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o | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Taiwan Semiconductor Manufacturing Company Limited (Translation of Registrant’s Name Into English) | Republic of China (Jurisdiction of Incorporation or Organization) |
Hsinchu Science Park
Hsinchu, Taiwan
Republic of China
(Address of Principal Executive Offices)
Title of Each Class | Name of Each Exchange on Which Registered | |
Common Shares, par value NT$10.00 each | The New York Stock Exchange, Inc.* |
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
(Title of Class)
* | Not for trading, but only in connection with the listing on the New York Stock Exchange, Inc. of American Depositary Shares representing such Common Shares |
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EX-8.1 LIST OF SUBSIDIARIES | ||||||||
EX-12.1 CERTIFICATION OF CEO UNDER RULE 13A-14(A) | ||||||||
EX-12.2 CERTIFICATION OF CFO UNDER RULE 13A-14(A) | ||||||||
EX-13.1 CERTIFICATION OF CEO UNDER RULE 13A-14(B) | ||||||||
EX-13.2 CERTIFICATION OF CFO UNDER RULE 13A-14(B) | ||||||||
EX-99.1 CONSENT OF DELOITTE & TOUCHE |
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• | the volatility of the semiconductor and microelectronics industry; | ||
• | overcapacity in the semiconductor industry; | ||
• | the increased competition from other companies and our ability to retain and increase our market share; | ||
• | our ability to develop new technologies successfully and remain a technological leader; | ||
• | our ability to maintain control over expansion and facility modifications; | ||
• | our ability to generate growth or profitable growth; | ||
• | our ability to hire and maintain qualified personnel; | ||
• | our ability to acquire required equipment and supplies necessary to meet customer demand; | ||
• | our reliance on certain major customers; | ||
• | the political stability of our local region; and | ||
• | general local and global economic conditions. |
Table of Contents
ASIC (Application Specific Integrated Circuit) | A custom-designed integrated circuit that performs specific functions that would otherwise require a number of off-the-shelf integrated circuits to perform. The use of an ASIC in place of a standard integrated circuit reduces product size and cost and also improves reliability. | |
BiCMOS | Integrated circuit fabrication technology that produces both bipolar transistors and CMOS transistors and combines them on one chip. | |
Cell | A primary unit that normally repeats many times in an integrated circuit. For example, a cell represents a bit in a memory integrated circuit. | |
CIS (CMOS Image Sensor) | A photodiode censoring circuit made by CMOS used in applications such as digital camera, surveillance and securing systems. | |
CMOS (Complementary Metal Oxide Silicon) | Currently the most common integrated circuit fabrication process technology, CMOS is one of the latest fabrication techniques to use metal oxide semiconductor transistors. | |
CVD (Chemical Vapor Deposition). | A process in which gaseous chemicals react on a heated surface to form solid crystalline materials. | |
Die | A piece of a semiconductor wafer containing the circuitry of a single chip. | |
DRAM (Dynamic Random Access Memory) | A volatile memory product that is used in electronic systems to store data and program instructions. It is the most common type of RAM and must be refreshed with electricity thousands of times per second or else it will fade away. | |
DSP (Digital Signal Processor) | A type of integrated circuit that processes and manipulates digital information after it has been converted from an analog source. | |
EPROM (Erasable Programmable Read-Only Memory) | A form of PROM that can be erased using ultraviolet light, so that it can be reprogrammed. | |
Fabless semiconductor company | A class of semiconductor company that designs, tests, markets and sells semiconductors, but subcontracts wafer manufacturing to silicon wafer manufacturers. | |
Flash memory | A type of non-volatile memory, similar to an EPROM in that it is erasable and reprogrammable. The difference is that it can be erased and electrically reprogrammed in the system into which the flash memory chip has been incorporated. | |
Integrated circuit | A combination of two or more transistors on a base material, usually silicon. All semiconductor chips, including memory chips and logic chips, are very |
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complicated integrated circuits with up to millions of transistors. | ||
Logic device | A device that contains digital integrated circuits that process, rather than store, information. | |
Mask | A piece of glass on which an integrated circuit’s circuitry is laid out. Integrated circuits may require as many as thirty different layers of design, each with its own mask. Also known as a reticle. | |
Memory | A group of integrated circuits that are used to store data or programs, such as ROM, Flash RAM, DRAM and SRAM. | |
Micron | 1/25,000 of an inch. Circuitry on an integrated circuit typically follows lines that are less than one micron wide. | |
MOS | A device which consists of three layers (metal, oxide and semiconductors) and operates as a transistor. | |
Nonvolatile memory | Memory products which retain their data content without the need for a constant power supply. | |
Reticle | See “Mask” above. | |
RISC (Reduced Instruction Set Computing) | A type of processor architecture that processes programs more quickly than conventional microprocessors by using smaller, faster, less complex sets of instructions. | |
Scanner | A machine used in the photolithography process in making wafers. A scanner combines stepper technology with a photoscanning method to permit the exposure of a larger segment of the wafer than a stepper. | |
SRAM (Static Random Access Memory) | A type of volatile memory product that is used in electronic systems to store data and program instructions. Unlike the more common DRAM, it does not need to be refreshed. | |
Stepper | A machine used in the photolithography process in making wafers. A stepper aligns a small portion of the wafer with the mask upon which the circuitry design is laid out and then exposes that portion of the wafer to a laser beam, transferring the circuit design on to the wafer. The machine then “steps” to the next area, repeating the process until the entire wafer has been completed. Exposing only a small area of a wafer at a time allows the laser to focus more intensely, which improves the resolution of the circuitry design. | |
Transistor | An individual circuit that can amplify or switch electric current. Transistors are the building blocks of all integrated circuits. | |
Volatile memory | Memory products which lose their data content when the power supply is switched off. |
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Wafer | A thin, round, flat piece of material that is the base of most integrated circuits. Silicon is the most commonly used material. |
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Year ended and as of December 31, | ||||||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | 2005 | |||||||||||||||||||
NT$ | NT$ | NT$ | NT$ | NT$ | US$ | |||||||||||||||||||
(in millions, except for percentages, | ||||||||||||||||||||||||
earnings per share and per ADS, and operating data) | ||||||||||||||||||||||||
Income Statement Data: | ||||||||||||||||||||||||
ROC GAAP | ||||||||||||||||||||||||
Net sales | 125,885 | 162,301 | 202,997 | 257,213 | 266,565 | 8,127 | ||||||||||||||||||
Cost of sales | (92,228 | ) | (109,988 | ) | (128,113 | ) | (141,394 | ) | (148,362 | ) | (4,523 | ) | ||||||||||||
Gross profit | 33,657 | 52,313 | 74,884 | 115,819 | 118,203 | 3,604 | ||||||||||||||||||
Operating expenses | (20,879 | ) | (20,724 | ) | (23,583 | ) | (27,337 | ) | (27,234 | ) | (830 | ) | ||||||||||||
Income from operations | 12,778 | 31,589 | 51,301 | 88,482 | 90,969 | 2,774 | ||||||||||||||||||
Non-operating income and gains(1) | 6,476 | 2,350 | 5,669 | 6,016 | 7,068 | 215 | ||||||||||||||||||
Non-operating expenses and losses(1) | (8,467 | ) | (6,717 | ) | (5,791 | ) | (2,532 | ) | (3,773 | ) | (115 | ) | ||||||||||||
Income before income tax and minority interest | 10,787 | 27,222 | 51,179 | 91,966 | 94,263 | 2,874 | ||||||||||||||||||
Income tax (expense) benefit | 3,740 | (5,637 | ) | (3,923 | ) | 363 | (630 | ) | (19 | ) | ||||||||||||||
Income before minority interest | 14,527 | 21,585 | 47,256 | 92,329 | 93,633 | 2,855 | ||||||||||||||||||
Minority interest in loss (income) of subsidiaries | (44 | ) | 25 | 3 | (13 | ) | (58 | ) | (2 | ) | ||||||||||||||
Net income | 14,483 | 21,610 | 47,259 | 92,316 | 93,575 | 2,853 | ||||||||||||||||||
Basic earnings per share(2) | 0.58 | 0.87 | 1.90 | 3.73 | 3.79 | 0.11 | ||||||||||||||||||
Diluted earnings per share(2) | 0.58 | 0.87 | 1.90 | 3.73 | 3.79 | 0.11 | ||||||||||||||||||
Basic earnings per ADS equivalent(2) | 2.91 | 4.36 | 9.49 | 18.67 | 18.96 | 0.58 | ||||||||||||||||||
Diluted earnings per ADS equivalent(2) | 2.91 | 4.36 | 9.49 | 18.67 | 18.95 | 0.58 | ||||||||||||||||||
Basic weighted average shares outstanding(2) | 24,848 | 24,793 | 24,796 | 24,718 | 24,680 | 24,680 |
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Year ended and as of December 31, | ||||||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | 2005 | |||||||||||||||||||
NT$ | NT$ | NT$ | NT$ | NT$ | US$ | |||||||||||||||||||
(in millions, except for percentages, | ||||||||||||||||||||||||
earnings per share and per ADS, and operating data) | ||||||||||||||||||||||||
Diluted weighted average shares outstanding(2) | 24,848 | 24,793 | 24,806 | 24,724 | 24,693 | 24,693 | ||||||||||||||||||
US GAAP | ||||||||||||||||||||||||
Net sales | 127,242 | 162,990 | 203,600 | 260,035 | 267,028 | 8,141 | ||||||||||||||||||
Cost of sales | (107,194 | ) | (115,374 | ) | (133,493 | ) | (154,785 | ) | (161,808 | ) | (4,933 | ) | ||||||||||||
Operating expenses | (41,712 | ) | (20,764 | ) | (25,744 | ) | (32,423 | ) | (32,605 | ) | (994 | ) | ||||||||||||
Income (loss) from operations | (21,664 | ) | 26,852 | 44,363 | 72,827 | 72,615 | 2,214 | |||||||||||||||||
Income (loss) before income tax and minority interest | (25,672 | ) | 20,210 | 42,441 | 76,838 | 75,983 | 2,317 | |||||||||||||||||
Income tax (expense) benefit | 3,741 | (5,638 | ) | (3,881 | ) | (508 | ) | (483 | ) | (15 | ) | |||||||||||||
Net income (loss) | (21,975 | ) | 14,534 | 38,661 | 76,253 | 75,418 | 2,299 | |||||||||||||||||
Cumulative preferred dividends | (455 | ) | (455 | ) | (184 | ) | — | — | — | |||||||||||||||
Income (loss) attributable to common shareholders | (22,430 | ) | 14,079 | 38,477 | 76,253 | 75,418 | 2,299 | |||||||||||||||||
Basic earnings per share(3) | (0.95 | ) | 0.59 | 1.59 | 3.14 | 3.07 | 0.09 | |||||||||||||||||
Diluted earnings per share(3) | (0.95 | ) | 0.59 | 1.59 | 3.14 | 3.07 | 0.09 | |||||||||||||||||
Basic earnings per ADS equivalent(3) | (4.74 | ) | 2.93 | 7.97 | 15.68 | 15.35 | 0.47 | |||||||||||||||||
Diluted earnings per ADS equivalent(3) | (4.74 | ) | 2.93 | 7.97 | 15.68 | 15.34 | 0.47 | |||||||||||||||||
Basic weighted average shares outstanding(3) | 23,671 | 23,991 | 24,135 | 24,311 | 24,571 | 24,571 | ||||||||||||||||||
Diluted weighted average shares outstanding(3) | 23,671 | 23,991 | 24,145 | 24,318 | 24,584 | 24,584 | ||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||||||
ROC GAAP | ||||||||||||||||||||||||
Working capital(4) | 37,472 | 62,705 | 136,121 | 120,530 | 177,133 | 5,400 | ||||||||||||||||||
Long-term investments | 11,599 | 10,635 | 10,748 | 38,102 | 42,428 | 1,294 | ||||||||||||||||||
Properties | 251,288 | 246,498 | 211,854 | 258,911 | 244,823 | 7,464 | ||||||||||||||||||
Goodwill | 11,438 | 10,159 | 8,721 | 7,116 | 6,011 | 183 | ||||||||||||||||||
Total assets | 366,518 | 390,542 | 407,401 | 499,454 | 519,510 | 15,839 | ||||||||||||||||||
Long term bank borrowing(5) | 22,399 | 11,051 | 8,800 | 1,915 | 663 | 20 | ||||||||||||||||||
Long-term bonds payable | 24,000 | 35,000 | 30,000 | 19,500 | 19,500 | 595 | ||||||||||||||||||
Guaranty deposit-in and other liabilities(4)(6) | 9,479 | 8,710 | 8,876 | 15,079 | 17,986 | 548 | ||||||||||||||||||
Total liabilities | 89,208 | 94,594 | 78,098 | 100,413 | 73,271 | 2,234 | ||||||||||||||||||
Minority interest in subsidiaries | 120 | 95 | 89 | 76 | 608 | 19 | ||||||||||||||||||
Capital stock | 181,326 | 199,229 | 202,666 | 232,520 | 247,300 | 7,540 | ||||||||||||||||||
Cash dividend on common shares | — | — | — | 12,160 | 46,504 | 1,418 | ||||||||||||||||||
Shareholders’ equity | 277,310 | 295,948 | 329,303 | 399,041 | 446,239 | 13,605 | ||||||||||||||||||
US GAAP | ||||||||||||||||||||||||
Goodwill | 47,464 | 47,476 | 47,287 | 46,757 | 46,993 | 1,433 | ||||||||||||||||||
Total assets | 393,990 | 420,528 | 439,853 | 536,286 | 558,919 | 17,040 | ||||||||||||||||||
Total liabilities | 91,419 | 96,747 | 81,977 | 108,416 | 80,962 | 2,468 | ||||||||||||||||||
Capital Stock | 168,326 | 186,229 | 202,666 | 232,520 | 247,300 | 7,540 | ||||||||||||||||||
Mandatory redeemable preferred stock | 13,000 | 13,000 | — | — | — | — | ||||||||||||||||||
Shareholders’ equity | 289,450 | 310,623 | 357,173 | 427,125 | 477,297 | 14,552 | ||||||||||||||||||
Other Financial Data: | ||||||||||||||||||||||||
ROC GAAP | ||||||||||||||||||||||||
Gross margin | 27 | % | 32 | % | 37 | % | 45 | % | 44 | % | 44 | % | ||||||||||||
Operating margin | 10 | % | 19 | % | 25 | % | 34 | % | 34 | % | 34 | % | ||||||||||||
Net margin | 12 | % | 13 | % | 23 | % | 36 | % | 35 | % | 35 | % | ||||||||||||
Capital expenditures | 70,201 | 55,236 | 37,871 | 81,095 | 79,879 | 2,435 | ||||||||||||||||||
Depreciation and amortization | 55,323 | 65,001 | 69,161 | 69,819 | 75,649 | 2,306 | ||||||||||||||||||
Cash provided by operating activities | 75,818 | 98,507 | 116,037 | 153,151 | 157,013 | 4,787 | ||||||||||||||||||
Cash used in investing activities(1)(7) | (77,232 | ) | (62,190 | ) | (53,702 | ) | (147,987 | ) | (77,440 | ) | (2,361 | ) |
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Year ended and as of December 31, | ||||||||||||||||||||||||
2001 | 2002 | 2003 | 2004 | 2005 | 2005 | |||||||||||||||||||
NT$ | NT$ | NT$ | NT$ | NT$ | US$ | |||||||||||||||||||
(in millions, except for percentages, | ||||||||||||||||||||||||
earnings per share and per ADS, and operating data) | ||||||||||||||||||||||||
Cash provided by (used in) financing activities(1)(7) | 897 | (6,346 | ) | (27,073 | ) | (32,181 | ) | (57,969 | ) | (1,767 | ) | |||||||||||||
Net cash inflow (outflow) | (1,284 | ) | 30,234 | 35,199 | (28,687 | ) | 22,181 | 676 | ||||||||||||||||
Operating Data: | ||||||||||||||||||||||||
Wafer (200mm equivalent) shipment(8) | 2,159 | 2,675 | 3,700 | 5,008 | 5,622 | 5,622 | ||||||||||||||||||
Average utilization rate(9) | 51 | % | 73 | % | 89 | % | 100 | % | 92 | % | 92 | % |
(1) | Balances in 2003 and 2004 were reclassified to be consistent with the reclassification used in our consolidated financial statements included herein. | |
(2) | Retroactively adjusted for all subsequent stock dividends and employee stock bonuses. | |
(3) | Retroactively adjusted for all subsequent stock dividends. | |
(4) | Amounts in 2003 reflect the reclassification of NT$727 million from current liabilities to long-term liabilities. | |
(5) | Excludes bonds payable. | |
(6) | Consists of other long term payables and total other liabilities. | |
(7) | Amounts in 2003 reflect the reclassification of NT$300 million from cash used in investing activities to cash used in financing activities. | |
(8) | In thousands. | |
(9) | Commencing in 2003, utilization rates exclude engineering wafers and all capacity and production at Vanguard, an investee accounted for under the equity method. |
NT dollars per U.S. dollar | ||||||||||||||||
Average(1) | High | Low | Period-End | |||||||||||||
2001 | NT$33.82 | NT$35.13 | NT$32.23 | NT$35.00 | ||||||||||||
2002 | 34.53 | 35.16 | 32.85 | 34.70 | ||||||||||||
2003 | 34.41 | 34.98 | 33.72 | 33.99 | ||||||||||||
2004 | 33.37 | 34.16 | 31.74 | 31.74 | ||||||||||||
2005 | 32.16 | 33.77 | 30.65 | 32.80 | ||||||||||||
October 2005 | 33.47 | 33.77 | 33.19 | 33.55 | ||||||||||||
November 2005 | 33.58 | 33.71 | 33.39 | 33.51 | ||||||||||||
December 2005 | 33.29 | 33.56 | 32.80 | 32.80 | ||||||||||||
January 2006 | 32.01 | 32.59 | 31.83 | 31.97 | ||||||||||||
February 2006 | 32.37 | 32.68 | 31.99 | 32.46 | ||||||||||||
March 2006 | 32.49 | 32.67 | 32.28 | 32.46 | ||||||||||||
April 2006 (through April 17, 2006) | 32.45 | 32.71 | 32.30 | 32.46 |
(1) | Annual averages calculated from month-end rates. |
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• | our future financial condition, results of operations and cash flows; | ||
• | general market conditions for financing activities by semiconductor companies; and | ||
• | economic, political and other conditions in Taiwan and elsewhere. |
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• | negotiating cross-license agreements using the strength of our intellectual property portfolio to try to offset any financial costs; | ||
• | seeking to acquire licenses to the allegedly infringed intellectual property, which may not be available on commercially reasonable terms, if at all; | ||
• | discontinuing using certain process technologies, which could cause us to stop manufacturing certain semiconductor products or applying particular technologies if we were unable to design around the allegedly infringed intellectual property; or | ||
• | fighting the matter in court and paying substantial monetary judgments in the event we were to lose. |
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Current most | ||||||||||||||||||||||||||||
advanced technology | Monthly capacity(3)(4) | |||||||||||||||||||||||||||
Year of | for volume | |||||||||||||||||||||||||||
Fab(1) | commencement | production(2) | 2001 | 2002 | 2003 | 2004 | 2005 | |||||||||||||||||||||
1(5) | 1987 | — | 11,378 | — | — | — | — | |||||||||||||||||||||
2 | 1990 | 0.45 | 45,225 | 43,540 | 42,977 | 47,584 | 47,584 | |||||||||||||||||||||
3(6) | 1995 | 0.18 | 82,700 | 71,000 | 71,600 | 83,300 | 83,300 | |||||||||||||||||||||
5 | 1997 | 0.15 | 40,000 | 34,920 | 37,800 | 42,500 | 42,500 | |||||||||||||||||||||
6 | 2000 | 0.13 | 41,000 | 48,700 | 63,500 | 73,000 | 73,000 | |||||||||||||||||||||
7 | 1995 | 0.35 | 46,500 | 22,500 | 11,800 | 13,400 | 13,400 | |||||||||||||||||||||
8 | 1998 | 0.15 | 54,700 | 52,600 | 63,500 | 76,500 | 76,500 | |||||||||||||||||||||
10 | 2004 | 0.25 | — | — | — | 500 | 15,600 | |||||||||||||||||||||
12 | 2001 | 0.09 | 3,375 | 11,475 | 31,797 | 60,300 | 106,875 | |||||||||||||||||||||
14 | 2004 | 0.09 | — | — | — | 6,750 | 46,125 | |||||||||||||||||||||
WaferTech | 1998 | 0.15 | 28,000 | 30,000 | 30,000 | 32,500 | 33,500 | |||||||||||||||||||||
SSMC(7) | 2000 | 0.18 | 5,166 | 8,000 | 9,600 | 13,400 | 16,700 | |||||||||||||||||||||
Total | 358,044 | 322,735 | 362,574 | 449,734 | 555,084 |
(1) | Fab 2 produces 150mm wafers. Fabs 3, 5, 6, 7, 8, 10, WaferTech and SSMC produce 200mm wafers. Fab 12 and Fab 14 produce 300mm wafers. Fabs 2, 3, 5, 7, 8 and 12 are located in Hsinchu Science Park. Fab 6 and Fab 14 are located in the Southern Taiwan Science Park. WaferTech is located in the United States, SSMC is located in Singapore and Fab 10 is located in Shanghai. | |
(2) | In microns, as of year-end. | |
(3) | Estimated capacity in 200mm equivalent wafers as of year-end for the total technology range available for production. Actual capacity during each year will be lower as new production capacity is phased in during the course of the year. | |
(4) | Under an agreement with Vanguard, TSMC is required to use its best commercial efforts to maintain utilization of a fixed amount of reserved capacity within a range of 5,000 wafers per month. Please see “Item 7. Major Shareholders and Related Party Transaction – Related Party Transactions – Vanguard International Semiconductor Corporation” for a discussion of certain of the Vanguard contract terms. The amounts to be used at Vanguard are not included in our monthly capacity figures. | |
(5) | We decommissioned Fab 1, a 150mm fab located at ITRI, on March 31, 2002, because of our decision not to renew our land lease agreement with ITRI since it was an outdated fab. | |
(6) | Fab 4, which commenced operation in 1999 with initial technology of 0.5 micron, was consolidated into Fab 3 during the fourth quarter of 2001. | |
(7) | Represents that portion of the total capacity that we had the option to utilize as of December 31, 2001, December 31, 2002, December 31, 2003, December 31, 2004 and December 31, 2005. This fab commenced production in September 2000. |
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• | ramping up production at Fab 12 (Phases II and III) and Fab 14 (Phase I) and commencing production at Fab 14 (Phase II); | ||
• | capacity expansion for mask operation; | ||
• | development of process technologies such as sub-45 and 65nm nodes; and | ||
• | other research and development projects. |
• | actual output during uninterrupted trial runs; | ||
• | expected down time due to setup for production runs; and | ||
• | expected product mix. |
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Year ended December 31, | ||||||||||||||||||||||||
2003 | 2004 | 2005 | ||||||||||||||||||||||
Customer Type | Net Sales | Percentage | Net Sales | Percentage | Net Sales | Percentage | ||||||||||||||||||
(in millions, except percentages) | ||||||||||||||||||||||||
Fabless semiconductor companies/systems companies | NT$145,752 | 71.8 | % | NT$176,705 | 68.7 | % | NT$187,662 | 70.4 | % | |||||||||||||||
