,000   N/A     20,062    
     Shenghua 1699     Short-term investment   1,009     12,000   N/A     12,059    

 

(Continued)

 

- 36 -


Held Company
Name


  

Marketable

Securities

Type and
Name


   Relationship with
the Company


  

Financial Statement
Account


   March 31, 2004

   Note

           

Shares/Units

(In Thousand)


  

Carrying Value

(US$ in
Thousand)


   Percentage of
Ownership


  

Market Value or
Net Asset Value

(US$ in
Thousand)


  
     Jihsun       Short-term investment    764    $ 10,000    N/A    $ 10,043     
     Shenghua 5599       Short-term investment    931      10,000    N/A      10,047     
     Mega Diamond       Short-term investment    377      4,151    N/A      4,169     
     Polaris       Short-term investment    694      7,072    N/A      7,101     
     Ta-Hua GC   Dollar       Short-term investment    39      13,691    N/A      13,436     
    

Taiwan Security   Overseas

  Fund

      Short-term investment    22      102,694    N/A      101,571     
     Stock funds                                       
     Polaris High-  performance   Fund       Short-term investment    269      5,000    N/A      5,342     
     Tisc Dollar       Short-term investment    302      5,000    N/A      5,330     

 

- 37 -


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 THREE MONTHS ENDED MARCH 31, 2004

(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)

 

Company
Name


 

Marketable
Securities
Type

and

Name


 

Financial
Statement
Account


 

Counter-
party


 

Nature

of
Relationship


  Beginning Balance

    Acquisition

  Disposal

  Ending Balance

          Shares/
Units
(Thousand)


 

Amount

(US$

in

Thousand)


    Shares/
Units
(Thousand)


 

Amount

(US$

in

Thousand)


  Shares/
Units
(Thousand)


 

Amount

(US$

in

Thousand)


   

Carrying
Value

(US$

in

Thousand)


   

Gain
(Loss) on
Disposal

(US$

in

Thousand)


  Shares/
Units
(Thousand)


 

Amount

(US$ in
Thousand)

(Note 1)


The

Company

  Money  market  funds                                                                      
    BOA Fund  

Short-term

investment

  BOA   —     40,000   $
US$
1,359,120
(40,000
 
)
  —     $ —     40,000   $
US$
1,359,120
(40,000
 
)
  $
US$
1,359,120
(40,000
 
)
  $ —     —     $ —  
    GS Fund  

Short-term

investment

  Goldman  Sachs   —     20,000    
US$
679,560
(20,000
 
)
  —       —     20,000    
US$
679,560
(20,000
 
)
   
US$
679,560
(20,000
 
)
    —     —       —  
    Bond funds                                                                      
    JF Taiwan  Bond Fund  

Short-term

investment

  JF Asset  Management  (Taiwan)  Ltd.   —     34,343     500,000     68,021     1,000,000   —       —         —         —     102,364     1,500,000
    ABN  AMRO  Bond Fund  

Short-term

investment

  ABN  AMRO   —     34,794     500,000     151,569     2,200,000   —       —         —         —     186,363     2,700,000
    JF First  Bond Fund  

Short-term

investment

  JF Asset Management (Taiwan) Ltd.   —     —       —       110,580     1,500,000   —       —         —         —     110,580     1,500,000
    INVESCO  GT Bond A  Fund  

Short-term

investment

 

INVESCO  Asset  Management

 Taiwan

  —     —       —       69,692     1,000,000   —       —         —         —     69,692     1,000,000
    Government  bonds                                                                      
    Bonds with  Repurchase  Agreement  

Short-term

investment

 

Chung  Shing Bills  Finance  Corp. and

 several  financial  institutions

  —     —       1,800,000     —       2,577,163   —       1,022,018       1,022,018       —     —       3,355,145
    2003  Government  Bond Series  A  

Short-term

investment

  BNP and  several  financial  institutions   —     —       —       —       1,207,409   —       —         —         —     —       1,207,409
    2003  Government  Bond Series  I  

Short-term

investment

  FCB and  several  financial  institutions   —     —       —       —       3,418,984   —       —         —         —     —       3,418,984
    2002  Government  Bond Series  A  

Short-term

investment

  BNP and  several  financial  institutions   —     —       3,157,331     —       —     —       3,169,750       3,157,331       12,419   —       —  
    2002  Government  Bond Series  J  

Short-term

investment

  BNP and  several  financial  institutions   —     —       —       —       2,023,206   —       —         —         —     —       2,023,206
    1994  Government  Bond Series  C  

Short-term

investment

  Chung  Shing Bills  Finance  Corp. and  several  financial  institutions   —     —       1,422,197     —       —     —       1,427,762       1,422,197       5,565   —       —  
    Stock                                                                      
    Emerging  Alliance  

Long-term

investment

  Emerging  Alliance   Subsidiary   —       704,744     —       167,583   —       —         —         —     —       824,793

InveStar

  Common  stock                                                                      
    RichTek  Technology  Corp.  