Integrated device manufacturers | 57,245 | 28.2 | 80,508 | 31.3 | 78,903 | 29.6 | ||||||||||||||||||
Total | NT$202,997 | 100.0 | % | NT$257,213 | 100.0 | % | NT$266,565 | 100.0 | % |
Year ended December 31, | ||||||||||||||||||||||||
2003 | 2004 | 2005 | ||||||||||||||||||||||
Region | Net Sales | Percentage | Net Sales | Percentage | Net Sales | Percentage | ||||||||||||||||||
(in millions, except percentages) | ||||||||||||||||||||||||
North America | NT$154,075 | 75.9 | % | NT$191,624 | 74.5 | % | NT$205,255 | 77.0 | % | |||||||||||||||
Asia | 39,381 | 19.4 | 47,584 | 18.5 | 40,785 | 15.3 | ||||||||||||||||||
Europe | 9,541 | 4.7 | 18,005 | 7.0 | 20,525 | 7.7 | ||||||||||||||||||
Total | NT$202,997 | 100.0 | % | NT$257,213 | 100.0 | % | NT$266,565 | 100.0 | % |
• | Circuit Design:The layout of the circuit components and interconnections is generally produced at computer-aided design terminals. A complex circuit may be designed in as many as thirty layers of patterns or more. | ||
• | Mask Making:Each layer of the pattern of the circuit is duplicated on a photographic negative, known as a mask (also referred to as a reticle), by an electron beam generator. | ||
• | Wafer Fabrication:This is the process by which raw silicon wafers are modified to form junctions, transistors or interconnects. In this process, the raw wafers are oxidized to form silicon dioxide, which is used as an insulator between the conductors and as an insulating layer for a controlling gate. Through the introduction of various impurities, the characteristics of conduction in the silicon are eventually changed to form a junction or transistor. During the wafer fabrication process, conductor, semiconductor or resistor materials are applied to the wafer in multiple layers in different patterns specified in the masks. |
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• | Wafer Probing:After a visual inspection, individual semiconductors, called “dies”, on a wafer are tested, or “probed”, electrically. Dies that fail this test are “marked” to be discarded. | ||
• | Assembly:Each wafer is cut into individual dies and defective dies are discarded. Good dies are connected to a conductive lead frame or organic substrate-based package and the bonded semiconductors, if lead frame based, are then encapsulated using a plastic molding compound or a ceramic casing. | ||
• | Testing:Packaged semiconductors are fully tested by the use of specialized testing equipment. |
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Year ended December 31, | ||||||||||||||||||||||||
2003 | 2004 | 2005 | ||||||||||||||||||||||
Semiconductor Type | Net Sales | Percentage | Net Sales | Percentage | Net Sales | Percentage | ||||||||||||||||||
(in millions, except percentages) | ||||||||||||||||||||||||
CMOS | ||||||||||||||||||||||||
Logic | NT$157,526 | 77.6 | % | NT$174,905 | 68.0 | % | NT$199,657 | 74.9 | % | |||||||||||||||
Memory | 3,045 | 1.5 | 22,120 | 8.6 | 2,133 | 0.8 | ||||||||||||||||||
Mixed-Signal(1) | 40,599 | 20.0 | 50,414 | 19.6 | 63,442 | 23.8 | ||||||||||||||||||
BiCMOS(2) | 406 | 0.2 | 1,029 | 0.4 | 1,066 | 0.4 | ||||||||||||||||||
Others | 1,421 | 0.7 | 8,745 | 3.4 | 267 | 0.1 | ||||||||||||||||||
Total | NT$202,997 | 100.0 | % | NT$257,213 | 100.0 | % | NT$266,565 | 100.0 | % |
(1) | Mixed-signal semiconductors made with the CMOS process. | |
(2) | Mixed-signal and other semiconductors made with the BiCMOS process. |
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• | firmly established customer-oriented culture, which emphasizes close interaction with our customers on a multifaceted basis, from senior management, sales and marketing, customer service staff to product and line engineers in the fabs and research and development staff; | ||
• | ability to deliver ordered wafers of consistent quality, on time and in the desired quantities; | ||
• | responsiveness to customer’s requirements in terms of engineering change orders and special wafer handling; | ||
• | flexibility in manufacturing processes, order size requirements and design changes, attributable in part to our technical capability and ability to plan and manage effectively many production runs; |
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• | ability to reduce customer costs through the sharing, to the extent permissible, of ever increasing silicon verification costs through our multi-project wafer service, which combines multiple designs on a single mask set; | ||
• | eFoundry service which features real-time on-line information exchange throughout product design, engineering and logistic phases, including WIP (work in progress) performance reports for both in-house and subcontracted activities, for the processes of handling, assembly and final testing, before the products are shipped to our customers; and | ||
• | Virtual fab™, which is a customer service program designed to make our manufacturing services as transparent and easy to deal with for our customers as their own in-house fabs, with well coordinated resource management. The Virtual fab™ provides customers with the benefits of in-house fabs, including confidentiality of proprietary information, quality of service and products, on-time delivery and flexibility in scheduling and capacity. |
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• | the worldwide demand for semiconductor products; | ||
• | the worldwide semiconductor production capacity as well as our production capacity; | ||
• | capacity utilization; | ||
• | technology migration; | ||
• | pricing; and | ||
• | fluctuation in foreign currency exchange rate. |
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Year ended December 31, | ||||||||||||
2003 | 2004 | 2005 | ||||||||||
Percentage of total wafer | Percentage of total wafer | Percentage of total wafer | ||||||||||
Resolution | revenue(1) | revenue(1) | revenue(1) | |||||||||
£0.13 micron | 17 | % | 28 | % | 45 | % | ||||||
0.15 micron | 20 | 13 | 9 | |||||||||
0.18 micron | 26 | 27 | 24 | |||||||||
0.25 micron | 20 | 15 | 10 | |||||||||
0.35 micron | 9 | 10 | 6 | |||||||||
>0.5 micron | 8 | 7 | 6 | |||||||||
Total | 100 | % | 100 | % | 100 | % |
(1) | Percentages represent wafer revenue by technology as a percentage of total revenue from wafer sales, which exclude revenue not associated with wafer sales, such as revenue from testing and masks. Total wafer revenue excludes sales returns and allowances. |
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• | significant under performance relative to historical or projected future operating results; | ||
• | significant changes in the manner of our use of the acquired assets or our overall business strategy; and | ||
• | significant unfavorable industry or economic trends. |
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• | significant decline in our stock price for a sustained period; and | ||
• | significant decline in our market capitalization relative to net book value. |
For the year ended December 31, | ||||||||||||
2003 | 2004 | 2005 | ||||||||||
Net sales | 100.0 | % | 100.0 | % | 100 | % | ||||||
Cost of sales | (63.1 | ) | (55.0 | ) | (55.7 | ) | ||||||
Gross profit | 36.9 | 45.0 | 44.3 | |||||||||
Operating expenses | ||||||||||||
General and administrative | (4.0 | ) | (4.4 | ) | (3.4 | ) | ||||||
Sales and marketing | (1.3 | ) | (1.3 | ) | (1.6 | ) | ||||||
Research and development | (6.3 | ) | (4.9 | ) | (5.3 | ) | ||||||
Total operating expenses | (11.6 | ) | (10.6 | ) | (10.3 | ) | ||||||
Income from operations | 25.3 | 34.4 | 34.0 | |||||||||
Non-operating income and gains | 2.8 | 2.4 | 2.7 | |||||||||
Non-operating expenses and losses | (2.9 | ) | (1.0 | ) | (1.4 | ) | ||||||
Income before income tax and minority interest | 25.2 | 35.8 | 35.3 | |||||||||
Income tax (expense) benefit | (1.9 | ) | 0.1 | (0.2 | ) | |||||||
Income before minority interest | 23.3 | 35.9 | 35.1 | |||||||||
Minority interest in loss (income) of subsidiaries | 0.0 | 0.0 | 0.0 | |||||||||
Net income | 23.3 | % | 35.9 | % | 35.1 | % |
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For the Year Ended December 31, | ||||||||||||||||||||||||
% | % | |||||||||||||||||||||||
Change | Change | |||||||||||||||||||||||
2003 | 2004 | from 2003 | 2005 | from 2004 | ||||||||||||||||||||
NT$ | NT$ | NT$ | US$ | |||||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
Net sales | 202,997 | 257,213 | 26.7 | % | 266,565 | 8,127 | 3.6 | % | ||||||||||||||||
Cost of sales | (128,113 | ) | (141,394 | ) | 10.4 | % | (148,362 | ) | (4,523 | ) | 4.9 | % | ||||||||||||
Gross profit | 74,884 | 115,819 | 54.7 | % | 118,203 | 3,604 | 2.1 | % | ||||||||||||||||
Gross margin percentage | 36.9 | % | 45.0 | % | — | 44.3 | % | 44.3 | % | — |
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For the Year Ended December 31 | ||||||||||||||||||||||||
% Change | % Change | |||||||||||||||||||||||
2003 | 2004 | from 2003 | 2005 | from 2004 | ||||||||||||||||||||
NT$ | NT$ | NT$ | US$ | |||||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
Research and development | 12,713 | 12,516 | (1.5 | )% | 14,017 | 427 | 12.0 | % | ||||||||||||||||
General and administrative | 8,200 | 11,454 | 39.7 | % | 9,085 | 277 | (20.7 | )% | ||||||||||||||||
Sales and marketing | 2,670 | 3,367 | 26.1 | % | 4,132 | 126 | 22.7 | % | ||||||||||||||||
Total operating expenses | 23,583 | 27,337 | 15.9 | % | 27,234 | 830 | (0.4 | )% | ||||||||||||||||
Percentage of net sales | 11.6 | % | 10.6 | % | — | 10.3 | % | 10.3 | % | — | ||||||||||||||
Income from operations | 51,301 | 88,482 | 72.5 | % | 90,969 | 2,773 | 2.81 | % | ||||||||||||||||
Operating Margin | 25.3 | % | 34.4 | % | — | 34.0 | % | 34.0 | % | — |
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For the Year Ended December 31 | ||||||||||||||||||||||||
% Change | % Change | |||||||||||||||||||||||
2003 | 2004 | from 2003 | 2005 | from 2004 | ||||||||||||||||||||
NT$ | NT$ | NT$ | US$ | |||||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
Non-operating income and gains | 5,669 | 6,016 | 6.1 | % | 7,068 | 215 | 17.5 | % | ||||||||||||||||
Non-operating expenses and losses | (5,791 | ) | (2,532 | ) | (56.3 | )% | (3,773 | ) | (115 | ) | 49.0 | % | ||||||||||||
Net non-operating income (expenses) | (122 | ) | 3,484 | — | (1) | 3,295 | 100 | (5.4 | )% | |||||||||||||||
(1) | Not meaningful. |
For the Year Ended December 31 | ||||||||||||||||||||||||
% Change | % Change | |||||||||||||||||||||||
2003 | 2004 | from 2003 | 2005 | from 2004 | ||||||||||||||||||||
NT$ | NT$ | NT$ | US$ | |||||||||||||||||||||
(in millions) | (in millions) | |||||||||||||||||||||||
Income tax benefit (expense) | (3,923 | ) | 363 | — | (1) | (631 | ) | (19 | ) | — | (1) | |||||||||||||
Net income | 47,259 | 92,316 | 95.3 | % | 93,575 | 2,853 | 1.4 | % | ||||||||||||||||
Net margin | 23.3 | % | 35.9 | % | — | 35.1 | % | 35.1 | % | — |
(1) | Not meaningful. |
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For the year ended December 31, | ||||||||||||||||
2003 | 2004 | 2005 | ||||||||||||||
NT$ | NT$ | NT$ | US$ | |||||||||||||
(in millions) | (in millions) | |||||||||||||||
Net cash provided by operating activities | 116,037 | 153,151 | 157,013 | 4,787 | ||||||||||||
Net cash used in investing activities | (53,702 | ) | (147,987 | ) | (77,440 | ) | (2,361 | ) | ||||||||
Net cash used in financing activities | (27,073 | ) | (32,181 | ) | (57,969 | ) | (1,767 | ) | ||||||||
Net increase/(decrease) in cash | 35,199 | (28,687 | ) | 22,181 | 676 |
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• | ramping up production at Fab 12 (Phase II) and Fab 14 (Phases I); | ||
• | capacity expansion for mask operations; | ||
• | developing process technologies such as sub-65 and 80/90nm nodes; and | ||
• | other research and development projects. |
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Long-term debt | Short-term debt | |||||||
(in millions) | ||||||||
NT$ | NT$ | |||||||
During 2006 | 5 | 329 | ||||||
During 2007 | 7,004 | — | ||||||
During 2008 | 133 | — | ||||||
During 2009 | 8,263 | — | ||||||
During 2010 and thereafter | 4,763 | — |
Payments Due by Period | ||||||||||||||||||||
Less than | More than | |||||||||||||||||||
Contractual Obligations | Total | 1 Year | 1-3 Years | 4-5 Years | 5 Years | |||||||||||||||
(in NT$ millions) | ||||||||||||||||||||
Long-Term Debt(1) | 20,168 | 5 | 15,400 | 263 | 4,500 | |||||||||||||||
Capital Lease Obligations(2) | 598 | — | — | — | 598 | |||||||||||||||
Operating Leases(3) | 2,802 | 371 | 1,034 | 440 | 957 | |||||||||||||||
Other Payments(4) | 2,384 | 873 | 985 | 526 | — | |||||||||||||||
Capital Purchase or other Purchase Obligations(5) | 10,957 | 10,902 | 55 | — | — | |||||||||||||||
Total Contractual Cash Obligations(6) | 36,909 | 12,151 | 17,474 | 1,229 | 6,055 |
(1) | Includes loan payable and bond payable without interest payments. | |
(2) | Capital lease obligations represent our commitment for leases of property. The obligations are included in the consolidated balance sheets as other liability. See note 22 to our consolidated financial statements for additional details. | |
(3) | Operating lease obligations are described in note 22 to our consolidated financial statements. | |
(4) | Includes royalty and license payments, as well as payables for acquisition of property, plant and equipment, but excludes payments that vary based upon our net sales of certain products and our sales volume of certain other products. | |
(5) | Represents commitments for construction or purchase of equipment, raw material and other property or services. These commitments are not recorded on our balance sheet as of December 31, 2005, as we have not received related goods or taken title of the property. | |
(6) | Minimum pension funding requirement is not included since such amounts have not been determined. We made pension contributions of approximately NT$226 million in 2005 and we estimate that we will contribute approximately NT$233 million to the pension fund in 2006. See note 15 to our consolidated financial statements for additional details regarding our pension plan. |
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Year ended and as of December 31, | ||||||||||||||||
2003 | 2004 | 2005 | 2005 | |||||||||||||
NT$ | NT$ | NT$ | US$ | |||||||||||||
(in NT$ millions) | ||||||||||||||||
Net income in accordance with: | ||||||||||||||||
ROC GAAP | 47,259 | 92,316 | 93,575 | 2,853 | ||||||||||||
US GAAP | 38,661 | 76,253 | 75,418 | 2,299 | ||||||||||||
Shareholders’ equity in accordance with: | ||||||||||||||||
ROC GAAP | 329,303 | 399,041 | 446,239 | 13,605 | ||||||||||||
US GAAP | 357,173 | 427,125 | 477,297 | 14,552 |
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• | investigation of our financial condition; | ||
• | inspection of corporate records; | ||
• | verification of statements by the board of directors; | ||
• | giving reports at shareholders’ meetings; | ||
• | representation of us in negotiations with our directors; and | ||
• | giving notification, when appropriate, to the board of directors to cease acting in contravention of applicable laws or regulations, or our articles of incorporation or a resolution of a meeting of shareholders. |
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Years | ||||||||
Term | with our | |||||||
Name | Position with our company | Expires | company | |||||
Morris Chang(1) | Chairman | 2006 | 19 | |||||
J.C. Lobbezoo | Director (Representative of Philips) | 2006 | 12 | |||||
F.C. Tseng | Vice Chairman | 2006 | 19 | |||||
Stan Shih | Director | 2006 | 6 | |||||
Chintay Shih | Director (Representative of the Development Fund) | 2006 | 9 | |||||
Lester Carl Thurow | Director | 2006 | 4 | |||||
Sir Peter Leahy Bonfield | Director | 2006 | 4 | |||||
Rick Tsai(1) | Director, President and Chief Executive Officer | 2006 | 16 | |||||
Michel Besseau | Supervisor (Representative of Philips) | 2006 | 1 | |||||
James C. Ho | Supervisor (Representative of the Development Fund) | 2006 | 2 | |||||
Michael E. Porter | Supervisor | 2006 | 4 | |||||
Shang-Yi Chiang | Senior Vice President of Research and Development | — | 9 | |||||
Kenneth Kin | Senior Vice President of Worldwide Sales and Services | — | 5 | |||||
Steve Tso | Senior Vice President and Chief Information Officer, Information Technology/Materials Management and Risk Management | — | 9 | |||||
C.C. Wei | Senior Vice President of Operations I | — | 8 | |||||
Mark Liu | Senior Vice President of Operations II | — | 12 | |||||
Lora Ho | Vice President, Chief Financial Officer and Spokesperson | — | 7 | |||||
M.C. Tzeng | Vice President of Operations, Deputy of Operations I | — | 19 |
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Years | ||||||||
Term | with our | |||||||
Name | Position with our company | Expires | company | |||||
Richard Thurston | Vice President and General Counsel | — | 4 | |||||
Chiam Wu | Vice President of Customer Partnership Development | — | 4 | |||||
P.H. Chang | Vice President of Corporate Human Resources | — | 6 | |||||
W.J. Lo | Vice President of Operations II | — | 2 | |||||
Jason Chen | Vice President of Corporate Development | — | 2 |
(1) | Effective July 1, 2005, Rick Tsai replaced Mr. Morris Chang as the Chief Executive Officer. |
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Percentage of | Number of | |||||||||||
Total | Common | |||||||||||
Outstanding | Shares | |||||||||||
Number of Common | Common | Underlying | ||||||||||
Name of Shareholders | Shares Owned(3) | Shares | Stock Options(4) | |||||||||
Morris Chang, Chairman | 112,677,772 | 0.46 | % | 615,000 | ||||||||
J.C. Lobbezoo, Director(1) | 4,066,046,793 | 16.44 | % | 0 | ||||||||
Chintay Shih, Director(2) | 1,581,649,996 | 6.40 | % | 0 | ||||||||
Stan Shih, Director | 1,415,785 | 0.01 | % | 0 | ||||||||
F.C. Tseng, Director and Vice Chairman | 39,120,891 | 0.16 | % | 0 | ||||||||
Sir Peter Leahy Bonfield, Director | 0 | 0.00 | % | 0 | ||||||||
Lester Carl Thurow, Director | 0 | 0.00 | % | 0 |
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Percentage of | Number of | |||||||||||
Total | Common | |||||||||||
Outstanding | Shares | |||||||||||
Number of Common | Common | Underlying | ||||||||||
Name of Shareholders | Shares Owned(3) | Shares | Stock Options(4) | |||||||||
Rick Tsai, Director, President & CEO | 25,576,795 | 0.10 | % | 615,000 | ||||||||
Michel Besseau, Supervisor(1) | 4,066,046,793 | 16.44 | % | 0 | ||||||||
James C. Ho, Supervisor(2) | 1,581,649,996 | 6.40 | % | 0 | ||||||||
Michael E. Porter, Supervisor | 0 | 0.00 | % | 0 | ||||||||
Shang-Yi Chiang, Senior Vice President | 7,671,306 | 0.03 | % | 0 | ||||||||
Kenneth Kin, Senior Vice President | 3,259,860 | 0.01 | % | 298,476 | ||||||||
Steve Tso, Senior Vice President and Chief Information Officer, Information Technology/Materials Management and Risk Management | 12,036,380 | 0.05 | % | 312,039 | ||||||||
C.C. Wei, Senior Vice President | 5,388,079 | 0.02 | % | 206,019 | ||||||||
Mark Liu, Senior Vice President | 9,897,792 | 0.04 | % | 615,000 | ||||||||
Lora Ho, Vice President & CFO & Spokesperson | 3,692,392 | 0.01 | % | 0 | ||||||||
M.C. Tzeng, Vice President | 5,336,601 | 0.02 | % | 0 | ||||||||
Richard Thurston, Vice President & General Counsel | 2,244,211 | 0.01 | % | 65,262 | ||||||||
Chiam Wu, Vice President | 1,927,464 | 0.01 | % | 0 | ||||||||
P.H. Chang, Vice President | 1,832,910 | 0.01 | % | 0 | ||||||||
W.J. Lo | 502,552 | 0.00 | % | 0 | ||||||||
Jason Chen | 361,000 | 0.00 | % | 0 |
(1) | Represents shares held by Koninklijke Philips Electronics N.V. | |
(2) | Represents shares held by the Development Fund of the Executive Yuan. | |
(3) | Except for the number of shares held by Koninklijke Philips Electronics N.V. and the Development Fund of the Executive Yuan, the disclosed number of shares owned by the directors, supervisors and executive officers does not include any common shares held in ADS form by such individuals as such individual ownership of ADSs has not been disclosed to shareholders or otherwise made public and each of these individuals owns less than one percent of all common shares outstanding as of February 28, 2006. | |
(4) | The stock options granted to our officers on March 7, 2003 under the 2002 Stock Option Plan all have an original exercise price of NT$41.6 and all will expire on March 6, 2013 if not previously exercised. The options were granted to certain of our officers as a result of their voluntary selection to exchange part of their profit sharing to stock options. |
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As of December 31, | ||||||||||||
Function | 2003 | 2004 | 2005 | |||||||||
Managers | 1,700 | 1,948 | 2,077 | |||||||||
Professionals | 5,945 | 7,158 | 7,769 | |||||||||
Assistant Engineers/Clericals | 1,056 | 1,268 | 950 | |||||||||
Technicians | 8,296 | 9,793 | 10,700 | |||||||||
Total | 16,997 | 20,167 | 21,496 |
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As of December 31, | ||||||||||||
Location of Facility and Office | 2003 | 2004 | 2005 | |||||||||
Hsinchu Science Park, Taiwan | 12,555 | 14,081 | 14,869 | |||||||||
Southern Taiwan Science Park, Taiwan | 3,303 | 4,298 | 4,543 | |||||||||
China | — | 561 | 860 | |||||||||
United States | 1,091 | 1,173 | 1,171 | |||||||||
Europe | 21 | 23 | 23 | |||||||||
Japan | 27 | 31 | 30 | |||||||||
Total | 16,997 | 20,167 | 21,496 |
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Common Shares Issuable under | ||||||||||||
2002 Employee Stock | 2003 Employee Stock | 2004 Employee Stock | ||||||||||
Name | Option Plan | Option Plan | Option Plan | |||||||||
Morris Chang | 615,000 | — | — | |||||||||
Rick Tsai | 615,000 | — | — | |||||||||