Short-term

investment

  —     —     947   US$ 121     —       —     726   US$ 4,393     US$ 92     US$ 4,301   221   US$ 29

InveStar II

  Common  stock                                                                      
    RichTek  Technology  Corp.  

Short-term

investment

  —     —     465   US$ 346     —       —     455   US$ 2,781     US$ 338     US$ 2,443   10   US$ 8

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.

 

- 38 -


TABLE 5

 

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD.

 

TOTAL PURCHASE FROM OR SALE TO RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL

FOR THE THREE MONTHS ENDED MARCH 31, 2004

(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)

 

Company
Name


  

Related Party


  

Nature
of
Relationship


  

Transaction Details


   Abnormal
Transaction


   Note/Accounts
Payable or
Receivable


   Note

        

Purchase/

Sale


   Amount

   % to
Total


   Payment Terms

   Unit
Price


   Payment
Terms


   Ending
Balance


    % to
Total


  

The Company

   TSMC—North America    Subsidiary    Sales    $ 31,648,127    54    Net 30 days from invoice date    None    None    $ 15,195,321     49   
     Philips and its affiliates    Major shareholder    Sales      1,344,714    2    Net 30 days from invoice date    None    None      1,021,009     3   
     WaferTech    Subsidiary    Purchases      3,505,826    35    Net 30 days from invoice date    None    None      (1,154,689 )   9   
     VIS    Investee    Purchases      1,873,410    19    Net 30 days from invoice date    None    None      (1,294,952 )   10   
     SSMC    Investee    Purchases      1,390,078    14    Net 30 days from invoice date    None    None      (528,454 )   4   

 

- 39 -


TABLE 6

 

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD.

 

RECEIVABLES FROM RELATED PARTIES AMOUNTING TO AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL

MARCH 31, 2004

(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)

 

Company Name


   Related Party

   Nature of
Relationship


   Ending
Balance


   Turnover
Rate


   Overdue

   Amounts
Received in
Subsequent
Period


   Allowance
for Bad
Debts


               Amount

   Action
Taken


     

The Company

   TSMC—North
America
   Subsidiary    $ 15,195,321    42
days
   $ 3,917,721    Accelerate
demand on
account
receivables
   $ 5,077,735    $ —  
     Philips and its
affiliates
   Major
shareholder
     1,021,009    65
days
     203,866    Accelerate
demand on
account
receivables
     19,224      —  
     VIS    Investee      180,829    Note      21,322    Accelerate
demand on
account
receivables
     —        —  

Note: Receivables are mainly from the sales of machinery and equipment to VIS. Therefore, the computation of the turnover rate is not applicable.

 

- 40 -


TABLE 7

 

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LTD.

 

NAMES, LOCATIONS, AND RELATED INFORMATION OF INVESTEES ON WHICH THE COMPANY EXERCISES SIGNIFICANT INFLUENCE

MARCH 31, 2004

(Amounts in Thousand New Taiwan Dollars, Unless Otherwise Specified)

 

Investor

Company


 

Investee

Company


  Location

 

Main

Businesses and
Products


 

Original

Investment

Amount


 

Balance as of

March 31, 2004


  Net
Income
(Loss) of
the
Investee


   

Investment
Gain (Loss)

(Note 2)


    Note

        March 31,
2004


  March 31,
2003


  Shares
(Thousand)


  Percentage of
Ownership


  Carrying
Value
(Note 1)


     

The Company

  TSMC—North America   San Jose,
  California, U.S.A.
  Marketing and
  engineering
  support
  $ 333,178   $ 333,178   11,000   100   $ 412,786   $ 19,141     $ 17,765     Subsidiary
    TSMC—Europe   Amsterdam, The
  Netherlands
  Marketing and
  engineering
  support
    15,749     15,749   —     100     23,434     44       44     Subsidiary
    TSMC—Japan   Yokohama, Japan   Marketing and
  engineering
  support
    83,760     83,760   6   100     104,186     2,296       2,296     Subsidiary
    TSMC Shanghai   Shanghai, China   IC and other
  wafer
  equipment
  manufacturing
  and marketing