Mark Liu | 615,000 | — | — | |||||||||
Steve Tso | 312,039 | — | — | |||||||||
Kenneth Kin | 298,476 | — | — | |||||||||
C.C. Wei | 206,019 | — | — | |||||||||
Richard Thurston | 65,262 | — | — |
Percentage of Total | ||||||||
Number of Common | Outstanding Common | |||||||
Names of Shareholders | Shares Owned | Shares | ||||||
Philips | 4,066,046,793 | 16.44 | % | |||||
Development Fund(1) | 1,581,649,966 | 6.40 | % | |||||
Capital Research and Management Company(2) | 2,225,141,590 | 9.00 | % | |||||
Directors, supervisors and executive officers as a group(3) | 232,941,790 | 0.94 | % |
(1) | Excludes any common shares that may be owned by other funds controlled by the ROC government. | |
(2) | According to the Schedule 13G of Capital Research and Management Corporation (“CRMC”) filed with the Securities and Exchange Commission on February 10, 2006, CRMC beneficially owned 2,225,141,590 common shares as of December 31, 2005. According to this Schedule 13G, CRMC is an investment adviser registered under the Investment Advisers Act of 1940. We do not have further information with respect to CRMC’s ownership in us subsequent to CRMC’s Schedule 13G filed on February 10, 2006. | |
(3) | Excludes ownership of Philips and Development Fund. |
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• | A technical cooperation agreement signed in 1987 between ITRI and TSMC whereby ITRI granted TSMC the license to use its metal-oxide-semiconductor technology and related patents and copyrights to manufacture silicon MOS wafers and agreed to provide certain associated assets and relevant technical assistance and information to us, in exchange for a license from us for improvements and refinements thereof. The agreement provides that the ROC Ministry of Economic Affairs, or the entity designated by the ROC Ministry of Economic Affairs, has an option to purchase up to 35% of our capacity as agreed in the agreement on favorable terms and conditions, provided that the exercise of such option shall not prejudice TSMC’s outstanding customer commitments. The term of this agreement is for five years beginning January 1, 1987 and is automatically renewed for successive periods of five years unless otherwise terminated by either party with one year prior notice. The agreement was automatically renewed in 1992 and 1997 and on January 1, 2002. | ||
• | A patent license agreement dated September 29, 2005 exists between ITRI and TSMC whereby ITRI grants TSMC the exclusive license to use certain patents in connection with semiconductor technology in exchange for a fixed royalty payment. The term of this agreement is from the effectiveness of the agreement to the end of the patent term for each of the patents concerned. | ||
• | From time to time, we provide foundry services to ITRI. In 2004 and 2005, we had total sales to ITRI of NT$85 million and NT$90 million (US$2.7 million), respectively, representing less than 1% of our net sales in each year. |
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• | On December 31, 1986, we entered into a technology cooperation agreement with Philips pursuant to which Philips initially had provided us with certain process and technical information for the production of unencapsulated MOS integrated circuits in wafer form. This agreement was amended on May 12, 1997 and extended for ten years. The agreement was further modified on June 20, 2004 and extended to December 31, 2008. Under the June 20, 2004 amendments, which took retroactive effect on January 1, 2004, we agreed with Philips to cross license certain patents to each other on a non-exclusive, royalty-free basis. In addition, Philips has included us in certain of its patent cross licensing arrangements with other companies (as identified in the agreement) and TSMC has been paying the agreed upon consideration. The agreement will not be automatically renewed upon expiration. | ||
• | On October 28, 1992, we entered into a letter agreement with Philips under which Philips had an option on up to 30% of our capacity as agreed in the agreement. This letter agreement was terminated on September 1, 2005. In 2003, 2004 and 2005, we had total sales to Philips and its affiliates of NT$3,577 million, NT$5,464 million and NT$3,299 million (US$101 million), representing 1.8%, 2.1% and 1.2% of total net sales in 2003, 2004 and 2005, respectively. | ||
• | In March 1999, we entered into an agreement with Philips, and EDB Investment Pte. Ltd. to found a joint venture to build the SSMC fab in Singapore. As of February 28, 2006, we owned 32% of the joint venture, Philips owned 50.5% and the EDB Investment owned 17.5%. We together with Philips, not only have the right to purchase up to 100% of its annual capacity, but are required, in the aggregate, to purchase up to 70% of SSMC’s full capacity. However, TSMC, alone, is not required to purchase more than 28% of the annual installed capacity. See “Item 4. Information on the Company — Our History and Structure — Systems on Silicon Manufacturing Company Pte. Ltd. (“SSMC”)” for a discussion of our agreement with Philips and EDB Investment to build our SSMC fab and “— Systems on Silicon Manufacturing Company Pte. Ltd.” for a detailed discussion of the contract terms we entered into with SSMC. | ||
• | In November 2000, Philips purchased from us 1,299,925,653 Preferred A shares, at the par value of NT$10 per share, which paid a cumulative annual cash dividend at the rate of 3.5% per annum. The Preferred A shares were redeemed on May 29, 2003. | ||
• | In November 2002, we entered into an Amended and Restated Joint Technology Cooperation Agreement with Philips, Motorola (who assigned its rights and obligations under this agreement to Freescale Semiconductor, Inc. in 2004) and ST Microelectronics to jointly develop 90-nanometer to 65-nanometer advanced CMOS Logic and e-DRAM technologies. We also agreed to align 0.12 micron CMOS Logic technology to enhance our foundry business opportunities. This agreement expired on December 31, 2005. |
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Cash Dividends | Stock dividends | Total shares issued | Outstanding common | |||||||||||||
Per Share | Per 100 shares | as stock dividends | shares at year end | |||||||||||||
NT$ | ||||||||||||||||
2001 | — | 40.0 | 4,675,745,835 | 16,832,553,051 | ||||||||||||
2002 | — | 10.0 | 1,683,255,306 | 18,622,886,745 | ||||||||||||
2003 | — | 8.0 | 1,489,830,940 | 20,266,618,984 | ||||||||||||
2004 | 0.6037 | 14.08668 | 2,837,326,658 | 23,251,963,693 | ||||||||||||
2005 | 1.9998 | 4.99971 | 1,162,602,422 | 24,730,024,647 |
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Taiwan Stock Exchange | New York Stock Exchange(1) | |||||||||||||||||||||||
Average daily | Average daily | |||||||||||||||||||||||
Closing price per | Trading volume | Trading volume (in | ||||||||||||||||||||||
common share(2) | (in thousands of | Closing price per ADS(2) | thousands of | |||||||||||||||||||||
High | Low | shares)(2) | High | Low | ADSs)(2) | |||||||||||||||||||
(NT$) | (NT$) | (US$) | (US$) | |||||||||||||||||||||
2001 | 73.74 | 36.34 | 48,569 | 12.81 | 5.94 | 5,086 | ||||||||||||||||||
2002 | 80.34 | 32.27 | 52,959 | 13.93 | 3.95 | 6,859 | ||||||||||||||||||
2003 | 64.81 | 36.44 | 47,172 | 10.30 | 4.73 | 8,488 | ||||||||||||||||||
2004 | 62.09 | 37.54 | 53,189 | 9.27 | 6.11 | 7,438 | ||||||||||||||||||
First Quarter | 62.09 | 49.85 | 53,558 | 9.27 | 7.42 | 8,393 | ||||||||||||||||||
Second Quarter | 58.01 | 39.29 | 53,289 | 8.97 | 6.67 | 8,170 | ||||||||||||||||||
Third Quarter | 44.61 | 37.54 | 49,691 | 7.31 | 6.11 | 6,710 | ||||||||||||||||||
Fourth Quarter | 46.36 | 38.46 | 56,152 | 8.06 | 6.34 | 6,530 | ||||||||||||||||||
2005 | 63.90 | 42.96 | 44,900 | 10.09 | 7.06 | 7,918 | ||||||||||||||||||
First Quarter | 50.49 | 42.96 | 49,379 | 8.67 | 7.06 | 7,922 | ||||||||||||||||||
Second Quarter | 57.20 | 45.53 | 45,849 | 9.43 | 7.42 | 6,155 | ||||||||||||||||||
Third Quarter | 57.10 | 51.00 | 41,666 | 9.40 | 7.80 | 9,559 | ||||||||||||||||||
Fourth Quarter | 63.90 | 49.20 | 43,161 | 10.09 | 7.64 | 9,119 | ||||||||||||||||||
October | 54.20 | 49.20 | 42,339 | 8.42 | 7.64 | 10,305 | ||||||||||||||||||
November | 59.70 | 51.80 | 50,133 | 9.58 | 8.05 | 9,870 | ||||||||||||||||||
December | 63.90 | 59.30 | 36,936 | 10.09 | 9.59 | 7,182 | ||||||||||||||||||
2006 January | 68.10 | 61.00 | 48,793 | 10.93 | 9.82 | 10,537 | ||||||||||||||||||
February | 66.50 | 60.80 | 40,384 | 10.69 | 9.73 | 9,532 | ||||||||||||||||||
March | 64.20 | 59.00 | 43,832 | 10.06 | 9.39 | 8,238 | ||||||||||||||||||
April (through April 17, 2006) | 68.00 | 64.50 | 43,173 | 10.70 | 10.21 | 7,190 |
(1) | Trading in ADSs commenced on October 8, 1997 on the New York Stock Exchange. Each ADS represents the right to receive five common shares. | |
(2) | As adjusted for a 40% stock dividend in July 2001, a 10% stock dividend in July 2002, a 8% stock dividend in July 2003, a 14.1% stock dividend in July 2004 and a 4.99971% stock dividend in July 2005. |
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• | offerings by shareholders of outstanding shares; and | ||
• | offerings of new shares through a private placement approved at a shareholders’ meeting. |
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• | dividends on or free distributions of shares; | ||
• | the exercise by holders of existing depositary receipts of their pre-emptive rights in connection with capital increases for cash; or | ||
• | if permitted under the deposit agreement and custody agreement, the deposit of common shares purchased by any person directly or through a depositary bank on the Taiwan Stock Exchange or the GreTai Securities Market (as applicable) or held by such person for deposit in the depositary receipt facility. |
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• | open a securities trading account with a local securities brokerage firm; | ||
• | remit funds; and | ||
• | exercise rights on securities and perform other matters as may be designated by the holder. |
• | the net payment indicated on the withholding tax voucher issued by the tax authority; |
• | the net investment gains as indicated on the holder’s certificate of tax payment; or |
• | the aggregate transfer price as indicated on the income tax return for transfer of tax-deferred dividend shares, whichever is applicable. |
• | converted by bondholders, other than citizens of the PRC and entities organized under the laws of the PRC, into shares of ROC companies; or |
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• | subject to ROC Financial Supervisory Commission approval, converted into depositary receipts issued by the same ROC company or by the issuing company of the exchange shares, in the case of exchangeable bonds. |
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• | an individual who is not an ROC citizen, who owns ADSs and who is not physically present in the ROC for 183 days or more during any calendar year; or | ||
• | a corporation or a non-corporate body that is organized under the laws of a jurisdiction other than the ROC for profit-making purposes and has no fixed place of business or other permanent establishment in the ROC. |
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• | 35% of the gains realized if you are a natural person; or | ||
• | 25% of the gains realized if you are an entity that is not a natural person. |
• | dealers in securities; | ||
• | traders in securities that elect to use a mark-to-market method of accounting for their securities holdings; | ||
• | tax-exempt organizations; | ||
• | life insurance companies; | ||
• | persons liable for alternative minimum tax; |
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• | persons that actually or constructively own 10% or more of our voting stock; | ||
• | persons that hold common shares or ADSs as part of a straddle or a hedging or conversion transaction; or | ||
• | U.S. holders, as defined below, whose functional currency is not the U.S. dollar. |
• | a citizen or resident of the United States; | ||
• | a domestic corporation; | ||
• | an estate whose income is subject to United States federal income tax regardless of its source; or | ||
• | a trust if a United States court can exercise primary supervision over the trust’s administration and one or more United States persons are authorized to control all substantial decisions of the trust. |
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• | at least 75% of our gross income for the taxable year is passive income; or | ||
• | at least 50% of the value, determined on the basis of a quarterly average, of our assets is attributable to assets that produce or are held for the production of passive income. |
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• | any gain you realize on the sale or other disposition of your common shares or ADSs; and | ||
• | any excess distribution that we make to you (generally, any distributions to you during a single taxable year that are greater than 125% of the average annual distributions received by you in respect of the common shares or ADSs during the three preceding taxable years or, if shorter, your holding period for the common shares or ADSs). |
• | the gain or excess distribution will be allocated ratably over your holding period for the common shares or ADSs, | ||
• | the amount allocated to the taxable year in which you realized the gain or excess distribution will be taxed as ordinary income, | ||
• | the amount allocated to each prior year, with certain exceptions, will be taxed at the highest tax rate in effect for that year, and | ||
• | the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such year. |
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As of December 31, 2005 | ||||||||||||||||||||||||||||||||||||
Expected Maturity Dates | As of December 31, 2004 | |||||||||||||||||||||||||||||||||||
2010 and | Aggregate | Aggregate | ||||||||||||||||||||||||||||||||||
2006 | 2007 | 2008 | 2009 | thereafter | Total | Fair Value | Total | Fair Value | ||||||||||||||||||||||||||||
Long-term debt (in millions) | ||||||||||||||||||||||||||||||||||||
US$-denominated debt | ||||||||||||||||||||||||||||||||||||
Variable rate | — | — | US$ | 4 | US$ | 8 | US$ | 8 | US$ | 20 | US$ | 20 | US$ | 60 | US$ | 60 | ||||||||||||||||||||
Average interest rate | — | — | 5.27 | % | 5.33 | % | 5.31 | % | 5.31 | %(2) | — | 4.41 | %(2) | — | ||||||||||||||||||||||
NT$-denominated debt | ||||||||||||||||||||||||||||||||||||
Fixed rate | NT$ | 5 | NT$ | 7,004 | NT$ | 2 | NT$ | 8,000 | NT$ | 4,500 | NT$ | 19,511 | NT$ | 19,936 | (1) | NT$ | 30,000 | NT$ | 30,607 | (1) | ||||||||||||||||
Average interest rate | 0.00 | % | 4.37 | % | 0.00 | % | 2.75 | % | 3.00 | % | 3.39 | %(2) | — | 4.04 | %(2) | — |
(1) | Represents the present value of expected cash flow discounted using the interest rate TSMC may obtain for similar long-term debts. | |
(2) | Average interest rates under “Total” are the weighted average of the average interest rates of each year for loan outstanding. |
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As of December 31, 2005 | As of | |||||||||||||||||||||||||||||||||||
Forward Exchange | Expected Maturity Dates | December 31, 2004 | ||||||||||||||||||||||||||||||||||
Contracts | 2010 and | Aggregate | Aggregate | |||||||||||||||||||||||||||||||||
(in millions) | 2006 | 2007 | 2008 | 2009 | thereafter | Total | Fair Value(1) | Total | Fair Value(1) | |||||||||||||||||||||||||||
(Sell US$/buy NT$) Contract amount | US$ | 60 | — | — | — | — | US$ | 60 | NT$ | 28.5 | US$ | 733 | NT$ | 248.8 | ||||||||||||||||||||||
Average contractual exchange rate (against NT dollars) | 33.2675 | — | — | — | — | — | — | 32.3074 | — | |||||||||||||||||||||||||||
(Buy EUR/Sell US$) Contract amount | — | — | — | — | — | — | — | EUR | 118.5 | NT$ | 68.3 | |||||||||||||||||||||||||
Average contractual exchange rate (against US dollars) | — | — | — | — | — | — | — | 1.3425 | — |
As of December 31, 2005 | As of | |||||||||||||||||||||||||||||||||||
Expected Maturity Dates | December 31, 2004 | |||||||||||||||||||||||||||||||||||
Cross Currency Swap | 2010 and | Aggregate | Aggregate | |||||||||||||||||||||||||||||||||
(in millions) | 2006 | 2007 | 2008 | 2009 | thereafter | Total | Fair Value(1) | Total | Fair Value(1) | |||||||||||||||||||||||||||
(Sell US$/buy NT$) | ||||||||||||||||||||||||||||||||||||
Contract amount | US$ | 2,089 | — | — | — | — | US$ | 2,089 | NT$ | 789.9 | US$ | 1,420 | NT$ | 760.0 | ||||||||||||||||||||||
Range of interest rate paid | 4.15%-4.54 | % | — | — | — | — | — | — | 1.28%-2.72 | % | — | |||||||||||||||||||||||||
Range of interest rate received | 0.02%-2.12 | % | — | — | — | — | — | — | 0.49%-1.17 | % | — |
(1) | Fair value represents the amount of the receivable from or payable to the counter-parties if the contracts were terminated on the balance sheet date. |
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2004 | 2005 | |||||||
(In thousands) | ||||||||
Audit Fees | NT$ | 43,954 | NT$ | 55,002 | ||||
Audit Related Fees | 210 | 5,567 | ||||||
Tax Fees | 747 | 458 | ||||||
All Other Fees | 3,820 | 124 | ||||||
Total | NT$ | 48,731 | NT$ | 61,151 | ||||
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Page | ||||
Consolidated Financial Statements of Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries | ||||
Report of Independent Registered Accounting Firm | F-1 | |||
Consolidated Balance Sheets | F-2 | |||
Consolidated Statements of Income | F-4 | |||
Consolidated Statements of Changes in Shareholders’ Equity. | F-7 | |||
Consolidated Statements of Cash Flows | F-9 | |||
Notes to Consolidated Financial Statements | F-12 |
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(a) | See Item 18 for a list of the financial statements filed as part of this annual report. | |||||
(b) | Exhibits to this Annual Report: | |||||
1.1(1) | Articles of Incorporation of Taiwan Semiconductor Manufacturing Company Limited, as amended and restated on May 10, 2005. | |||||
2b.1 | The Company hereby agrees to furnish to the Securities and Exchange Commission, upon request, copies of instruments defining the rights of holders of long-term debt of the Company and its subsidiaries. | |||||
3.1(2) | Rules for Election of Directors and Supervisors, as amended and restated on May 7, 2002. | |||||
3.2(2) | Rules and Procedures of Shareholders’ Meetings, as amended and restated on May 7, 2002. | |||||
4.1(2) | Land Lease with Southern Taiwan Science Park Administration (formerly Tainan Science Park Administration) relating to the fabs located in Southern Taiwan Science Park (effective August 1, 1997 to July 31, 2017) (in Chinese with English summary). | |||||
4.2(3) | Land Lease with Southern Taiwan Science Park Administration (formerly Tainan Science Park Administration) relating to the fabs located in Southern Taiwan Science Park (effective May 1, 1998 to April 30, 2018) (in Chinese with English summary). | |||||
4.3(3) | Land Lease with Southern Taiwan Science Park Administration (formerly Tainan Science Park Administration) relating to the fabs located in Southern Taiwan Science Park (effective November 1, 1999 to October 31, 2019) (in Chinese with English summary). | |||||
4.4(3) | Land Lease with Hsinchu Science Park Administration relating to Fab 7 (effective December 4, 1989 to December 3, 2009) (in Chinese with English summary). | |||||
4.5(2) | Land Lease with Hsinchu Science Park Administration relating to the Fab 7 (effective July 1, 1995 to June 30, 2015) (in Chinese with English summary). | |||||
4.6(2) | Land Lease with Hsinchu Science Park Administration relating to Fab 8 (effective March 15, 1997 to March 14, 2017) (in Chinese with English summary). | |||||
4.7(3) | Land Lease with Hsinchu Science Park Administration relating to Fab 12 (Phase I) (effective December 1, 1999 to November 30, 2019) (in Chinese with English summary). | |||||
+4.8a(1) | Technology Cooperation Agreement between Taiwan Semiconductor Manufacturing Company Ltd. and Philips Electronics N.V., as amended and restated on June 30, 2004. | |||||
4.9a(4) | Taiwan Semiconductor Manufacturing Company Limited 2002 Employee Stock Option Plan, as revised by the board of directors on March 4, 2003. | |||||
4.9aa(5) | Taiwan Semiconductor Manufacturing Company Limited 2003 Employee Stock Option Plan. |
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4.9aaa(6) | Taiwan Semiconductor Manufacturing Company Limited 2004 Employee Stock Option Plan. | |||||
4.9aaaa(1) | Taiwan Semiconductor Manufacturing Company Limited 2004 Employee Stock Option Plan, as revised on February 22, 2005. | |||||
4.9b(4) | TSMC North America 2002 Employee Stock Option Plan, as revised on June 5, 2003. | |||||
4.9bb(5) | TSMC North America 2003 Employee Stock Option Plan. | |||||
4.9c(4) | WaferTech, LLC 2002 Employee Stock Option Plan, as revised on June 5, 2003. | |||||
4.9cc(5) | Wafer Tech, LLC 2003 Employee Stock Option Plan. | |||||
4.9ccc(6) | Wafer Tech, LLC 2004 Employee Stock Option Plan. | |||||
4.9cccc(1) | Wafer Tech, LLC 2004 Employee Stock Option Plan, as revised on February 22, 2005. | |||||
+4.10(7) | Shareholders Agreement, dated as of March 15, 1999, by and among EDB Investments Pte. Ltd., Koninklijke Philips Electronics N.V. and Taiwan Semiconductor Manufacturing Company Ltd. | |||||
4.11(9) | Land Lease with Hsinchu Science Park Administration relating to Fabs 2 and 5 and Corporate Headquarters (effective April 1, 1988 to March 31, 2008) (in Chinese with English summary). | |||||
4.12(9) | Land Lease with Hsinchu Science Park Administration relating to Fabs 3 and 4 (effective May 16, 1993 to May 15, 2013) (in Chinese with English summary). | |||||
4.13(8) | Land Lease with Hsinchu Science Park Administration relating to Fab 12 (Phase II) (effective May 1, 2001 to December 31, 2020) (English summary). | |||||
4.14(8) | Land Lease with Southern Taiwan Science Park Administration relating to fabs located in Southern Taiwan Science Park (effective November 1, 2000 to October 31, 2020) (English summary). | |||||
8.1 | List of subsidiaries of Taiwan Semiconductor Manufacturing Company Limited. | |||||
12.1 | Certification of Chief Executive Officer required by Rule 13a-14(a) under the Exchange Act. | |||||
12.2 | Certification of Chief Financial Officer required by Rule 13a-14(a) under the Exchange Act. | |||||
13.1 | Certification of Chief Executive Officer required by Rule 13a-14(b) under the Exchange Act. | |||||
13.2 | Certification of Chief Financial Officer required by Rule 13a-14(b) under the Exchange Act. | |||||
99.1 | Consent of Deloitte & Touche. |
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(1) | Previously filed in TSMC’s annual report on Form 20-F for the fiscal year ended December 31, 2004, filed by TSMC on May 16, 2005. | ||
(2) | Previously filed in TSMC’s annual report on Form 20-F for the fiscal year ended December 31, 2001, filed by TSMC on May 9, 2002. | ||
(3) | Previously filed in TSMC’s annual report on Form 20-F for the fiscal year ended December 31, 1999, filed by TSMC on June 29, 2000. | ||
(4) | Previously filed in TSMC’s annual report on Form 20-F for the fiscal year ended December 31, 2002, filed by TSMC on June 23, 2003. | ||
(5) | Previously filed in TSMC’s registration statement on Form S-8, filed by TSMC on October 20, 2003. | ||
(6) | Previously filed in TSMC’s registration statement on Form S-8, filed by TSMC on January 6, 2005. | ||
(7) | Previously filed in TSMC’s annual report on Form 20-F for the fiscal year ended December 31, 1998, filed by TSMC on April 30, 1999. | ||
(8) | Previously filed in TSMC’s annual report on Form 20-F for the fiscal year ended December 31, 2003, filed by TSMC on May 28, 2004. | ||
(9) | Previously filed in TSMC’s registration statement on Form F-1, filed by TSMC on September 15, 1997. | ||
+ | Contains portions for which confidential treatment has been requested. |
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TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED | ||||||
By: | /s/ Lora Ho | |||||
Name: | ||||||
Title: | Vice President and Chief Financial Officer |
Table of Contents
Taiwan Semiconductor Manufacturing Company Limited
Taipei, Taiwan
The Republic of China
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(In Millions of New Taiwan or U.S. Dollars, Except Par Value)
December 31 | ||||||||||||||
Notes | 2004 | 2005 | ||||||||||||
NT$ | NT$ | US$ | ||||||||||||
(Note 3) | ||||||||||||||
ASSETS | ||||||||||||||
CURRENT ASSETS | ||||||||||||||
Cash and cash equivalents | 2, 4, 5 | $ | 74,302.4 | $ | 96,483.7 | $ | 2,941.6 | |||||||
Short-term investments, net | 2, 5 | 54,108.0 | 47,399.3 | 1,445.1 | ||||||||||
Notes and accounts receivables, net | 2, 6 | 26,889.1 | 37,784.3 | 1,152.0 | ||||||||||
Receivables from related parties | 21 | 654.3 | 693.3 | 21.1 | ||||||||||
Other receivables from related parties | 21 | 141.6 | 597.9 | 18.2 | ||||||||||
Other financial assets | 2, 25 | 2,212.4 | 2,915.7 | 88.9 | ||||||||||
Inventories, net | 2, 7 | 15,555.9 | 17,728.3 | 540.5 | ||||||||||
Deferred income tax assets, net | 2, 16 | 8,918.0 | 7,149.3 | 218.0 | ||||||||||
Prepaid expenses and other current assets | 1,667.4 | 1,503.4 | 45.8 | |||||||||||
Total current assets | 184,449.1 | 212,255.2 | 6,471.2 | |||||||||||
LONG-TERM INVESTMENTS | 2, 8, 19, 24 | 38,101.9 | 42,428.1 | 1,293.5 | ||||||||||
PROPERTY, PLANT AND EQUIPMENT, NET | 2, 9, 12, 21 | 258,911.3 | 244,823.3 | 7,464.1 | ||||||||||
GOODWILL | 2 | 7,115.5 | 6,010.6 | 183.3 | ||||||||||
OTHER ASSETS | ||||||||||||||
Deferred charges, net | 2, 10, 24 | 8,992.5 | 7,006.3 | 213.6 | ||||||||||
Deferred income tax assets, net | 2, 16 | 1,650.0 | 6,788.4 | 207.0 | ||||||||||
Refundable deposits | 106.4 | 106.8 | 3.2 | |||||||||||
Others | 2 | 127.4 | 90.9 | 2.8 | ||||||||||
Total other assets | 10,876.3 | 13,992.4 | 426.6 | |||||||||||
TOTAL ASSETS | 499,454.1 | 519,509.6 | 15,838.7 | |||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||
CURRENT LIABILITIES | ||||||||||||||
Short-term bank loans | 11 | 383.0 | 328.5 | 10.0 | ||||||||||
Accounts payable | 7,264.4 | 9,421.4 | 287.2 | |||||||||||
Payables to related parties | 21 | 2,217.8 | 1,743.1 | 53.2 | ||||||||||
Income tax payable | 404.0 | 4,015.5 | 122.4 | |||||||||||
Accrued expenses and other current liabilities | 2, 14, 25 | 9,722.4 | 10,542.2 | 321.4 | ||||||||||
Payable to contractors and equipment suppliers | 33,427.7 | 9,066.0 | 276.4 | |||||||||||
Current portion of long-term liabilities | 12, 13 | 10,500.0 | 5.5 | 0.2 | ||||||||||
Total current liabilities | 63,919.3 | 35,122.2 | 1,070.8 | |||||||||||
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December 31 | ||||||||||||||
Notes | 2004 | 2005 | ||||||||||||
NT$ | NT$ | US$ | ||||||||||||
(Note 3) | ||||||||||||||
LONG-TERM LIABILITIES | ||||||||||||||
Long-term bank loans | 12 | $ | 1,915.0 | $ | 663.1 | $ | 20.2 | |||||||
Bonds payable | 13 | 19,500.0 | 19,500.0 | 594.5 | ||||||||||
Other long-term payables | 14 | 7,965.0 | 8,548.9 | 260.7 | ||||||||||
Other payables to related parties | 21, 24 | 2,318.0 | 1,100.5 | 33.6 | ||||||||||
Obligations under capital lease | 2, 9 | 566.2 | 597.7 | 18.2 | ||||||||||
Total long-term liabilities | 32,264.2 | 30,410.2 | 927.2 | |||||||||||
OTHER LIABILITIES | ||||||||||||||
Accrued pension cost | 2, 15 | 3,101.7 | 3,474.4 | 105.9 | ||||||||||
Guarantee deposits | 24 | 412.9 | 2,896.4 | 88.3 | ||||||||||
Others | 2, 21 | 715.0 | 1,367.7 | 41.7 | ||||||||||
Total other liabilities | 4,229.6 | 7,738.5 | 235.9 | |||||||||||
COMMITMENTS AND CONTINGENCIES | 24 | |||||||||||||
EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF PARENT | 2, 17 | �� | ||||||||||||
Capital stock — NT$10 par value | ||||||||||||||
Authorized: 24,600,000 thousand shares and 27,050,000 thousand shares in 2004 and 2005, respectively | ||||||||||||||
Issued: 23,251,964 thousand shares and 24,730,025 thousand shares in 2004 and 2005, respectively | 232,519.6 | 247,300.2 | 7,539.6 | |||||||||||
Capital surplus | 56,537.3 | 57,117.9 | 1,741.4 | |||||||||||
Retained earnings | 113,730.0 | 142,771.0 | 4,352.8 | |||||||||||
Cumulative translation adjustments | 2 | (2,226.4 | ) | (640.7 | ) | (19.5 | ) | |||||||
Treasury stock (at cost) — 45,521 thousand and 32,938 thousand shares in 2004 and 2005, respectively | 2, 19 | (1,595.2 | ) | (918.1 | ) | (28.0 | ) | |||||||
Total equity attributable to shareholders of the parent | 398,965.3 | 445,630.3 | 13,586.3 | |||||||||||
MINORITY INTEREST IN SUBSIDIARIES | 2 | 75.7 | 608.4 | 18.5 | ||||||||||
Total shareholders’ equity | 399,041.0 | 446,238.7 | 13,604.8 | |||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 499,454.1 | 519,509.6 | 15,838.7 | |||||||||||
The accompanying notes are an integral part of the consolidated financial statements. | (Concluded) |
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(In Millions of New Taiwan or U.S. Dollars, Except Earnings Per Share that are in New Taiwan or U.S. Dollars)
Year Ended December 31 | ||||||||||||||||||
Notes | 2003 | 2004 | 2005 | |||||||||||||||
NT$ | NT$ | NT$ | US$ | |||||||||||||||
(Note 3) | ||||||||||||||||||
NET SALES | 2, 21, 26 | $ | 202,996.8 | $ | 257,212.6 | $ | 266,565.1 | $ | 8,126.9 | |||||||||
COST OF SALES | 21 | 128,113.3 | 141,393.4 | 148,362.2 | 4,523.2 | |||||||||||||
GROSS PROFIT | 74,883.5 | 115,819.2 | 118,202.9 | 3,603.7 | ||||||||||||||
OPERATING EXPENSES | 21 | |||||||||||||||||
Research and development | 12,712.7 | 12,516.4 | 14,016.5 | 427.3 | ||||||||||||||
General and administrative | 8,200.0 | 11,454.4 | 9,085.5 | 277.0 | ||||||||||||||
Sales and marketing | 2,670.2 | 3,366.7 | 4,132.3 | 126.0 | ||||||||||||||
Total operating expenses | 23,582.9 | 27,337.5 | 27,234.3 | 830.3 | ||||||||||||||
INCOME FROM OPERATIONS | 51,300.6 | 88,481.7 | 90,968.6 | 2,773.4 | ||||||||||||||
NON-OPERATING INCOME AND GAINS | ||||||||||||||||||
Interest | 2, 25 | 888.1 | 1,783.7 | 3,069.4 | 93.6 | |||||||||||||
Equity in earnings of equity method investees, net | 2, 8 | — | 2,094.1 | 1,433.2 | 43.7 | |||||||||||||
Settlement income | 23 | — | — | 964.7 | 29.4 | |||||||||||||
Technical service income | 21, 24 | 209.8 | 423.8 | 462.6 | 14.1 | |||||||||||||
Gain on disposal of property, plant and equipment | 2 | 438.8 | 242.8 | 342.8 | 10.5 | |||||||||||||
Subsidy income | — | — | 321.9 | 9.8 | ||||||||||||||
Gain on sales of investments, net | 2 | 3,538.1 | 914.5 | — | — | |||||||||||||
Other | 21 | 594.5 | 556.6 | 472.9 | 14.4 | |||||||||||||
Total non-operating income and gains | 5,669.3 | 6,015.5 | 7,067.5 | 215.5 | ||||||||||||||
NON-OPERATING EXPENSES AND LOSSES | ||||||||||||||||||
Interest | 2, 9, 25 | 1,891.0 | 1,454.2 | 2,662.5 | 81.2 | |||||||||||||
Unrealized valuation loss of short-term investments | 2 | — | 75.2 | 337.2 | 10.3 | |||||||||||||
Loss on idle assets | 2 | 1,506.2 | — | 131.8 | 4.0 |
F-4
Table of Contents
Year Ended December 31 | ||||||||||||||||||
Notes | 2003 | 2004 | 2005 | |||||||||||||||
NT$ | NT$ | NT$ | US$ | |||||||||||||||
(Note 3) | ||||||||||||||||||
Loss on impairment of long-term investments | 2 | $ | 652.7 | $ | 350.6 | $ | 128.9 | $ | 3.9 | |||||||||
Loss on disposal of property, plant and equipment | 2 | 374.1 | 131.1 | 60.1 | 1.8 | |||||||||||||
Foreign exchange loss, net | 2, 25 | 755.1 | 382.2 | — | — | |||||||||||||
Equity in losses of equity method investees, net | 2, 8 | 294.3 | — | — | — | |||||||||||||
Amortization of premium paid for option contracts, net | 2, 25 | 153.8 | — | — | — | |||||||||||||
Other | 164.1 | 138.3 | 452.3 | 13.8 | ||||||||||||||
Total non-operating expenses and losses | 5,791.3 | 2,531.6 | 3,772.8 | 115.0 | ||||||||||||||
INCOME BEFORE INCOME TAX | 51,178.6 | 91,965.6 | 94,263.3 | 2,873.9 | ||||||||||||||
INCOME TAX BENEFIT (EXPENSE) | 2, 16 | (3,922.9 | ) | 363.4 | (630.6 | ) | (19.2 | ) | ||||||||||
NET INCOME | 47,255.7 | 92,329.0 | 93,632.7 | 2,854.7 | ||||||||||||||
ATTRIBUTABLE TO: | ||||||||||||||||||
Shareholders of the parent | 47,258.7 | 92,316.1 | 93,575.0 | 2,852.9 | ||||||||||||||
Minority interest | 2 | (3.0 | ) | 12.9 | 57.7 | 1.8 | ||||||||||||
47,255.7 | 92,329.0 | 93,632.7 | 2,854.7 | |||||||||||||||
BASIC EARNINGS PER SHARE | 2, 20 | |||||||||||||||||
Before tax | 2.06 | 3.72 | 3.82 | 0.12 | ||||||||||||||
Net income | 1.90 | 3.73 | 3.79 | 0.11 | ||||||||||||||
DILUTED EARNINGS PER SHARE | 2, 20 | |||||||||||||||||
Before tax | 2.06 | 3.72 | 3.82 | 0.12 | ||||||||||||||
Net income | 1.90 | 3.73 | 3.79 | 0.11 | ||||||||||||||
BASIC EARNINGS PER EQUIVALENT ADS | 2 | |||||||||||||||||
Before tax | 10.28 | 18.60 | 19.09 | 0.58 | ||||||||||||||
Net income | 9.49 | 18.67 | 18.96 | 0.58 | ||||||||||||||
DILUTED EARNINGS PER EQUIVALENT ADS | 2 | |||||||||||||||||
Before tax | 10.28 | 18.60 | 19.08 | 0.58 | ||||||||||||||
Net income | 9.49 | 18.67 | 18.95 | 0.58 | ||||||||||||||
F-5
Table of Contents
Year Ended December 31 | ||||||||||||||||||
Notes | 2003 | 2004 | 2005 | |||||||||||||||
NT$ | NT$ | NT$ | US$ | |||||||||||||||
(Note 3) | ||||||||||||||||||
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING (Thousands) | 2, 20 | 24,796,042 | 24,717,531 | 24,679,947 | ||||||||||||||
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING (Thousands) | 2, 20 | 24,806,147 | 24,724,015 | 24,693,112 | ||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements. | (Concluded) |
F-6
Table of Contents
(In Millions of New Taiwan Dollars, Except Par Value and Per Share Amounts)
Equity Attributable to Shareholders of the Parent | ||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized | ||||||||||||||||||||||||||||||||||||||||||||||||
Gain (Loss) | ||||||||||||||||||||||||||||||||||||||||||||||||
Capital Stock (NT$10 Par Value) | on | Cumulative | Minority | Total | ||||||||||||||||||||||||||||||||||||||||||||
Preferred stock | Common stock | Capital | Retained | Long-term | Translation | Treasury | Interest in | Shareholders’ | ||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Surplus | Earnings | Investments | Adjustments | Stock | Total | Subsidiaries | Equity | |||||||||||||||||||||||||||||||||||||
(Thousands) | NT$ | (Thousands) | NT$ | NT$ | NT$ | NT$ | NT$ | NT$ | NT$ | NT$ | NT$ | |||||||||||||||||||||||||||||||||||||
BALANCE, JANUARY 1, 2003 | 1,300,000 | 13,000.0 | 18,622,887 | 186,228.9 | 57,004.8 | 40,792.3 | (194.3 | ) | 945.0 | (1,923.5 | ) | 295,853.2 | 95.5 | 295,948.7 | ||||||||||||||||||||||||||||||||||
Redemption and retirement of preferred stock | (1,300,000 | ) | (13,000.0 | ) | — | — | — | — | — | — | — | (13,000.0 | ) | — | (13,000.0 | ) | ||||||||||||||||||||||||||||||||
Appropriations of prior year’s earnings | ||||||||||||||||||||||||||||||||||||||||||||||||
Employees’ profit sharing — in stock | — | — | 153,901 | 1,539.0 | — | (1,539.0 | ) | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
Cash dividends to preferred shareholders | — | — | — | — | — | (455.0 | ) | — | — | — | (455.0 | ) | — | (455.0 | ) | |||||||||||||||||||||||||||||||||
Stock dividends to common shareholders — NT$0.8 per share | — | — | 1,489,831 | 14,898.3 | — | (14,898.3 | ) | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
Bonus to directors and supervisors | — | — | — | — | — | (58.6 | ) | — | — | — | (58.6 | ) | — | (58.6 | ) | |||||||||||||||||||||||||||||||||
Net income in 2003 | — | — | — | — | — | 47,258.7 | — | — | — | 47,258.7 | 3.0 | 47,261.7 | ||||||||||||||||||||||||||||||||||||
Adjustment arising from changes of percentage of ownership in investees | — | — | — | — | (158.9 | ) | — | — | — | — | (158.9 | ) | — | (158.9 | ) | |||||||||||||||||||||||||||||||||
Reversal of unrealized loss on long-term investments of investees | — | — | — | — | — | — | 194.2 | — | — | 194.2 | — | 194.2 | ||||||||||||||||||||||||||||||||||||
Translation adjustments | — | — | — | — | — | — | — | (719.6 | ) | — | (719.6 | ) | — | (719.6 | ) | |||||||||||||||||||||||||||||||||
Treasury stock transactions — sales of parent company’s stock held by subsidiaries | — | — | — | — | 10.0 | — | — | — | 290.3 | 300.3 | — | 300.3 | ||||||||||||||||||||||||||||||||||||
Decrease in minority interest | — | — | — | — | — | — | — | — | — | — | (9.5 | ) | (9.5 | ) | ||||||||||||||||||||||||||||||||||
BALANCE, DECEMBER 31, 2003 | — | — | 20,266,619 | 202,666.2 | 56,855.9 | 71,100.1 | (0.1 | ) | 225.4 | (1,633.2 | ) | 329,214.3 | 89.0 | 329,303.3 | ||||||||||||||||||||||||||||||||||
Appropriations of prior year’s earnings | ||||||||||||||||||||||||||||||||||||||||||||||||
Employees’ profit sharing — in cash | — | — | — | — | — | (681.6 | ) | — | — | — | (681.6 | ) | — | (681.6 | ) | |||||||||||||||||||||||||||||||||
Employees’ profit sharing — in stock | — | — | 272,651 | 2,726.5 | — | (2,726.5 | ) | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
Cash dividends to preferred shareholders | — | — | — | — | — | (184.5 | ) | — | — | — | (184.5 | ) | — | (184.5 | ) | |||||||||||||||||||||||||||||||||
Cash dividends to common shareholders — NT$0.6 per share | — | — | — | — | — | (12,160.0 | ) | — | — | — | (12,160.0 | ) | — | (12,160.0 | ) | |||||||||||||||||||||||||||||||||
Stock dividends to common shareholders — NT$1.4 per share | — | — | 2,837,327 | 28,373.3 | — | (28,373.3 | ) | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
Bonus to directors and supervisors | — | — | — | — | — | (127.8 | ) | — | — | — | (127.8 | ) | — | (127.8 | ) | |||||||||||||||||||||||||||||||||
Net income in 2004 | — | — | — | — | — | 92,316.1 | — | — | — | 92,316.1 | 12.9 | 92,329.0 | ||||||||||||||||||||||||||||||||||||
Adjustment arising from changes of percentage of ownership in investees | — | — | — | — | 34.0 | — | — | — | — | 34.0 | — | 34.0 | ||||||||||||||||||||||||||||||||||||
Reversal of unrealized loss on long-term investments of investees | — | — | — | — | — | — | 0.1 | — | — | 0.1 | — | 0.1 | ||||||||||||||||||||||||||||||||||||
Translation adjustments | — | — | — | — | — | — | — | (2,451.8 | ) | — | (2,451.8 | ) | — | (2,451.8 | ) | |||||||||||||||||||||||||||||||||
Issuance of stock from exercising stock options | — | — | 87 | 0.8 | 2.8 | — | — | — | — | 3.6 | — | 3.6 | ||||||||||||||||||||||||||||||||||||
Cash dividends received by subsidiaries from parent company | — | — | — | — | 22.8 | — | — | — | — | 22.8 | — | 22.8 | ||||||||||||||||||||||||||||||||||||
Treasury stock transactions — sales of parent company’s stock held by subsidiaries | — | — | — | — | 1.9 | — | — | — | 38.0 | 39.9 | — | 39.9 | ||||||||||||||||||||||||||||||||||||
Common stock repurchases | — | — | — | — | — | — | — | — | (7,059.8 | ) | (7,059.8 | ) | — | (7,059.8 | ) | |||||||||||||||||||||||||||||||||
Retirement of treasury stock | — | — | (124,720 | ) | (1,247.2 | ) | (380.1 | ) | (5,432.5 | ) | — | — | 7,059.8 | — | — | — | ||||||||||||||||||||||||||||||||
Decrease in minority interest | — | — | — | — | — | — | — | — | — | — | (26.2 | ) | (26.2 | ) | ||||||||||||||||||||||||||||||||||
BALANCE, DECEMBER 31, 2004 | — | — | 23,251,964 | 232,519.6 | 56,537.3 | 113,730.0 | — | (2,226.4 | ) | (1,595.2 | ) | 398,965.3 | 75.7 | 399,041.0 |
F-7
Table of Contents
Equity Attributable to Shareholders of the Parent | ||||||||||||||||||||||||||||||||||||||||||||||||
Unrealized | ||||||||||||||||||||||||||||||||||||||||||||||||
Gain (Loss) | ||||||||||||||||||||||||||||||||||||||||||||||||
Capital Stock (NT$10 Par Value) | on | Cumulative | Minority | Total | ||||||||||||||||||||||||||||||||||||||||||||
Preferred stock | Common stock | Capital | Retained | Long-term | Translation | Treasury | Interest in | Shareholders’ | ||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Surplus | Earnings | Investments | Adjustments | Stock | Total | Subsidiaries | Equity | |||||||||||||||||||||||||||||||||||||
(Thousands) | NT$ | (Thousands) | NT$ | NT$ | NT$ | NT$ | NT$ | NT$ | NT$ | NT$ | NT$ | |||||||||||||||||||||||||||||||||||||
Appropriations of prior year’s earnings | ||||||||||||||||||||||||||||||||||||||||||||||||
Employees’ profit sharing — in cash | — | — | — | — | — | (3,086.2 | ) | — | — | — | (3,086.2 | ) | — | (3,086.2 | ) | |||||||||||||||||||||||||||||||||
Employees’ profit sharing — in stock | — | — | 308,622 | 3,086.2 | — | (3,086.2 | ) | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
Cash dividends to common shareholders — NT$2.00 per share | — | — | — | — | — | (46,504.1 | ) | — | — | — | (46,504.1 | ) | — | (46,504.1 | ) | |||||||||||||||||||||||||||||||||
Stock dividends to common shareholders — NT$0.50 per share | — | — | 1,162,602 | 11,626.0 | — | (11,626.0 | ) | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
Bonus to directors and supervisors | — | — | — | — | — | (231.5 | ) | — | — | — | (231.5 | ) | — | (231.5 | ) | |||||||||||||||||||||||||||||||||
Net income in 2005 | — | — | — | — | — | 93,575.0 | — | — | — | 93,575.0 | 57.7 | 93,632.7 | ||||||||||||||||||||||||||||||||||||
Adjustment arising from changes of percentage of ownership in investees | — | — | — | — | 71.4 | — | — | — | — | 71.4 | — | 71.4 | ||||||||||||||||||||||||||||||||||||
Translation adjustments | — | — | — | — | — | — | — | 1,585.7 | — | 1,585.7 | (51.8 | ) | 1,533.9 | |||||||||||||||||||||||||||||||||||
Issuance of stock from exercising stock options | — | — | 6,837 | 68.4 | 202.5 | — | — | — | — | 270.9 | — | 270.9 | ||||||||||||||||||||||||||||||||||||
Cash dividends received by subsidiaries from parent company | — | — | — | — | 84.3 | — | — | — | — | 84.3 | — | 84.3 | ||||||||||||||||||||||||||||||||||||
Treasury stock transactions — sales of parent company’s stock held by subsidiaries | — | — | — | — | 222.4 | — | — | — | 677.1 | 899.5 | — | 899.5 | ||||||||||||||||||||||||||||||||||||
Increase in minority interest | — | — | — | — | — | — | — | — | — | — | 526.8 | 526.8 | ||||||||||||||||||||||||||||||||||||
BALANCE, DECEMBER 31, 2005 | — | — | 24,730,025 | 247,300.2 | 57,117.9 | 142,771.0 | — | (640.7 | ) | (918.1 | ) | 445,630.3 | 608.4 | 446,238.7 | ||||||||||||||||||||||||||||||||||
BALANCE, DECEMBER 31, 2005 (In millions of US$ — Note 3) | — | 7,539.6 | 1,741.4 | 4,352.8 | — | (19.5 | ) | (28.0 | ) | 13,586.3 | 18.5 | 13,604.8 | ||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of the consolidated financial statements. | (Concluded) |
F-8
Table of Contents
(In Millions of New Taiwan or U.S. Dollars)
Year Ended December 31 | ||||||||||||||||
2003 | 2004 | 2005 | ||||||||||||||
NT$ | NT$ | NT$ | US$ | |||||||||||||
(Note 3) | ||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||||||||||
Net income attributable to shareholders of the parent | 47,258.7 | 92,316.1 | 93,575.0 | 2,852.9 | ||||||||||||
Net income attributable to minority interest | (3.0 | ) | 12.9 | 57.7 | 1.8 | |||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
Depreciation and amortization | 69,161.3 | 69,818.5 | 75,649.4 | 2,306.4 | ||||||||||||
Deferred income taxes | 3,665.4 | (1,058.4 | ) | (3,353.0 | ) | (102.2 | ) | |||||||||
Equity in losses (earnings) of equity method investees, net | 294.3 | (2,094.1 | ) | (1,433.2 | ) | (43.7 | ) | |||||||||
Amortization of premium/discount of long-term bond investments, net | — | 28.7 | 120.9 | 3.7 | ||||||||||||
Loss on impairment of long-term investments | 652.7 | 350.6 | 128.9 | 3.9 | ||||||||||||
Gain on sales of long-term investments, net | (78.7 | ) | (85.2 | ) | (15.3 | ) | (0.5 | ) | ||||||||
Gain on disposal of property, plant and equipment and idle assets, net | (64.7 | ) | (111.6 | ) | (282.6 | ) | (8.6 | ) | ||||||||
Loss on idle assets | 1,506.2 | — | 131.8 | 4.0 | ||||||||||||
Donation of idle assets | — | — | 7.2 | 0.2 | ||||||||||||
Provision for pension cost | 389.9 | 500.3 | 360.1 | 11.0 | ||||||||||||
Dividends received from equity method investees | — | — | 668.5 | 20.4 | ||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Decrease (increase) in: | ||||||||||||||||
Notes and accounts receivables, net | (9,063.5 | ) | (1,540.3 | ) | (10,601.0 | ) | (323.2 | ) | ||||||||
Receivables from related parties | (544.8 | ) | 266.0 | (101.9 | ) | (3.1 | ) | |||||||||
Other receivables from related parties | (67.7 | ) | (9.8 | ) | (88.0 | ) | (2.7 | ) | ||||||||
Other financial assets | (347.2 | ) | (777.1 | ) | (469.0 | ) | (14.3 | ) | ||||||||
Inventories, net | (933.9 | ) | (3,420.6 | ) | (2,006.2 | ) | (61.2 | ) | ||||||||
Prepaid expenses and other current assets | 605.0 | (34.5 | ) | 183.0 | 5.6 | |||||||||||
Increase (decrease) in: | ||||||||||||||||
Accounts payable | 1,300.0 | 825.8 | 2,088.6 | 63.7 | ||||||||||||
Payables to related parties | 1,472.1 | (1,500.0 | ) | (1,629.2 | ) | (49.7 | ) | |||||||||
Income tax payable | 107.3 | 266.5 | 3,611.5 | 110.1 | ||||||||||||
Accrued expenses and other current liabilities | 727.7 | (602.9 | ) | 409.9 | 12.5 | |||||||||||
Net cash provided by operating activities | 116,037.1 | 153,150.9 | 157,013.1 | 4,787.0 | ||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||||||
Decrease (increase) in short-term investments, net | (13,326.3 | ) | (43,554.9 | ) | 6,954.2 | 212.0 | ||||||||||
Acquisitions of: | ||||||||||||||||
Long-term investments | (1,412.3 | ) | (23,054.4 | ) | (14,675.4 | ) | (447.4 | ) | ||||||||
Property, plant and equipment | (37,870.9 | ) | (81,094.5 | ) | (79,878.7 | ) | (2,435.3 | ) | ||||||||
Proceeds from disposal of: | ||||||||||||||||
Long-term investments | 505.7 | 165.2 | 10,533.6 | 321.1 | ||||||||||||
Property, plant and equipment and idle assets | 177.3 | 1,812.6 | 480.7 | 14.7 |
F-9
Table of Contents
Year Ended December 31 | ||||||||||||||||
2003 | 2004 | 2005 | ||||||||||||||
NT$ | NT$ | NT$ | US$ | |||||||||||||
(Note 3) | ||||||||||||||||
Increase in deferred charges | (2,138.1 | ) | (2,405.7 | ) | (856.0 | ) | (26.1 | ) | ||||||||
Decrease in refundable deposits | 357.7 | 93.1 | 0.8 | — | ||||||||||||
Decrease in other assets — others | 4.6 | 51.6 | 0.7 | — | ||||||||||||
Net cash used in investing activities | (53,702.3 | ) | (147,987.0 | ) | (77,440.1 | ) | (2,361.0 | ) | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||||||
Payments on: | ||||||||||||||||
Short-term bank loans | (309.8 | ) | — | (54.5 | ) | (1.7 | ) | |||||||||
Bonds payable | (4,000.0 | ) | (5,000.0 | ) | (10,500.0 | ) | (320.1 | ) | ||||||||
Long-term bank loans | (8,915.5 | ) | (6,656.1 | ) | (1,337.4 | ) | (40.8 | ) | ||||||||
Increase (decrease) in guarantee deposits | (631.1 | ) | (351.0 | ) | 2,483.5 | 75.7 | ||||||||||
Cash bonus paid to employees | — | (681.6 | ) | (3,086.2 | ) | (94.1 | ) | |||||||||
Cash dividends paid for preferred stock | (455.0 | ) | (184.5 | ) | — | — | ||||||||||
Cash dividends paid for common stock | — | (12,137.2 | ) | (46,419.8 | ) | (1,415.2 | ) | |||||||||
Redemption of preferred stock | (13,000.0 | ) | — | — | — | |||||||||||
Bonus to directors and supervisors | (58.6 | ) | (127.8 | ) | (231.5 | ) | (7.0 | ) | ||||||||
Repurchase of treasury stock | — | (7,059.8 | ) | — | — | |||||||||||
Proceeds from: | ||||||||||||||||
Exercise of stock options | — | 3.6 | 270.9 | 8.3 | ||||||||||||
Disposal of treasury stock | 300.3 | 39.9 | 899.5 | 27.4 | ||||||||||||
Increase (decrease) in minority interest in subsidiaries | (3.5 | ) | (26.1 | ) | 6.8 | 0.2 | ||||||||||
Net cash used in financing activities | (27,073.2 | ) | ( 32,180.6 | ) | (57,968.7 | ) | (1,767.3 | ) | ||||||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 35,261.6 | ( 27,016.7 | ) | 21,604.3 | 658.7 | |||||||||||
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | ( 62.9 | ) | ( 1,669.8 | ) | 348.9 | 10.6 | ||||||||||
EFFECT OF FIRST INCLUSION FOR CONSOLIDATION OF CERTAIN SUBSIDIARIES | — | — | 228.1 | 7.0 | ||||||||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR | 67,790.2 | 102,988.9 | 74,302.4 | 2,265.3 | ||||||||||||
CASH AND CASH EQUIVALENTS, END OF YEAR | 102,988.9 | 74,302.4 | 96,483.7 | 2,941.6 | ||||||||||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||||||||||
Cash paid for | ||||||||||||||||
Interest (excluding amounts capitalized) | 1,982.6 | 1,470.3 | 2,435.8 | 74.3 | ||||||||||||
Income tax | 219.0 | 389.2 | 341.7 | 10.4 | ||||||||||||
Cash paid for acquisition of property, plant and equipment | ||||||||||||||||
Total acquisitions | 31,697.5 | 113,043.5 | 56,166.2 | 1,712.4 |
F-10
Table of Contents
Year Ended December 31 | ||||||||||||||||
2003 | 2004 | 2005 | ||||||||||||||
NT$ | NT$ | NT$ | US$ | |||||||||||||
(Note 3) | ||||||||||||||||
Decrease (increase) in payables to contractors and equipment suppliers | 6,900.0 | (26,195.6 | ) | 24,361.7 | 742.7 | |||||||||||
Increase in other long-term payables | (726.6 | ) | (5,913.7 | ) | (649.2 | ) | (19.8 | ) | ||||||||
Decrease in obligations under capital lease | — | 160.3 | — | — | ||||||||||||
37,870.9 | 81,094.5 | 79,878.7 | 2,435.3 | |||||||||||||
NONCASH INVESTING AND FINANCING ACTIVITIES | ||||||||||||||||
Current portion of long-term liabilities | 5,000.0 | 10,500.0 | 5.5 | 0.2 | ||||||||||||
Current portion of other payables to related parties (under payables to related parties) | — | 469.5 | 694.0 | 21.2 | ||||||||||||
Current portion of other long-term payables (under accrued expenses and other current liabilities) | 1,592.0 | 1,505.3 | 869.1 | 26.5 | ||||||||||||
Reclassification of long-term investments to short-term investments | 141.0 | 344.0 | 245.6 | 7.5 | ||||||||||||
Reclassification of short-term investments to long-term investments | — | 3,402.4 | — | — |
The accompanying notes are an integral part of the consolidated financial statements. | (Concluded) |
F-11
Table of Contents
1. | GENERAL | |
Taiwan Semiconductor Manufacturing Company Limited (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; Philips Electronics N.V. and certain of its affiliates (Philips); and certain other private investors. On September 5, 1994, its shares were listed on the Taiwan Stock Exchange (TSE). On October 8, 1997, TSMC listed some of its shares of stock on the New York Stock Exchange (NYSE) in the form of American Depositary Shares (ADSs). | ||
TSMC is engaged mainly in the manufacturing, selling, packaging, testing and computer-aided designing of integrated circuits and other semiconductor devices, and the manufacturing of masks. | ||
2. | SIGNIFICANT ACCOUNTING POLICIES | |
The consolidated 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: | ||
Principles of Consolidation | ||
The accompanying consolidated financial statements include accounts of all directly and indirectly majority owned subsidiaries of TSMC, and the accounts of investees in which TSMC’s ownership percentage is less than 50% but has a controlling interest. All significant intercompany balances and transactions are eliminated upon consolidation. | ||
In compliance with the revised R.O.C. Statement of Financial Accounting Standards (SFAS) No. 7 “Consolidated Financial Statements”, beginning January 1, 2005, the consolidated financial statements included new consolidated entities, including Global Unichip Corporation (GUC), Global Unichip Corp.-North America (GUC-NA), Global Unichip Japan Co., Ltd. (GUC-Japan) and VisEra Technology Company, Ltd. (VisEra; due to changes in investment structure, the Company no longer had a controlling interest over VisEra in November 2005; the consolidated statement of income for the year ended December 31, 2005 included the revenue and expenses of VisEra for the ten months ended October 31, 2005); moreover, pursuant to the newly revised standard, the Company did not retroactively restate its consolidated financial statements as of and for the years ended December 31, 2003 and 2004. |
F-12
Table of Contents
Percentage of | ||||||||
Ownership at | ||||||||
December 31, | ||||||||
Name of Investor | Name of Investee | 2005 | Remark | |||||
TSMC | TSMC North America (TSMC-NA) | 100 | % | — | ||||
TSMC Japan K. K. (TSMC-Japan) | 100 | % | — | |||||
Taiwan Semiconductor Manufacturing Company Europe B.V. (TSMC-Europe) | 100 | % | — | |||||
TSMC (Shanghai) Company Limited (TSMC-Shanghai) | 100 | % | — | |||||
TSMC Partners, Ltd. (TSMC Partners) | 100 | % | — | |||||
TSMC International Investment Ltd. (TSMC International) | 100 | % | — | |||||
Chi Cherng Investment Co., Ltd. (Chi Cherng) | 36 | % | TSMC and Hsin Ruey held in aggregate a 100% ownership of Chi Cherng. As of December 31, 2005, Chi Cherng held 16,454 thousand common shares in TSMC (approximately 0.07% of outstanding common shares). | |||||
Hsin Ruey Investment Co., Ltd. (Hsin Ruey) | 36 | % | TSMC and Chi Cherng held in aggregate a 100% ownership of Hsin Ruey. As of December 31, 2005, Hsin Ruey held 16,484 thousand common shares in TSMC (approximately 0.07% of outstanding common shares). | |||||
Emerging Alliance Fund, L.P. (Emerging Alliance) | 99.5 | % | — | |||||
VentureTech Alliance Fund II, L.P. (VTAF II) | 98 | % | — | |||||
GUC | 46 | % | Starting from January 1, 2005, GUC became a consolidated entity of TSMC as GUC’s president was assigned by TSMC and TSMC has a controlling interest over the financial, operating and personnel hiring decisions of GUC. Please see Note 21 for significant intercompany transactions between TSMC and GUC during 2004. |
F-13
Table of Contents
Percentage of | ||||||||
Ownership at | ||||||||
December 31, | ||||||||
Name of Investor | Name of Investee | 2005 | Remark | |||||
VisEra | — | Starting from January 1, 2005, VisEra became a consolidated entity of TSMC as VisEra’s president was assigned by TSMC and TSMC had a controlling interest over the financial, operating and personnel hiring decisions of VisEra. However, due to the changes in investment structure, TSMC no longer had a controlling interest over VisEra beginning in November 2005. As a result, its revenue and expenses after October 31, 2005 were excluded from the consolidated statement of income for the year ended December 31, 2005. | ||||||
TSMC International | TSMC Technology, Inc. (TSMC Technology) | 100 | % | — | ||||
TSMC Development, Inc. (TSMC Development) | 100 | % | — | |||||
InveStar Semiconductor Development Fund, Inc. (ISDF) | 97 | % | — | |||||
InveStar Semiconductor Development Fund, Inc. (II) LDC (ISDF II) | 97 | % | — | |||||
TSMC Development | WaferTech, LLC (WaferTech) | 99.996 | % | — | ||||
GUC | GUC-NA | 100 | % | Starting from January 1, 2005, GUC-NA became a consolidated entity of TSMC as TSMC has a controlling interest over GUC. TSMC did not enter into significant transactions with GUC-NA in prior years. |
F-14
Table of Contents
Percentage of | ||||||||
Ownership at | ||||||||
December 31, | ||||||||
Name of Investor | Name of Investee | 2005 | Remark | |||||
GUC-Japan | 100 | % | Starting from January 1, 2005, GUC-Japan became a consolidated entity of TSMC as TSMC has a controlling interest over GUC. TSMC did not enter into significant transactions with GUC-Japan in prior years. |
F-15
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F-16
Table of Contents
F-17
Table of Contents
F-18
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F-19
Table of Contents
F-20
Table of Contents
F-21
Table of Contents
F-22
Table of Contents
December 31 | ||||||||
2004 | 2005 | |||||||
NT$ | NT$ | |||||||
(In Millions) | ||||||||
Cash and deposits in bank | 54,609.0 | 48,107.3 | ||||||
Government bonds acquired under repurchase agreements | 19,215.2 | 47,963.2 | ||||||
Corporate notes | 478.2 | 413.2 | ||||||
74,302.4 | 96,483.7 | |||||||
F-23
Table of Contents
December 31 | ||||||||
2004 | 2005 | |||||||
NT$ | NT$ | |||||||
(In Millions) | ||||||||
Agency bonds | 8,633.9 | 14,607.7 | ||||||
Corporate bonds | 13,554.6 | 12,463.7 | ||||||
Corporate issued asset-backed securities | 11,766.9 | 11,724.1 | ||||||
Bond funds | 10,662.8 | 6,055.6 | ||||||
Government bonds | 7,346.8 | 2,087.4 | ||||||
Public-traded stocks | 168.3 | 349.2 | ||||||
Corporate notes | 63.8 | 263.3 | ||||||
Money market funds | 1,641.0 | 260.7 | ||||||
Government bonds acquired under repurchase agreements | 249.4 | — | ||||||
Commercial papers | 95.7 | — | ||||||
54,183.2 | 47,811.7 | |||||||
Allowance for valuation | (75.2 | ) | (412.4 | ) | ||||
54,108.0 | 47,399.3 | |||||||
Market Value | 54,990.5 | 49,137.4 | ||||||
December 31 | ||||||||
2004 | 2005 | |||||||
NT$ | NT$ | |||||||
(In Millions) | ||||||||
Notes receivable | 2.9 | 76.3 | ||||||
Accounts receivable | 31,211.5 | 43,006.0 | ||||||
31,214.4 | 43,082.3 | |||||||
Allowance for doubtful receivables | (982.8 | ) | (980.6 | ) | ||||
Allowance for sales returns and others | (3,342.5 | ) | (4,317.4 | ) | ||||
(4,325.3 | ) | (5,298.0 | ) | |||||
26,889.1 | 37,784.3 | |||||||
F-24
Table of Contents
2003 | 2004 | 2005 | ||||||||||
NT$ | NT$ | NT$ | ||||||||||
(In Millions) | ||||||||||||
Allowance for doubtful receivables | ||||||||||||
Balance, beginning of year | 933.0 | 1,020.4 | 982.8 | |||||||||
Effect of inclusion of newly consolidated subsidiary, GUC | — | — | 3.5 | |||||||||
Additions | 98.4 | — | 1.1 | |||||||||
Deductions | (11.0 | ) | (37.6 | ) | (6.8 | ) | ||||||
Balance, end of year | 1,020.4 | 982.8 | 980.6 | |||||||||
Allowance for sales returns and others | ||||||||||||
Balance, beginning of year | 2,372.5 | 2,135.8 | 3,342.5 | |||||||||
Additions | 4,251.8 | 4,650.2 | 5,805.5 | |||||||||
Deductions | (4,488.5 | ) | (3,443.5 | ) | (4,830.6 | ) | ||||||
Balance, end of year | 2,135.8 | 3,342.5 | 4,317.4 | |||||||||
December 31 | ||||||||
2004 | 2005 | |||||||
NT$ | NT$ | |||||||
(In Millions) | ||||||||
Finished goods | 3,526.0 | 2,964.0 | ||||||
Work in process | 11,437.5 | 13,359.2 | ||||||
Raw materials | 993.2 | 1,765.3 | ||||||
Supplies and spare parts | 1,176.7 | 1,325.6 | ||||||
17,133.4 | 19,414.1 | |||||||
Allowance for valuation | (1,577.5 | ) | (1,685.8 | ) | ||||
15,555.9 | 17,728.3 | |||||||
2003 | 2004 | 2005 | ||||||||||
NT$ | NT$ | NT$ | ||||||||||
(In Millions) | ||||||||||||
Balance, beginning of year | 1,736.3 | 1,364.2 | 1,577.5 | |||||||||
Effect of inclusion of newly consolidated subsidiary, GUC | — | — | 0.2 | |||||||||
Additions | 1,532.3 | 1,771.6 | 159.0 | |||||||||
Write-offs | (1,904.4 | ) | (1,558.3 | ) | (50.9 | ) | ||||||
Balance, end of year | 1,364.2 | 1,577.5 | 1,685.8 | |||||||||
F-25
Table of Contents
December 31 | ||||||||||||||||
2004 | 2005 | |||||||||||||||
% of | % of | |||||||||||||||
Carrying | Owner- | Carrying | Owner- | |||||||||||||
Amount | Ship | Amount | Ship | |||||||||||||
NT$ | NT$ | |||||||||||||||
(In Millions) | ||||||||||||||||
Equity method | ||||||||||||||||
Vanguard International Semiconductor Corporation (VIS) | 5,402.0 | 28 | 5,419.7 | 27 | ||||||||||||
Systems on Silicon Manufacturing Company Pte Ltd. (SSMC) | 3,290.9 | 32 | 4,215.2 | 32 | ||||||||||||
VisEra Holding Company (VisEra Holding) | — | — | 652.5 | 50 | ||||||||||||
GUC | 391.6 | 47 | — | — | ||||||||||||
VisEra | 59.1 | 25 | — | — | ||||||||||||
9,143.6 | 10,287.4 | |||||||||||||||
Cost method | ||||||||||||||||
Common stock | ||||||||||||||||
Publicly traded stocks | 71.8 | — | 60.2 | — | ||||||||||||
Non-publicly traded stocks | 1,226.5 | — | 1,006.2 | — | ||||||||||||
Preferred stocks | 1,677.9 | — | 1,964.0 | — | ||||||||||||
Funds | 290.1 | — | 335.0 | — | ||||||||||||
3,266.3 | 3,365.4 | |||||||||||||||
Long-term bonds | ||||||||||||||||
Government bonds | 10,260.5 | 9,923.0 | ||||||||||||||
Corporate bonds | ||||||||||||||||
Taiwan Power Company | 915.3 | 3,263.3 | ||||||||||||||
Nan Ya Plastics Corporation | 407.5 | 2,150.8 | ||||||||||||||
China Steel Corporation | 2,978.8 | 1,010.5 | ||||||||||||||
Formosa Petrochemical Corporation | 202.6 | 792.0 | ||||||||||||||
Chinese Petroleum Corporation | — | 705.4 | ||||||||||||||
Far Eastone Telecommunication Co., Ltd | — | 300.0 | ||||||||||||||
Formosa Plastics Corporation | 405.5 | 268.9 | ||||||||||||||
Formosa Chemical & Fiber Corporation | — | 134.4 | ||||||||||||||
15,170.2 | 18,548.3 | |||||||||||||||
Other investments | 10,521.7 | 10,227.0 | ||||||||||||||
38,101.8 | 42,428.1 | |||||||||||||||
F-26
Table of Contents
Principal | Interest | Range of | ||||||||||||||
Amount | Receivable | Interest Rates | Maturity Date | |||||||||||||
NT$ | NT$ | |||||||||||||||
(In Millions) | ||||||||||||||||
December 31, 2004 | ||||||||||||||||
Step-up callable deposits | ||||||||||||||||
Domestic banks | $ | 2,000.0 | $ | 7.7 | 2.05%-2.20 | % | Jul. 2007-Aug. 2007 | |||||||||
Foreign banks | 2,138.3 | 14.0 | 1.44%-4.75 | % | Jun. 2007-Aug. 2007 | |||||||||||
Callable range accrual deposits | ||||||||||||||||
Foreign banks | 6,383.4 | 30.8 | (See below) | Sep. 2009-Dec. 2009 | ||||||||||||
$ | 10,521.7 | $ | 52.5 | |||||||||||||
December 31, 2005 | ||||||||||||||||
Step-up callable deposits | ||||||||||||||||
Foreign banks | $ | 3,000.0 | $ | 8.1 | 1.40%-1.50 | % | Jun. 2007-Oct. 2007 | |||||||||
Callable range accrual deposits | ||||||||||||||||
Foreign banks | 7,227.0 | 10.0 | (See below) | Sep. 2009-Jan. 2010 | ||||||||||||
$ | 10,227.0 | $ | 18.1 | |||||||||||||
F-27
Table of Contents
December 31 | ||||||||
2004 | 2005 | |||||||
NT$ | NT$ | |||||||
(In Millions) | ||||||||
Cost | ||||||||
Land and land improvements | 803.5 | 851.2 | ||||||
Buildings | 97,882.7 | 105,832.0 | ||||||
Machinery and equipment | 433,130.4 | 510,922.1 | ||||||
Office equipment | 8,538.2 | 9,670.6 | ||||||
Leased assets | 566.2 | 597.7 | ||||||
540,921.0 | 627,873.6 | |||||||
Advance payments and construction in progress | 49,244.2 | 15,074.3 | ||||||
590,165.2 | 642,947.9 | |||||||
Accumulated depreciation | ||||||||
Land improvements | 172.5 | 206.4 | ||||||
Buildings | 38,160.3 | 46,560.1 | ||||||
Machinery and equipment | 287,204.4 | 344,431.0 | ||||||
Office equipment | 5,683.6 | 6,862.5 | ||||||
Leased assets | 33.1 | 64.6 | ||||||
331,253.9 | 398,124.6 | |||||||
258,911.3 | 244,823.3 | |||||||
December 31 | ||||||||
2004 | 2005 | |||||||
NT$ | NT$ | |||||||
(In Millions) | ||||||||
Technology license fees | 6,534.9 | 5,099.2 | ||||||
Software and system design costs | 2,213.7 | 1,737.4 | ||||||
Others | 243.9 | 169.7 | ||||||
8,992.5 | 7,006.3 | |||||||
F-28
Table of Contents
Amount | ||||
NT$ | ||||
Year | (In Millions) | |||
2006 | 2,815.6 | |||
2007 | 1,527.4 | |||
2008 | 964.8 | |||
2009 | 569.2 | |||
2010 | 462.4 | |||
2011 and thereafter | 666.9 | |||
7,006.3 | ||||
December 31 | ||||||||
2004 | 2005 | |||||||
NT$ | NT$ | |||||||
(In Millions) | ||||||||
Unsecured loans in U.S. dollars | ||||||||
US$12.0 million and US$10.0 million in 2004 and 2005, respectively, repayable by June 2006, annual interest at 2.80% and 4.77% in 2004 and 2005, respectively | 383.0 | 328.5 | ||||||
December 31 | ||||||||
2004 | 2005 | |||||||
NT$ | NT$ | |||||||
(In Millions) | ||||||||
Unsecured loan | ||||||||
US$60.0 million, repaid before original maturities, annual interest at 2.475% | 1,915.0 | — | ||||||
Secured loan | ||||||||
US$20.0 million, repayable by November 2010 in 5 payments, annual interest at 5.01% | — | 656.9 | ||||||
Science Park Administration (SPA) SOC loan, repayable by July 2008 in 20 payments, interest free | — | 7.7 | ||||||
SPA DSP loans, repayable by April 2007 in 20 payments, interest free | — | 4.0 | ||||||
1,915.0 | 668.6 | |||||||
Current portion | — | (5.5 | ) | |||||
1,915.0 | 663.1 | |||||||
F-29
Table of Contents
Amount | ||||
NT$ | ||||
Year of Repayment | (In Millions) | |||
2006 | 5.5 | |||
2007 | 4.1 | |||
2008 | 133.4 | |||
2009 | 262.8 | |||
2010 | 262.8 | |||
668.6 | ||||
December 31 | ||||||||
2004 | 2005 | |||||||
NT$ | NT$ | |||||||
(In Millions) | ||||||||
Domestic unsecured bonds | ||||||||
Issued in December 2000 and repayable in December 2005 and 2007 in two installments, 5.25% and 5.36% interest payable annually, respectively | 15,000.0 | 4,500.0 | ||||||
Issued in January 2002 and repayable in January 2007, 2009 and 2012 in three installments, 2.60%, 2.75% and 3.00% interest payable annually, respectively | 15,000.0 | 15,000.0 | ||||||
30,000.0 | 19,500.0 | |||||||
Current portion | (10,500.0 | ) | — | |||||
19,500.0 | 19,500.0 | |||||||
Amount | ||||
NT$ | ||||
Year of Repayment | (In Millions) | |||
2007 | 7,000.0 | |||
2009 | 8,000.0 | |||
2010 and thereafter | 4,500.0 | |||
19,500.0 | ||||
F-30
Table of Contents
December 31 | ||||||||
2004 | 2005 | |||||||
NT$ | NT$ | |||||||
(In Millions) | ||||||||
Payables for acquisition of property, plant and equipment (Note 24k) | 6,030.0 | 7,037.8 | ||||||
Payables for royalties | 3,440.3 | 2,380.2 | ||||||
9,470.3 | 9,418.0 | |||||||
Current portion (classified under accrued expenses and other current liabilities) | (1,505.3 | ) | (869.1 | ) | ||||
7,965.0 | 8,458.9 | |||||||
Amount | ||||
NT$ | ||||
Year of Payment | (In Millions) | |||
2006 | 869.1 | |||
2007 | 459.9 | |||
2008 | 262.8 | |||
2009 | 262.8 | |||
2010 | 262.8 | |||
2011 and thereafter | 7,300.6 | |||
9,418.0 | ||||
F-31
Table of Contents
Year Ended December 31 | ||||||||||||
2003 | 2004 | 2005 | ||||||||||
NT$ | NT$ | NT$ | ||||||||||
(In Millions) | ||||||||||||
Benefit obligation | ||||||||||||
Projected benefit obligation at beginning of year | 2,926.0 | 3,958.7 | 4,904.1 | |||||||||
Effect of inclusion of newly consolidated subsidiary, GUC | — | — | 16.1 | |||||||||
Service cost | 502.1 | 632.6 | 470.9 | |||||||||
Interest cost | 109.7 | 128.3 | 163.8 | |||||||||
Actuarial gain | 424.4 | 185.9 | 436.6 | |||||||||
Benefits paid | (3.5 | ) | (1.4 | ) | (14.6 | ) | ||||||
Projected benefit obligation at end of year | 3,958.7 | 4,904.1 | 5,976.9 | |||||||||
Plan assets | ||||||||||||
Balance, beginning of year | 1,014.0 | 1,207.3 | 1,447.5 | |||||||||
Effect of inclusion of newly consolidated subsidiary, GUC | — | — | 7.6 | |||||||||
Actual return of plan assets | 15.7 | 15.3 | 18.7 | |||||||||
Employer contribution | 181.1 | 226.3 | 226.2 | |||||||||
Benefits paid | (3.5 | ) | (1.4 | ) | (8.4 | ) | ||||||
Balance, end of year | 1,207.3 | 1,447.5 | 1,691.6 | |||||||||
F-32
Table of Contents
Year Ended December 31 | ||||||||||||
2003 | 2004 | 2005 | ||||||||||
NT$ | NT$ | NT$ | ||||||||||
(In Millions) | ||||||||||||
a. Components of net periodic pension cost | ||||||||||||
Service cost | 502.1 | 632.6 | 470.9 | |||||||||
Interest cost | 109.7 | 128.3 | 163.8 | |||||||||
Projected return on plan assets | (41.2 | ) | (41.9 | ) | (49.8 | ) | ||||||
Amortization | 2.4 | 8.3 | 8.3 | |||||||||
Net periodic pension cost | 573.0 | 727.3 | 593.2 | |||||||||
December 31 | ||||||||
2004 | 2005 | |||||||
NT$ | NT$ | |||||||
(In Millions) | ||||||||
b. Reconciliation of funded status of the plans and accrued pension cost | ||||||||
Benefit obligation | ||||||||
Vested benefit obligation | 67.1 | 62.3 | ||||||
Nonvested benefit obligation | 2,704.3 | 3,364.3 | ||||||
Accumulated benefit obligation | 2,771.4 | 3,426.6 | ||||||
Additional benefits based on future salaries | 2,132.7 | 2,550.3 | ||||||
Projected benefit obligation | 4,904.1 | 5,976.9 | ||||||
Fair value of plan assets | (1,447.5 | ) | (1,691.6 | ) | ||||
Funded status | 3,456.6 | 4,285.3 | ||||||
Unrecognized net transitional obligation | (132.8 | ) | (127.0 | ) | ||||
Unrecognized actuarial loss | (222. 6 | ) | (684.4 | ) | ||||
Accrued pension cost | 3,101.2 | 3,473.9 | ||||||
Vested benefit | 76.0 | 67.8 | ||||||
c. Actuarial assumptions | ||||||||
Discount rate used in determining present values | 3.25 | % | 2.75%~3.50 | % | ||||
Future salary increase rate | 3.00 | % | 2.00%~3.00 | % | ||||
Expected rate of return on plan assets | 3.25 | % | 2.50%~2.75 | % |
F-33
Table of Contents
d. | Expected Benefits Payments |
Amount | ||||
NT$ | ||||
(In Millions) | ||||
2006 | 46.3 | |||
2007 | 31.5 | |||
2008 | 24.3 | |||
2009 | 39.1 | |||
2010 | 75.3 | |||
2011 and thereafter | 689.3 |
e. | TSMC and GUC expect to make contributions to their pension funds in 2006 of NT$230.4 million and NT$2.2 million, respectively. |
a. | Income tax benefit (expense) consisted of: |
Year Ended December 31 | ||||||||||||
2003 | 2004 | 2005 | ||||||||||
NT$ | NT$ | NT$ | ||||||||||
(In Millions) | ||||||||||||
Current | ||||||||||||
Domestic | (136.5 | ) | (566.5 | ) | (3,531.8 | ) | ||||||
Foreign | (158.8 | ) | (173.7 | ) | (485.3 | ) | ||||||
(295.3 | ) | (740.2 | ) | (4,017.1 | ) | |||||||
Deferred | ||||||||||||
Domestic | (3,639.9 | ) | 1,101.4 | 3,295.7 | ||||||||
Foreign | 12.3 | 2.2 | 90.8 | |||||||||
(3,627.6 | ) | 1,103.6 | 3,386.5 | |||||||||
Income tax benefit (expense) | (3,922.9 | ) | 363.4 | (630.6 | ) | |||||||
b. | A reconciliation of income tax expense based on income before income tax and minority interest at statutory rates and income tax benefit (expense) was as follows: |
F-34
Table of Contents
Year Ended December 31 | ||||||||||||
2003 | 2004 | 2005 | ||||||||||
NT$ | NT$ | NT$ | ||||||||||
(In Millions) | ||||||||||||
Income tax expense based on income before income tax and minority interest at statutory rates | (12,881.5 | ) | (23,840.5 | ) | (23,658.5 | ) | ||||||
Tax-exempt income | 5,255.7 | 14,712.5 | 12,243.4 | |||||||||
Temporary and permanent differences | 732.7 | (658.2 | ) | (1,123.7 | ) | |||||||
Current income tax expense before income tax credits | (6,893.1 | ) | (9,786.2 | ) | 12,538.8 | ) | ||||||
Additional tax at 10% on unappropriated earnings | (1,273.5 | ) | (823.9 | ) | (1,494.8 | ) | ||||||
Income tax credits | 7,917.1 | 10,470.9 | 10,133.8 | |||||||||
Other income tax adjustment | (8.1 | ) | (555.8 | ) | (117.3 | ) | ||||||
Net change in deferred income tax assets | ||||||||||||
Net operating loss carryforwards | 535.8 | (1,653.0 | ) | (690.6 | ) | |||||||
Investment tax credits | (917.7 | ) | 234.7 | (1,965.9 | ) | |||||||
Temporary differences | (300.9 | ) | 1,131.3 | 2,402.4 | ||||||||
Adjustment in valuation allowance | (2,982.5 | ) | 1,345.4 | 3,640.6 | ||||||||
Income tax benefit (expense) | (3,922.9 | ) | 363.4 | (630.6 | ) | |||||||
c. | Deferred income tax assets (liabilities) consisted of: |
December 31 | ||||||||
2004 | 2005 | |||||||
NT$ | NT$ | |||||||
(In Millions) | ||||||||
Current deferred income tax assets | ||||||||
Investment tax credits | 8,849.0 | 7,033.6 | ||||||
Temporary differences | 319.7 | 454.1 | ||||||
Net operating loss carryforwards | — | 15.8 | ||||||
Valuation allowance | (250.7 | ) | (354.2 | ) | ||||
8,918.0 | 7,149.3 | |||||||
Noncurrent deferred income tax assets | ||||||||
Net operating loss carryforwards | 6,735.1 | 6,261.5 | ||||||
Investment tax credits | 17,035.6 | 17,004.3 | ||||||
Temporary differences | 13.7 | 14.1 | ||||||
Valuation allowance | (14,360.5 | ) | (10,836.9 | ) | ||||
9,423.9 | 12,443.0 | |||||||
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December 31 | ||||||||
2004 | 2005 | |||||||
NT$ | NT$ | |||||||
(In Millions) | ||||||||
Noncurrent deferred income tax liabilities | ||||||||
- Temporary differences | ||||||||
Depreciation | (5,298.2 | ) | (4,975.3 | ) | ||||
Others | (2,475.7 | ) | (679.3 | ) | ||||
(7,773.9 | ) | (5,654.6 | ) | |||||
Net noncurrent deferred income tax assets | 1,650.0 | 6,788.4 | ||||||
d. | Integrated income tax information: | ||
The balance of the imputation credit account of TSMC as of December 31, 2004 and 2005 was nil and NT$20.1 million, respectively. | |||
The actual and expected creditable ratio of TSMC for distribution of earnings of 2004 and 2005 was 0.11% and 0.02%, respectively. | |||
The imputation credit allocated to the shareholders is based on its balance as of the date of dividend distribution. The expected creditable ratio may change when the actual distribution of the imputation credits is made. | |||
e. | TSMC’s earnings generated prior to December 31, 1997 have been fully appropriated. | ||
f. | As of December 31, 2005, investment tax credits of TSMC and GUC consisted of: |
Total | Remaining | |||||||||||||||
Creditable | Creditable | Expiry | ||||||||||||||
Law | Item | Amounts | Amounts | Year | ||||||||||||
NT$ | NT$ | |||||||||||||||
(In Millions) | ||||||||||||||||
Statute for Upgrading Industries | Purchases of machinery and equipment | 134.4 | — | 2005 | ||||||||||||
4,886.6 | — | 2006 | ||||||||||||||
4,138.9 | 4,054.2 | 2007 | ||||||||||||||
11,002.0 | 11,002.0 | 2008 | ||||||||||||||
4,160.4 | 4,160.4 | 2009 | ||||||||||||||
24,322.3 | 19,216.6 | |||||||||||||||
Statute for Upgrading Industries | Research and development expenditures | 3,145.9 | — | 2005 | ||||||||||||
1,809.8 | 20.3 | 2006 | ||||||||||||||
1,421.6 | 1,421.6 | 2007 | ||||||||||||||
1,647.3 | 1,647.3 | 2008 | ||||||||||||||
1,667.8 | 1,667.8 | 2009 | ||||||||||||||
9,692.4 | 4,757.0 | |||||||||||||||
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Total | Remaining | |||||||||||||||
Creditable | Creditable | Expiry | ||||||||||||||
Law | Item | Amounts | Amounts | Year | ||||||||||||
NT$ | NT$ | |||||||||||||||
(In Millions) | ||||||||||||||||
Statute for Upgrading Industries | Personnel training | 29.4 | — | 2005 | ||||||||||||
20.4 | — | 2006 | ||||||||||||||
27.0 | 27.0 | 2007 | ||||||||||||||
37.3 | 37.3 | 2008 | ||||||||||||||
114.1 | 64.3 | |||||||||||||||
Statute for Upgrading Industries | Investments in important technology-based enterprises | 38.0 | — | 2005 | ||||||||||||
g. | As of December 31, 2005, the net operating loss carryforwards pertained to WaferTech, TSMC Development, TSMC Technology and GUC would expire at various dates through 2024. | ||
h. | The profits generated from the following expansion and construction projects of TSMC’s manufacturing plants are exempt from income tax: |
Tax-Exemption Period | ||||
Construction of Fab 8 - module B | 2002 to 2005 | |||
Expansion of Fab 2 - modules A and B, Fab 3, Fab 4, Fab 5 and Fab 6 | 2003 to 2006 | |||
Construction of Fab 12 | 2004 to 2007 |
i. | The tax authorities have examined income tax returns of TSMC through 2001. |
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December 31 | ||||||||
2004 | 2005 | |||||||
NT$ | NT$ | |||||||
(In Millions) | ||||||||
From merger | 24,003.6 | 24,003.6 | ||||||
Additional paid-in capital | 23,051.7 | 23,254.2 | ||||||
From convertible bonds | 9,360.4 | 9,360.4 | ||||||
From treasury stock transactions | 0.2 | 306.9 | ||||||
From long-term investments | 121.4 | 192.8 | ||||||
Donations | — | — | ||||||
Total | 56,537.3 | 57,117.9 | ||||||
December 31 | ||||||||
2004 | 2005 | |||||||
NT$ | NT$ | |||||||
(In Millions) | ||||||||
Unappropriated earnings | 88,202.0 | 106,196.4 | ||||||
Legal capital reserve | 25,528.0 | 34,348.2 | ||||||
Special capital reserve | — | 2,226.4 | ||||||
Total | 113,730.0 | 142,771.0 | ||||||
a. | Legal capital reserve at 10% of the profits left over, until the accumulated legal capital reserve has equaled TSMC’s total capital; | ||
b. | Special capital reserve in accordance with relevant laws or regulations or as requested by the authorities in charge; | ||
c. | Bonus to directors and supervisors and bonus to employees of TSMC equal to not more than 0.3% and not less than 1% of the remainder, respectively. Directors who also serve as executive officers of TSMC are not entitled to receive the bonus to directors and supervisors. TSMC may issue stock bonuses to employees of an affiliated company meeting the conditions set by the Board of Directors or, by the person duly authorized by the Board of Directors; | ||
d. | Any balance left over shall be allocated according to the resolution of the shareholders’ meeting. |
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Appropriation of Earnings | Dividend Per Share | |||||||||||||||||||||||
For Fiscal | For Fiscal | For Fiscal | For Fiscal | For Fiscal | For Fiscal | |||||||||||||||||||
Year 2003 | Year 2004 | Year 2005 | Year 2003 | Year 2004 | Year 2005 | |||||||||||||||||||
NT$ | NT$ | NT$ | NT$ | NT$ | NT$ | |||||||||||||||||||
(in Millions) | ||||||||||||||||||||||||
Legal capital reserve | 4,725.8 | 8,820.2 | 9,357.5 | |||||||||||||||||||||
Special capital reserve | (68.9 | ) | 2,226.4 | (1,585.7 | ) | |||||||||||||||||||
Employees’ profit sharing — in cash | 681.6 | 3,086.2 | 3,432.1 | |||||||||||||||||||||
Employees’ profit sharing — in stock | 2,726.5 | 3,086.2 | 3,432.1 | |||||||||||||||||||||
Cash dividends to preferred shareholders | 184.5 | — | — | 0.35 | — | — | ||||||||||||||||||
Cash dividends to common shareholders | 12,160.0 | 46,504.1 | 61,825.1 | 0.60 | 2.00 | 2.50 | ||||||||||||||||||
Stock dividends to common shareholders | 28,373.3 | 11,626.0 | 3,709.5 | 1.41 | 0.50 | 0.15 | ||||||||||||||||||
Bonus to directors and supervisors | 127.8 | 231.5 | 257.4 | |||||||||||||||||||||
48,910.6 | 75,580.6 | 80,428.0 | ||||||||||||||||||||||
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As of February 27, 2006, the appropriation for earnings of 2005 had not approved by shareholders. | ||
The above information about the appropriations of bonuses to employees, directors and supervisors is available at the Market Observation Post System website. | ||
Under the Integrated Income Tax System that became effective on January 1, 1998, the R.O.C. resident shareholders are allowed a tax credit for their proportionate share of the income tax paid by TSMC on earnings generated since January 1, 1998. | ||
Preferred Stock | ||
TSMC 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 TSMC’s Articles of Incorporation, TSMC is no longer authorized to issue preferred stock. | ||
The terms and conditions of the preferred shares were as follows: | ||
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 TSMC available for distribution to shareholders upon liquidation or dissolution; however, the pre-emptive rights to the assets shall not exceed the issue price 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 TSMC’s related obligations remain the same until the preferred shares are redeemed by TSMC. |
TSMC’s Employee Stock Option Plans, consisting of TSMC 2002 Plan, TSMC 2003 Plan and TSMC 2004 Plan, were approved by the SFB on June 25, 2002, October 29, 2003 and January 6, 2005, respectively. The maximum number of options authorized to be granted under the TSMC 2002 Plan, TSMC 2003 Plan and TSMC 2004 Plan was 100,000 thousand, 120,000 thousand and 11,000 thousand, respectively, with each option eligible to subscribe for one common share when exercisable. The options may be granted to qualified employees of TSMC or any of its domestic or foreign subsidiaries, in which TSMC’s shareholding with voting rights, directly or indirectly, is more than fifty percent (50%). The options of all the plans are valid for ten years and exercisable at certain percentages subsequent to the second anniversary of the grant date. Under the terms of the plans, the options are granted at an exercise price equal to the closing price of TSMC’s common shares listed on the TSE on the |
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grant date. | ||
Options that had never been granted or had been granted and subsequently cancelled under the TSMC 2002 Plan and TSMC 2003 Plan were expired as of December 31, 2005. | ||
Information about TSMC’s outstanding stock options for the years ended December 31 2003, 2004 and 2005 was as follows: |
Weighted- | ||||||||
Average | ||||||||
Number of | Exercise | |||||||
Options | Price | |||||||
(in Thousands) | (NT$) | |||||||
Balance, January 1, 2003 | 19,369 | |||||||
Options granted | 32,874 | 50.7 | ||||||
Options cancelled | (2,886 | ) | 48.8 | |||||
Balance, December 31, 2003 | 49,357 | |||||||
Options granted | 20,400 | 47.3 | ||||||
Options exercised | (87 | ) | 41.8 | |||||
Options cancelled | (5,303 | ) | 45.9 | |||||
Balance, December 31, 2004 | 64,367 | |||||||
Options granted | 14,864 | 48.4 | ||||||
Options exercised | (6,837 | ) | 39.6 | |||||
Options cancelled | (4,636 | ) | 44.1 | |||||
Balance, December 31, 2005 | 67,758 | |||||||
The numbers of outstanding stock options and exercise prices have been adjusted to reflect the appropriations of dividends in accordance with the plans. | ||
As of December 31, 2005, information about TSMC’s outstanding and exercisable options was as follows: |
Options Outstanding | Options Exercisable | |||||||||||||||||||||
Weighted- | ||||||||||||||||||||||
Average | Weighted- | Weighted- | ||||||||||||||||||||
Range of | Number of | Remaining | Average | Number of | Average | |||||||||||||||||
Exercise | Options (in | Contractual | Exercise | Options (in | Exercise | |||||||||||||||||
Price (NT$) | Thousands) | Life (Years) | Price (NT$) | Thousands) | Price (NT$) | |||||||||||||||||
29.9-42.1 | 45,787 | 7.10 | 38.73 | 27,143 | 38.59 | |||||||||||||||||
47.0-54.5 | 21,971 | 8.82 | 49.20 | 327 | 54.50 | |||||||||||||||||
67,758 | 27,470 | |||||||||||||||||||||
GUC’s Employee Stock Option Plans, consisting of GUC 2002 Plan and GUC 2003 Plan, were approved by its Board of Directors on July 1, 2002 and January 23, 2003, respectively. The maximum number of options authorized to be granted under the GUC 2002 Plan and GUC 2003 Plan was 5,000 and 7,535, respectively, with each option eligible to subscribe for one thousand |
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common shares when exercisable. The options may be granted to qualified employees of GUC. The options of all the plans are valid for six years and exercisable at certain percentage in accordance with the plans subsequent to the second anniversary of the grant date. As of December 31, 2005, all of the options under the GUC 2002 Plan and GUC 2003 Plan had been granted or were expired. | ||
Moreover, GUC 2004 Plan was approved by the SFB on August 16, 2004 to grant a maximum of 2,500 options, with each option eligible to subscribe for one thousand common shares when exercisable. The options may be granted to qualified employees of GUC or any of its subsidiaries. The options of GUC 2004 Plan are valid for six years and exercisable at certain percentage in accordance with the plan subsequent to the second anniversary of the grant date. | ||
Information about GUC’s outstanding stock options for the years ended December 31, 2003, 2004 and 2005 was as follows: |
Weighted- | ||||||||
Average | ||||||||
Exercise | ||||||||
Number of | Price | |||||||
Options | (NT$) | |||||||
Balance, January 1, 2003 | 4,238 | |||||||
Options granted | 2,820 | 10.5 | ||||||
Balance, December 31, 2003 | 7,058 | |||||||
Options granted | 831 | 10.5 | ||||||
Balance, December 31, 2004 | 7,889 | |||||||
Options granted | 2,499 | 10.96 | ||||||
Options exercised | (2,641 | ) | 10.50 | |||||
Options cancelled | (615 | ) | 10.57 | |||||
Balance, December 31, 2005 | 7,132 | |||||||
Options Outstanding | Options Exercisable | |||||||||||||||||||||||
Weighted- | ||||||||||||||||||||||||
Average | Weighted- | Weighted- | ||||||||||||||||||||||
Range of | Remaining | Average | Average | |||||||||||||||||||||
Exercise | Number of | Contractual | Exercise | Number of | Exercise | |||||||||||||||||||
Price (NT$) | Options | Life (Years) | Price (NT$) | Options | Price (NT$) | |||||||||||||||||||
10.50-10.96 | 7,132 | 2.58-5.75 | 10.66 | 3,890 | 10.50 | |||||||||||||||||||
No compensation cost was recognized under the intrinsic value method for the years ended December 31, 2004 and 2005 for TSMC and GUC. Had the Company used the fair value based method (based on the Black-Scholes model) to evaluate the options granted after January 1, 2004, the assumptions and pro forma results of the Company for the years ended December 31, 2004 and 2005 would have been as follows: |
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2004 | 2005 | |||||
Assumptions: | ||||||
TSMC | Expected dividend yield | 1.00% | 1.00%-3.44% | |||
Expected volatility | 43.77%-46.15% | 43.77%-46.15% | ||||
Risk free interest rate | 3.07%-3.85% | 3.07%-3.85% | ||||
Expected life | 5 years | 5 years | ||||
GUC | Expected dividend yield | — | — | |||
Expected volatility | 38.74%-41.74% | 22.65%-41.74% | ||||
Risk free interest rate | 2.56% | 2.56% | ||||
Expected life | 6 years | 6 years |
NT$ | NT$ | |||||||
(In Millions) | ||||||||
Net income attributable to shareholders of the parent: | ||||||||
As reported | 92,316.1 | 93,575.0 | ||||||
Pro forma | 92,257.4 | 93,456.5 |
NT$ | NT$ | |||||||
Consolidated earnings per share (EPS) — after income tax: | ||||||||
Basic EPS as reported | 3.73 | 3.79 | ||||||
Pro forma basic EPS | 3.73 | 3.79 | ||||||
Diluted EPS as reported | 3.73 | 3.79 | ||||||
Pro forma diluted EPS | 3.73 | 3.78 |
The estimated weighted average fair value per unit of option granted during the years ended December 31, 2004 and 2005 under the TSMC plans was NT$19.73 and NT$17.69, respectively. The estimated weighted average fair value per unit of option (eligible to subscribe for one thousand common shares) granted during the years ended December 31, 2004 and 2005 under the GUC plans was NT$3.86 thousand and NT$3.32 thousand, respectively. |
Increase/ | ||||||||||||||||
Beginning | Stock | Ending | ||||||||||||||
Shares | Dividend | Disposal | Shares | |||||||||||||
(Shares in Thousands) | ||||||||||||||||
Year ended December 31, 2004 | ||||||||||||||||
Reclassification of parent company stock held by subsidiaries from long-term investments | 40,597 | 5,676 | 752 | 45,521 | ||||||||||||
Repurchase under share buyback plan | — | 124,720 | 124,720 | — | ||||||||||||
40,597 | 130,396 | 125,472 | 45,521 | |||||||||||||
Year ended December 31, 2005 | ||||||||||||||||
Reclassification of parent company stock held by subsidiaries from long-term investments | 45,521 | 2,242 | 14,825 | 32,938 | ||||||||||||
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Proceeds from the sales of treasury stock for the years ended December 31, 2003, 2004 and 2005 were NT$331.9 million, NT$39.9 million and NT$899.5 million, respectively. As of December 31, 2004 and 2005, the book value of the treasury stock was NT$1,595.2 million and NT$918.1 million, respectively; the market value was NT$2,241.0 million and NT$2,047.1 million, respectively. TSMC’s stocks held by its subsidiaries are treated as treasury stock and the holders are entitled to the rights of shareholders, except that starting from June 24, 2005, pursuant to the revised Company Law, the holders are no longer entitled to the right to vote. | ||
TSMC held a special meeting of the Board of Directors and approved a share buyback plan to repurchase TSMC’s common shares listed on the TSE during the period from March 24, 2004 to May 23, 2004. TSMC repurchased 124,720 thousand common shares for a total cost of NT$7,059.8 million. All the treasury stock repurchased under the buyback plan was retired on August 16, 2004. |
Consolidated EPS are computed as follows: |
Amounts (Numerator) | Consolidated EPS | |||||||||||||||||||
Number of | ||||||||||||||||||||
Before | After | Shares | Before | After | ||||||||||||||||
Tax | Tax | (Denominator) | Tax | Tax | ||||||||||||||||
NT$ | NT$ | (Thousands) | NT$ | NT$ | ||||||||||||||||
Year ended December 31, 2003 | ||||||||||||||||||||
Income available to shareholders of the parent | 51,181.6 | 47,258.7 | ||||||||||||||||||
Less—preferred stock dividends | (184.5 | ) | (184.5 | ) | ||||||||||||||||
Basic EPS | ||||||||||||||||||||
Income available to shareholders of the parent | 50,997.1 | 47,074.2 | 24,796,042 | 2.06 | 1.90 | |||||||||||||||
Effect of dilutive potential common stock — stock options | — | — | 10,105 | |||||||||||||||||
Diluted EPS | ||||||||||||||||||||
Income available to shareholders of the parent (including the effect of dilutive potential common stock) | 50,997.1 | 47,074.2 | 24,806,147 | 2.06 | 1.90 | |||||||||||||||
Year ended December 31, 2004 | ||||||||||||||||||||
Basic EPS | ||||||||||||||||||||
Income available to shareholders of the parent | 91,952.7 | 92,316.1 | 24,717,531 | 3.72 | 3.73 | |||||||||||||||
Effect of dilutive potential common stock — stock options | — | — | 6,484 | |||||||||||||||||
Diluted EPS | ||||||||||||||||||||
Income available to shareholders of the parent (including the effect of dilutive potential common stock) | 91,952.7 | 92,316.1 | 24,724,015 | 3.72 | 3.73 | |||||||||||||||
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Amounts (Numerator) | Consolidated EPS | |||||||||||||||||||
Number of | ||||||||||||||||||||
Before | After | Shares | Before | After | ||||||||||||||||
Tax | Tax | (Denominator) | Tax | Tax | ||||||||||||||||
NT$ | NT$ | (Thousands) | NT$ | NT$ | ||||||||||||||||
Year ended December 31, 2005 | ||||||||||||||||||||
Basic EPS | ||||||||||||||||||||
Income available to shareholders of the parent | 94,205.6 | 93,575.0 | 24,679,947 | 3.82 | 3.79 | |||||||||||||||
Effect of dilutive potential common stock — stock options | — | — | 13,165 | |||||||||||||||||
Diluted EPS | ||||||||||||||||||||
Income available to shareholders of the parent (including the effect of dilutive potential common stock) | 94,205.6 | 93,575.0 | 24,693,112 | 3.82 | 3.79 | |||||||||||||||
The Company engages in business transactions with the following related parties: |
a. | Industrial Technology Research Institute (ITRI), the Chairman of TSMC is one of its directors | ||
b. | Philips, a major shareholder of TSMC | ||
c. | Investees of TSMC | ||
VIS (accounted for using equity method) SSMC (accounted for using equity method) GUC (with controlling financial interest and was consolidated from 2005 with significant transactions eliminated) | |||
d. | Indirect investee | ||
VisEra, originally an investee over which TSMC had control; beginning in November 2005, VisEra became an indirect investee accounted for using the equity method due to changes in investment structure. |
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Transactions with the aforementioned parties, excluding those disclosed in other notes, are summarized as follows: |
Year Ended December 31 | ||||||||||||
2003 | 2004 | 2005 | ||||||||||
NT$ | NT$ | NT$ | ||||||||||
(In Millions) | ||||||||||||
For the year | ||||||||||||
Sales | ||||||||||||
Philips | 3,577.0 | 5,463.6 | 3,298.8 | |||||||||
Others | 610.6 | 812.2 | 492.7 | |||||||||
4,187.6 | 6,275.8 | 3,791.5 | ||||||||||
Purchases | ||||||||||||
SSMC | 5,519.8 | 5,869.1 | 5,729.7 | |||||||||
VIS | 4,910.8 | 9,169.6 | 4,142.4 | |||||||||
10,430.6 | 15,038.7 | 9,872.1 | ||||||||||
Manufacturing expenses—technical assistance fees Philips (see Note 24a) | 3,023.7 | 907.0 | 581.1 | |||||||||
General and administrative expenses—rental | ||||||||||||
GUC | — | 13.2 | — | |||||||||
Research and development expenses | ||||||||||||
GUC | — | 11.7 | — | |||||||||
Proceeds from disposal of property, plant and equipment | ||||||||||||
VisEra | — | — | 534.3 | |||||||||
VIS | 15.1 | 34.0 | — | |||||||||
Non-operating income and gains SSMC (primarily technical service income, see Note 24e) | 201.9 | 364.5 | 316.2 | |||||||||
VisEra | — | 28.9 | 308.1 | |||||||||
VIS (primarily technical service income, see Note 24j) | 0.2 | 117.8 | 210.7 | |||||||||
202.1 | 511.2 | 835.0 | ||||||||||
At end of year | ||||||||||||
Receivables | ||||||||||||
Philips | 581.5 | 573.6 | ||||||||||
Others | 72.8 | 119.7 | ||||||||||
654.3 | 693.3 | |||||||||||
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Year Ended December 31 | ||||||||||||
2003 | 2004 | 2005 | ||||||||||
NT$ | NT$ | NT$ | ||||||||||
(In Millions) | ||||||||||||
Other receivables | ||||||||||||
VisEra | 30.3 | 374.2 | ||||||||||
SSMC | 63.7 | 149.2 | ||||||||||
VIS | 47.6 | 74.5 | ||||||||||
141.6 | 597.9 | |||||||||||
Payables | ||||||||||||
Philips | 469.5 | 694.0 | ||||||||||
VIS | 1,533.9 | 563.2 | ||||||||||
SSMC | 207.8 | 485.9 | ||||||||||
GUC | 6.6 | — | ||||||||||
�� | ||||||||||||
2,217.8 | 1,743.1 | |||||||||||
Other long-term payables | ||||||||||||
Philips | 2,318.0 | 1,100.5 | ||||||||||
Deferred credits (under other liabilities-others) | ||||||||||||
VisEra | — | 186.5 | ||||||||||
The terms of sales to related parties were not significantly different from those to third parties. For other related party transactions, prices were determined in accordance with related contractual agreements. | ||
The Company deferred the gains (classified under deferred credits) derived from sales of property, plant and equipment to VisEra, and then recognized such gains (classified under non-operating income and gains) over the depreciable lives of 5 years of the disposed assets. |
TSMC and GUC lease parcels of land from the SPA. These operating leases expire on various dates from March 2008 to December 2021 and can be renewed upon expiration. | ||
TSMC-NA leases its office premises and certain equipment under non-cancelable operating leases. TSMC-Japan has also entered into lease agreements for its office premises. These operating leases expire between 2010 and 2011 and can be renewed upon expiration. |
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As of December 31, 2005 , future lease payments were as follows: |
Year | Amount | |||
NT$ | ||||
(In Millions) | ||||
2006 | 371.2 | |||
2007 | 361.5 | |||
2008 | 339.0 | |||
2009 | 333.7 | |||
2010 | 267.1 | |||
2011 and thereafter | 1,129.3 | |||
2,801.8 | ||||
Rental expense for the years ended December 31, 2003, 2004 and 2005 was NT$1,297.7 million, NT$823.0 million and NT$949.4 million, respectively. |
TSMC, TSMC-NA and WaferTech filed a series of lawsuits in late 2003 and 2004 against Semiconductor Manufacturing International Corporation (“SMIC”), SMIC (Shanghai) and SMIC Americas. The lawsuits alleged that SMIC companies infringed multiple TSMC patents and misappropriated TSMC’s trade secrets. These suits were settled out of court on January 30, 2005. As part of the settlement, SMIC shall pay TSMC US$175 million over six years to resolve TSMC’s claims. |
The significant commitments and contingencies of the Company as of December 31, 2005 were as follows: |
a. | On June 20, 2004, TSMC and Philips amended the Technical Cooperation Agreement, which was originally signed on May 12, 1997. The amended Technical Cooperation Agreement is for five years beginning from January 1, 2004. Upon expiration, this amended Technical Cooperation Agreement will be terminated and will not be automatically renewed; however, the patent cross license arrangement between TSMC and Philips will survive the expiration of the amended Technical Cooperation Agreement. Under this amended Technical Cooperation Agreement, TSMC will pay Philips royalties based on a fixed amount mutually agreed-on, rather than under certain percentage of TSMC’s annual net sales. TSMC and Philips agreed to cross license the patents owned by each party. TSMC also obtained through Philips a number of cross patent licenses. | ||
b. | Under a technical cooperation agreement with ITRI, TSMC 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. The term of this agreement is for five years beginning from January 1, 1987 and is automatically renewed for successive periods of five years unless otherwise terminated by either party with one year prior notice. The agreement was automatically renewed in 1992 and 1997 and on January 1, 2002. |
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c. | Under several foundry agreements, TSMC shall reserve a portion of its production capacity for certain major customers that have guarantee deposits with TSMC. As of December 31, 2005, TSMC had a total of US$87.7 million 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. TSMC’s equity interest in SSMC was 32%. TSMC and Philips committed to buy specific percentages of the production capacity of SSMC. TSMC and Philips are required, in the aggregate, to purchase up to 70% of SSMC’s full capacity, but TSMC alone is not required to purchase more than 28% of the annual installed capacity. 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. | TSMC provides technical services to SSMC under a Technology Cooperation Agreement (the Agreement) entered into on May 12, 1999. TSMC receives compensation for such services computed at a specific percentage of net selling price of all products sold by SSMC. The Agreement shall remain in force for ten years and may be automatically renewed for successive periods of five years each unless pre-terminated by either party under certain conditions. | ||
f. | Under a Technology Transfer Agreement (TTA) with National Semiconductor Corporation (National) entered into on June 27, 2000, TSMC 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, TSMC and National entered into a Termination Agreement whereby the TTA was terminated for convenience. Under the Termination Agreement, TSMC will be relieved of any further obligation to transfer any additional technology. In addition, TSMC 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. | ||
g. | Beginning in 2001, TSMC entered into several licensing arrangements for certain semiconductor patents. The terms of the contracts vary with payments to be made in the form of royalties. TSMC 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. | ||
h. | In November 2002, TSMC entered into an Amended and Restated Joint Technology Cooperation Agreement with Philips, Freescale Semiconductor, Inc. and STMicroelectronics to jointly develop 90-nm to 65-nm advanced CMOS Logic and e-DRAM technologies. TSMC also agreed to align 0.12 micron CMOS Logic technology to enhance its foundry business opportunities. TSMC will contribute process technologies and share a portion of the costs associated with this joint development project. This agreement expired on December 31, 2005. | ||
i. | In December 2003, TSMC entered into a Technology Development and License Agreement with Freescale Semiconductor, Inc. to jointly develop 65-nm SOI (silicon on insulator) technology. TSMC will also license related 90-nm SOI technology from Freescale Semiconductor, Inc. Any intellectual properties arising out of the co-development project shall be jointly owned by the parties. In accordance with the agreement, TSMC will pay |
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royalties to Freescale Semiconductor, Inc. and will share a portion of the costs associated with the joint development project. | |||
j. | TSMC provides a technology transfer to VIS under a Manufacturing License and Technology Transfer Agreement entered into on April 1, 2004. TSMC receives compensation for such technology transfer in the form of royalty payments from VIS computed at specific percentages of net selling price of certain products sold by VIS. VIS agreed to reserve its certain capacity to manufacture for TSMC certain products at prices as agreed by the parties. | ||
k. | TSMC-Shanghai entered into an agreement with a certain foreign company. In accordance with the agreement, TSMC-Shanghai is obligated to purchase certain property, plant and equipment at the agreed-upon price within the contract period. If the purchase is not completed, TSMC-Shanghai is obligated to compensate counterparty. | ||
l. | Amounts available under unused letters of credit as of December 31, 2005 were NT$6.5 million. |
The Company entered into derivative financial instrument transactions in the years ended December 31, 2004 and 2005 to manage exposures related to foreign exchange rate and interest rate fluctuations. Certain information on these contracts was as follows: |
a. | Outstanding forward exchange contracts as of December 31, 2004 and 2005: |
Currency | ||||||||||||||||||||||||
Currency | Amount | To be | Amount | Fair Value | ||||||||||||||||||||
To Pay | (In Millions) | Received | (In Millions) | Maturity | (In Millions) | |||||||||||||||||||
2004 | ||||||||||||||||||||||||
Sell | US$ | US$ | 733.0 | NT$ | NT$ 23,681.3 | Jan. to Mar. 2005 | NT$ 248.8 | |||||||||||||||||
Sell | US$ | US$ | 159.1 | EUR | EUR 118.5 | Jan. 2005 | NT$ 68.3 | |||||||||||||||||
2005 | ||||||||||||||||||||||||
Sell | US$ | US$ | 60.0 | NT$ | NT$ 1,996.1 | Jan. 2006 | NT$ 28.5 |
As of December 31, 2004 and 2005, receivables resulted from forward exchange contracts (classified under current assets) aggregated NT$392.5 million and NT$26.7 million, respectively. As of December 31, 2004, payables resulted from forward contracts (classified under current liabilities) aggregated NT$0.6 million. |
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b. | Outstanding cross currency swap contracts as of December 31, 2004 and 2005: |
Contract | Range of | Range of | ||||||||||||||
Amount | Interest Rate | Interest Rate | Fair Value | |||||||||||||
Maturity Date | (In Millions) | Paid | Received | (In Millions) | ||||||||||||
2004 | ||||||||||||||||
Jan. 2005 to Jun. 2005 | US$ | 1,420.0 | 1.28%-2.72 | % | 0.49%-1.17 | % | NT$760.0 | |||||||||
2005 | ||||||||||||||||
Jan. 2006 to Mar. 2006 | US$ | 2,089.0 | 4.15%-4.54 | % | 0.02%-2.12 | % | NT$789.9 |
As of December 31, 2004 and 2005, receivables from the cross currency swap contracts (classified under current assets) were NT$761.0 million and NT$1,119.9 million, respectively. | |||
Net exchange gains arising from forward exchange contracts for the years ended December 31, 2003 were NT$321.0 million. Net exchange losses arising from forward exchange contracts and cross currency swap contracts for the years ended December 31, 2004 and 2005 were NT$3,844.0 million and NT$2,524.2 million, respectively. Net interest expenses arising from cross currency swap contracts for the years ended December 31, 2004 and 2005 were NT$91.3 million and NT$1,249.1 million, respectively. | |||
c. | Options contracts | ||
The Company did not enter into any foreign currency option contract in the year ended December, 31 2004. As of December 31, 2005, the Company did not have any outstanding foreign currency option contract. Net realized premium expenses for the years ended December 31, 2003 and 2005 were NT$153.8 million and nil, respectively. | |||
d. | Interest rate swaps contracts | ||
The Company rescinded all interest rate swap contracts in the first quarter of 2005 before their original maturities. The rescission loss of NT$28.3 million was recognized in the “interest expense” account. There was no outstanding contract as of December 31, 2005. Outstanding contracts as of December 31, 2004 were as follows: |
Notional | ||||||||||||
Amount | Interest Rate | Interest | ||||||||||
Contract Date | (In Millions) | Contract Period | Received | Rate Paid | ||||||||
September 2003 | NT$500.0 | September 2003 to December 2005 | One month LIBOR | 5.25 | % | |||||||
October 2003 | NT$500.0 | October 2003 to December 2005 | One month LIBOR | 5.25 | % | |||||||
October 2003 | NT$500.0 | October 2003 to December 2005 | One month LIBOR | 5.25 | % | |||||||
October 2003 | NT$500.0 | October 2003 to December 2005 | One month LIBOR | 5.25 | % | |||||||
October 2003 | NT$500.0 | October 2003 to December 2005 | One month LIBOR | 5.25 | % | |||||||
November 2003 | NT$500.0 | November 2003 to December 2005 | One month LIBOR | 5.25 | % |
Net interest expenses arising from interest rate swap contracts for the year ended December |
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31, 2003 was NT$141.0 million. Net interest income arising from interest rate swap contracts for the year ended December 31, 2004 was NT$11.6 million. |
e. | 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 to be 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 exposure related to the potential default by those counter-parties is low. | ||
ii) | Market price risk. All derivative financial instruments are intended as hedges for fluctuations in foreign exchange rates and interest rates. Gains or losses from these hedging instruments are likely to be offset by gains or losses from the hedged items. Thus, market price risk is believed to be low. | ||
iii) | Cash flow risk and the amount and period of future cash needs. | ||
As of December 31, 2005, the Company’s future cash needs for outstanding forward exchange contracts and cross currency swap contracts were as follows: |
Term | Inflow | Outflow | ||||||
(In Millions) | ||||||||
Within one year | NT$71,820.9 | US$ | 2,149.0 |
The Company has sufficient operating capital to meet the above cash needs. In addition, there will be corresponding cash inflow for the cash outflow. Therefore, the cash flow risk is low. |
f. | Fair values of financial instruments were as follows: |
December 31, 2004 | December 31, 2005 | |||||||||||||||
Carrying | Carrying | |||||||||||||||
Amount | Fair Value | Amount | Fair Value | |||||||||||||
NT$ | NT$ | NT$ | NT$ | |||||||||||||
(In Millions) | ||||||||||||||||
Non-derivative financial instruments | ||||||||||||||||
Assets | ||||||||||||||||
Short-term investments, net | 54,108.0 | 54,990.5 | 47,399.3 | 49,137.4 | ||||||||||||
Long-term investments (securities with market prices) | 31,165.7 | 34,265.1 | 34,273.3 | 39,678.8 | ||||||||||||
Liabilities | ||||||||||||||||
Bonds payable (including current portion) | 30,000.0 | 30,607.3 | 19,500.0 | 19,924.9 |
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December 31, 2004 | December 31, 2005 | |||||||||||||||
Carrying | Carrying | |||||||||||||||
Amount | Fair Value | Amount | Fair Value | |||||||||||||
NT$ | NT$ | NT$ | NT$ | |||||||||||||
(In Millions) | ||||||||||||||||
Derivative financial instruments | ||||||||||||||||
Assets (liabilities) | ||||||||||||||||
Forward exchange contracts | 392.0 | 317.1 | 26.7 | 28.5 | ||||||||||||
Cross currency swap contracts | 761.0 | 760.0 | 1,119.9 | 789.9 | ||||||||||||
Interest rate swap contracts | 4.4 | (22.7 | ) | — | — |
The above financial instruments do not include cash and cash equivalents, receivables, other financial assets, short-term bank loans, payables, and payable to contractors and equipment suppliers. The carrying amounts of the aforementioned financial instruments reported in the balance sheet approximate their fair values. | ||
The above financial instruments also exclude refundable deposits, guarantee deposits, long-term investments that do not have quoted market prices, long-term bank loans as well as other long-term payables. The future cash inflow and outflow of the deposits approximate their fair values. Some of the long-term investments do not have quoted market prices; therefore, fair values for those long-term investments are not shown above. The fair value of long-term bank loans with floating interest rates is their carrying amount. The fair value of long-term bank loans with fixed interest rates is the present value of expected cash flows discounted using the interest rate the Company may obtain for similar long-term bank loans. The fair value of other long-term payables is determined using the discounted value of expected cash flows, which approximates their carrying amount. | ||
Fair values of financial instruments were determined as follows: |
a) | Fair value of short-term and publicly traded long-term investments is based on quoted market prices. | ||
b) | The fair value of bonds payable is the quoted market value. | ||
c) | Fair value of derivative financial instruments is the amount receivable from or payable to the counter-party if the contracts were terminated on the balance sheet date. |
The fair values of some financial and non-financial instruments were not included in the fair values disclosed above. Accordingly, the sum of the fair values of the financial instruments listed above does not represent the fair value of the Company as a whole. |
a. | Industry financial information | ||
The Company is engaged mainly in the manufacturing, selling, packaging and testing of integrated circuits. Therefore, the disclosure of industry financial information is not applicable to the Company. |
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b. | Geographic information |
North | Adjustments | |||||||||||||||
America | and | |||||||||||||||
and Others | Taiwan | Elimination | Consolidated | |||||||||||||
NT$ | NT$ | NT$ | NT$ | |||||||||||||
(In Millions) | ||||||||||||||||
2003 | ||||||||||||||||
Sales to other than consolidated entities | 118,851.4 | 84,145.4 | — | 202,996.8 | ||||||||||||
Sales among consolidated entities | 11,494.9 | 117,758.9 | (129,253.8 | ) | — | |||||||||||
Total sales | 130,346.3 | 201,904.3 | (129,253.8 | ) | 202,996.8 | |||||||||||
Gross profit | 2,392.9 | 72,891.6 | (401.0 | ) | 74,883.5 | |||||||||||
Operating expenses | (23,582.9 | ) | ||||||||||||||
Non-operating income and gains | 5,669.3 | |||||||||||||||
Non-operating expenses and losses | (5,791.3 | ) | ||||||||||||||
Income before income tax | 51,178.6 | |||||||||||||||
Net income attributable to minority interest | (3.0 | ) | ||||||||||||||
Identifiable assets | 52,276.3 | 358,451.5 | (14,075.3 | ) | 396,652.5 | |||||||||||
Long-term investments | 10,748.0 | |||||||||||||||
Total assets | 407,400.5 | |||||||||||||||
2004 | ||||||||||||||||
Sales to other than consolidated entities | 143,801.1 | 113,411.5 | — | 257,212.6 | ||||||||||||
Sales among consolidated entities | 15,657.8 | 142,580.9 | (158,238.7 | ) | — | |||||||||||
Total sales | 159,458.9 | 255,992.4 | (158,238.7 | ) | 257,212.6 | |||||||||||
Gross profit | 6,173.8 | 110,160.6 | (515.2 | ) | 115,819.2 | |||||||||||
Operating expenses | (27,337.5 | ) | ||||||||||||||
Non-operating income and gains | 6,015.5 | |||||||||||||||
Non-operating expenses and losses | (2,531.6 | ) | ||||||||||||||
Income before income tax | 91,965.6 | |||||||||||||||
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North | Adjustments | |||||||||||||||
America | and | |||||||||||||||
and Others | Taiwan | Elimination | Consolidated | |||||||||||||
NT$ | NT$ | NT$ | NT$ | |||||||||||||
(In Millions) | ||||||||||||||||
Net income attributable to minority interest | 12.9 | |||||||||||||||
Identifiable assets | 89,000.9 | 416,076.6 | (43,725.3 | ) | 461,352.2 | |||||||||||
Long-term investments | 38,101.9 | |||||||||||||||
Total assets | 499,454.1 | |||||||||||||||
2005 | ||||||||||||||||
Sales to other than consolidated entities | 152,517.8 | 114,047.3 | — | 266,565.1 | ||||||||||||
Sales among consolidated entities | 13,513.2 | 152,132.5 | (165,645.7 | ) | — | |||||||||||
Total sales | 166,031.0 | 266,179.8 | (165,645.7 | ) | 266,565.1 | |||||||||||
Gross profit | 2,858.1 | 115,722.2 | (377.4 | ) | 118,202.9 | |||||||||||
Operating expenses | (27,234.3 | ) | ||||||||||||||
Non-operating income and gains | 7,067.5 | |||||||||||||||
Non-operating expenses and losses | (3,772.8 | ) | ||||||||||||||
Income before income tax | 94,263.3 | |||||||||||||||
Net income attributable to minority interest | 57.7 | |||||||||||||||
Identifiable assets | 92,904.4 | 430,038.4 | (45,861.3 | ) | 477,081.5 | |||||||||||
Long-term investments | 42,428.1 | |||||||||||||||
Total assets | 519,509.6 | |||||||||||||||
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c. | Net sales: |
Year Ended December 31 | ||||||||||||
2003 | 2004 | 2005 | ||||||||||
NT$ | NT$ | NT$ | ||||||||||
(In Millions) | ||||||||||||
Areas | ||||||||||||
Taiwan | 22,195.2 | 36,649.6 | 30,908.7 | |||||||||
United States | 104,500.7 | 114,866.0 | 119,792.3 | |||||||||
Asia and others | 68,872.8 | 91,342.4 | 102,977.9 | |||||||||
Europe | 11,710.4 | 19,089.3 | 18,122.8 | |||||||||
207,279.1 | 261,947.3 | 271,801.7 | ||||||||||
Sales returns and allowances | (4,282.3 | ) | (4,734.7 | ) | (5,236.6 | ) | ||||||
Net sales | 202,996.8 | 257,212.6 | 266,565.1 | |||||||||
The net sales information is presented by billed regions. | |||
d. | Major customers: | ||
The Company only had one customer to which the net sales accounted for at least 10% of its total net sales in the year ended December 31, 2003, 2004 and 2005. The net sales to such customer amounted to NT$31,220.1 million, NT$25,299.9 million and NT$29,258.3 million in the years ended December 31, 2003, 2004 and 2005, representing 15%, 10% and 11% of its total net sales, respectively. | |||
e. | Net sales by product categories: |
Year Ended December 31 | ||||||||||||
2003 | 2004 | 2005 | ||||||||||
NT$ | NT$ | NT$ | ||||||||||
(In Millions) | ||||||||||||
Products | ||||||||||||
Wafer fabrication | 186,178.9 | 233,216.9 | 239,576.6 | |||||||||
Mask making | 12,629.9 | 14,136.6 | 14,448.5 | |||||||||
Others | 4,188.0 | 9,859.1 | 12,540.0 | |||||||||
202,996.8 | 257,212.6 | 266,565.1 | ||||||||||
27. | SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES FOLLOWED BY THE COMPANY AND ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA | |
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the Republic of China (R.O.C. GAAP), which differ in the following respects from accounting principles generally accepted in the United States of America (U.S. GAAP): |
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a. | Marketable securities | ||
Under R.O.C. GAAP, marketable securities are carried at the lower of cost or market value with only unrealized losses recognized. Under U.S. GAAP, marketable securities that have readily determinable fair values are classified as either trading, available-for-sale or held-to-maturity securities. Debt securities that the Company has the positive intent and ability to hold to maturity are classified as held-to-maturity securities and reported at amortized cost. Debt and equity securities that are bought and traded for short-term profit are classified as trading securities and reported at fair value, with unrealized gains and losses recognized in earnings for the current period. Debt and equity securities not classified as either held-to-maturity or trading are classified as available-for-sale securities and reported at fair value, with unrealized gains and losses excluded from earnings and reported as a separate component of shareholders’ equity. | |||
b. | Equity-method investees | ||
The Company’s proportionate share of the income (loss) from an equity-method investee may differ if the equity-method investee’s net income (loss) under R.O.C. GAAP differs from that under U.S. GAAP. Such differences between R.O.C. GAAP and U.S. GAAP for the equity-method investees would result in adjustments to long-term investments and net income (loss). | |||
c. | Impairment of long-lived assets | ||
Under U.S. GAAP, an impairment loss is recognized when the carrying amount of an asset or a group of assets is not recoverable from the expected future cash flows and an impairment loss is measured as the difference between fair value and carrying amount of the asset or group of assets. The impairment losses are recorded in current period earnings and cannot be reversed subsequently. Long-lived assets (excluding goodwill and other indefinite-lived assets effective January 1, 2002) held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Under R.O.C. GAAP, for purposes of evaluating the recoverability of long-lived assets, assets purchased for use in the business but subsequently determined to have no use were written down to fair value and recorded as either idle assets or assets held for disposition. Under R.O.C. GAAP, effective January 1, 2005, the Company is required to recognize an impairment loss when an indication is identified that the carrying amount of an asset or a group of assets is not recoverable from the expected future cash flows. However, if the recoverable amount increases in a future period, the amount previously recognized as impairment would be reversed and recognized as a gain. The adjusted amount may not exceed the carrying amount that would have been determined, net of depreciation, as if no impairment loss had been recognized. Accordingly, the depreciation basis of long-lived assets impaired prior to 2005 under U.S. GAAP are different from those assets that continues to be depreciated under R.O.C. GAAP. | |||
d. | 10% tax on undistributed earnings | ||
In the R.O.C., a 10% tax is imposed on any undistributed earnings. For R.O.C. GAAP purposes, the Company recorded the 10% tax on undistributed earnings in the year of shareholders’ approval. Starting from 2002, the American Institute of Certified Public Accountants International Practices Task Force (the “Task Force”) concluded that in accordance with Emerging Issues Task Force (EITF) 95-10, “Accounting for tax credits related to dividends in accordance with U.S. SFAS 109,” the 10% tax on undistributed |
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earnings should be accrued during the period the earnings arise and adjusted to the extent that distributions are approved by the shareholders in the following year. In 2002, the Company modified its U.S. GAAP accounting policy to comply with the Task Force’s conclusion. The modification had no effect on the income tax expense in 2003 and 2005 due to a corresponding reduction in the valuation allowance as the additional tax made the previously reserved tax credits utilizable. To the extent the Company does not have sufficient tax credits to offset the 10% tax, an expense would be recognized in the year the earnings arise under U.S. GAAP. | |||
e. | Goodwill | ||
Under R.O.C. GAAP, goodwill was recorded for the excess of the purchase price over the net tangible assets for the purchase of 32% of TSMC-Acer Semiconductor Manufacturing Corporation (TASMC) in 1999 and is being amortized over ten years. Effective January 1, 2005, the Company reviews goodwill for impairment whenever an event occurs or circumstances change that more likely than not reduce the fair value of goodwill below its carrying amount. Under U.S. GAAP, the goodwill was then amortized over five years. Goodwill was not recorded under R.O.C. GAAP for the acquisition of the remaining 68% of TASMC in June 2000, because under R.O.C. GAAP goodwill from a business combination in the form of a share exchange was charged to capital surplus. Under U.S. GAAP, the acquisition cost is the fair value of the shares exchanged and the difference between the cost of an acquired company and the sum of the fair values of the net tangible and identifiable intangible assets is recorded as goodwill. Accordingly, the goodwill from the acquisition of the remaining 68% of TASMC is recorded for U.S. GAAP and was amortized over the estimated life of five years. Effective January 1, 2002, the Company adopted U.S. SFAS No. 142, “Goodwill and Other Intangible Assets” and ceased amortization of goodwill which are now assessed for impairment annually or more frequently if impairment indicators arise. In accordance with U.S. SFAS No. 142, the Company determined that it is comprised of one reporting unit and has completed its goodwill impairment test in accordance with the provisions of the standard and found no impairment as of December 31, 2003, 2004 and 2005. | |||
f. | Capital stock issued for contributed technology | ||
In 1998, certain employees received common shares of Worldwide Semiconductor Manufacturing Corporation prior to its merger with TSMC in exchange for contributed technology related to the testing and packaging of integrated circuits. The value of the contributed technology was determined to be NT$270.0 million. Under R.O.C. GAAP, capital stock issued for the contributed technology was recorded as an intangible asset and amortized over a five-year period, the estimated life of the technology. Under U.S. GAAP, the Company adjusted the carrying amount of the technology to zero at the time of the merger. | |||
g. | Derivative financial instruments | ||
Under R.O.C. GAAP, foreign-currency forward contracts are accounted for in a manner similar to that required under U.S. SFAS No. 52. All other derivatives are recorded upon settlement under R.O.C. GAAP as described in Note 2. Under U.S. GAAP, accounting for derivative instruments is covered under U.S. SFAS No. 133, as amended, and requires all entities to recognize derivative instruments as assets and liabilities on the balance sheet at fair value. If certain conditions are met, entities may elect to designate a derivative instrument as a hedging instrument. The derivative instruments currently used by the |
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Company do not qualify for hedge accounting criteria under U.S. SFAS No.133. Therefore, under U.S. GAAP, derivatives have historically been, and continue to be, recorded on the balance sheet at fair value, with the changes in fair values recognized in current period earnings. | |||
h. | Bonuses to employees, directors and supervisors | ||
According to R.O.C. regulations and the TSMC’s Articles of Incorporation, a portion of the Company’s distributable earnings should be set aside as bonuses to employees, directors and supervisors. Bonus to directors and supervisors is usually paid in cash. However, bonus to employees may be paid in cash or stock or a combination of both. Under R.O.C. GAAP, the bonuses, including stock bonuses which are valued at par value of NT$10, are treated as appropriations of retained earnings and are charged against retained earnings after such bonuses are formally approved by the shareholders in the following year. Under U.S. GAAP, such bonuses are treated as compensation expense and are charged to earnings. The amount of compensation expense related to stock bonuses is determined based on the market value of the Company’s common stock at the date of approval of distribution by the shareholders’ in the subsequent year. The total amount of the aforementioned bonuses to be paid in the following year is initially accrued based on management’s estimate pursuant to the Company’s Articles of Incorporation. Any difference between the amount initially accrued and the market value of the bonuses upon the payment of cash and the issuance of shares is recognized in the year of approval by shareholders. | |||
i. | Pension benefits | ||
U.S. SFAS No. 87, “Employer’s Accounting for Pensions” requires the Company to determine the accumulated pension obligation and the pension expense on an actuarial basis. The Company adopted U.S. SFAS No. 87 at the beginning of 1993 for U.S. GAAP purposes. R.O.C. SFAS No. 18 is similar in many respects to U.S. SFAS No. 87 and was adopted by the Company in 1996. The difference in the dates of adoption gives rise to a U.S. GAAP difference in the actuarial computation for transition obligation pension expense. | |||
j. | Stock-based compensation | ||
For U.S. GAAP reporting, the Company has elected to follow Accounting Principles Board Opinion (APB Opinion) No. 25, “Accounting for Stock Issued to Employees”, which measures compensation expense based on the difference, if any, between the market price of the underlying common stock and the exercise price of the stock option on the date of grant for stock option plans that are determined to be a fixed plan under the guidelines. TSMC 2002 Plan and GUC 2004 Plan included a provision for a reduction in the exercise price in the event TSMC or GUC issues additional common shares or issues ADSs at a price lower than the exercise price of a granted stock option. As such, under U.S. APB Opinion No. 25 and its related interpretations, TSMC 2002 Plan and GUC 2004 Plan are deemed variable plans, for which the Company is required to record compensation expense over the vesting period based on the difference between the exercise price and the current market price at the end of each period. TSMC 2003 Plan, TSMC 2004 Plan, GUC 2002 Plan and GUC 2003 Plan are fixed plans and do not result in any compensation expense as long as the exercise price is equal to the market price of the underlying common stock on the date of grant. The Company is required under U.S. SFAS No. 123, “Accounting for Stock-based Compensation” to disclose the pro forma information regarding options granted to its employees computed as if the fair value method had been applied. |
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Under R.O.C. GAAP, employee stock option plans that are amended or have options granted on or after January 1, 2004 must be accounted for by the interpretations issued by the ARDF. The Company adopted the intrinsic value method and any compensation expense determined using this method is recognized over the vesting period. No stock-based compensation expense was recognized under R.O.C. GAAP for the years ended December 31, 2003, 2004 and 2005. | |||
k. | Consolidated earnings per share | ||
Under R.O.C. GAAP, earnings per share is calculated as described in Note 2. Under U.S. GAAP, earnings per share is calculated by dividing net income by the weighted-average number of shares outstanding in each period, adjusted retroactively for any stock dividends and stock splits issued subsequently. Other shares issued from unappropriated earnings, such as stock bonus to employees, are included in the calculation of weighted-average number of shares outstanding from the date of occurrence. Earnings per equivalent American Depository Share (ADS) is calculated by multiplying earnings per share by five (one ADS represents five common shares). | |||
l. | Consolidated entities | ||
Before the ARDF revised the R.O.C. SFAS No. 7, “Consolidated Financial Statements”, an investee is required to be consolidated into an enterprise only if the enterprise holds more than 50% of the outstanding common shares of the investee. As a result, the Company did not consolidate the accounts of GUC and VisEra for the years ended December 31, 2003 and 2004 for R.O.C. GAAP. Under U.S. GAAP, consolidation may be required when share ownership is less than 50% but there are various factors that indicate substantive control of an entity. In January and February of 2003, TSMC purchased an aggregate of 47% ownership interest in GUC. In addition to the share ownership, TSMC executives represent a majority of the directors on GUC’s board of directors and several members of TSMC’s management team also hold management positions at GUC. Additionally, in November 2003, TSMC acquired a 25% ownership interest in VisEra. In addition to the share ownership, several members of TSMC’s management team hold key management positions at VisEra. As a result, the Company consolidated the accounts of GUC and VisEra for U.S. GAAP purposes for the years ended December 31, 2003 and 2004. | |||
In December 2004, the ARDF revised R.O.C. SFAS No. 7, which is required to be adopted by the Company in 2005. The revised R.O.C. SFAS No. 7 requires the Company to consolidate all investees under the controlling interest of the Company. In compliance with the revised R.O.C. SFAS No. 7, the consolidated financial statements included GUC, GUC-NA, and GUC-Japan for the year ended December 31, 2005. The Company lost its control over VisEra in November 2005, due to changes in investment structure, the consolidated statement of income for the year ended December 31, 2005, included the revenue and expenses of VisEra for the ten months ended October 31, 2005; moreover, pursuant to the newly revised standard, the Company did not retroactively restate its consolidated financial statements as of and for the year ended December 31, 2003 and 2004. | |||
In December 2003, the FASB released Interpretation No. 46R, “Consolidation of Variable Interest Entities — an Interpretation of Accounting Research Bulletin (ARB) No. 51” (“FIN46R”) which requires that all primary beneficiaries of Variable Interest Entities (VIE) consolidate that entity. FIN46R is effective immediately for VIEs created after December 15, 2003 and to VIEs |
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in which an enterprise obtains an interest after that date. Upon the adoption of FIN 46R, the Company performed its analysis and did not identify any variable interest entity, as defined by FIN 46R, having significant effect on the consolidated financial statements. | |||
The following reconciles net income and shareholders’ equity under R.O.C. GAAP as reported in the consolidated financial statements to the net income and shareholders’ equity amounts determined under U.S. GAAP, giving effect to the differences listed above. |
Year Ended December 31 | ||||||||||||||||
2003 | 2004 | 2005 | ||||||||||||||
NT$ | NT$ | NT$ | US$ | |||||||||||||
(Note 3) | ||||||||||||||||
(In Millions Except Per Share Amounts) | ||||||||||||||||
Net income | ||||||||||||||||
Net income attributable to shareholders of the parent based on R.O.C. GAAP | $ | 47,258.7 | $ | 92,316.1 | $ | 93,575.0 | $ | 2,852.9 | ||||||||
Adjustments: | ||||||||||||||||
Adjustment of unrealized gain (loss) on trading securities | (1,667.7 | ) | 365.1 | 868.7 | 26.4 | |||||||||||
Reversal unrealized loss on marketable securities under R.O.C. GAAP | — | 75.2 | 337.2 | 10.3 | ||||||||||||
U.S. GAAP adjustments on equity-method investees | (70.6 | ) | 952.2 | (161.9 | ) | (4.9 | ) | |||||||||
Reversal of depreciation on assets impaired under U.S. GAAP | 1,483.6 | 1,514.7 | 1,398.7 | 42.6 | ||||||||||||
Reversal of additional impairment write-off under R.O.C. GAAP | 104.6 | — | — | — | ||||||||||||
Income tax effect of U.S. GAAP adjustments | 42.4 | 7.0 | 147.8 | 4.5 | ||||||||||||
Reversal of amortization of goodwill recognized under R.O.C. GAAP | 1,281.7 | 1,255.3 | 1,220.3 | 37.2 | ||||||||||||
Reversal of amortization of capital stock payment for technology transfer | 59.6 | — | — | — | ||||||||||||
Adjustment to market value for derivative financial instruments | 555.3 | (142.0 | ) | (225.3 | ) | (6.9 | ) | |||||||||
Bonuses to employees, directors and supervisors Current year accrual | (3,530.2 | ) | (6,403.9 | ) | (7,121.7 | ) | (217.1 | ) | ||||||||
Fair market value adjustment of prior year accrual | (6,441.1 | ) | (12,956.7 | ) | (13,795.4 | ) | (420.6 | ) |
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Year Ended December 31 | ||||||||||||||||
2003 | 2004 | 2005 | ||||||||||||||
NT$ | NT$ | NT$ | US$ | |||||||||||||
(Note 3) | ||||||||||||||||
(In Millions Except Per Share Amounts) | ||||||||||||||||
Pension expense | (0.5 | ) | 2.6 | (9.9 | ) | (0.3 | ) | |||||||||
Stock-based compensation | (463.7 | ) | 156.2 | (791.4 | ) | (24.1 | ) | |||||||||
10% tax on undistributed earnings | — | (878.1 | ) | — | — | |||||||||||
Minority interest effect of U.S. GAAP adjustments | 49.3 | (10.3 | ) | (23.8 | ) | (0.7 | ) | |||||||||
Net decrease in net income attributable to shareholders of the parent | (8,597.3 | ) | (16,062.7 | ) | (18,156.7 | ) | (553.6 | ) | ||||||||
Net income attributable to shareholders of the parent based on U.S. GAAP | 38,661.4 | 76,253.4 | 75,418.3 | 2,299.3 | ||||||||||||
Cumulative preferred dividends | (184.5 | ) | — | — | — | |||||||||||
Income attributable to common shareholders of the parent | $ | 38,476.9 | $ | 76,253.4 | $ | 75,418.3 | $ | 2,299.3 | ||||||||
Basic earnings per common share | 1.59 | 3.14 | 3.07 | 0.09 | ||||||||||||
Diluted earnings per common share | 1.59 | 3.14 | 3.07 | 0.09 | ||||||||||||
Basic number of weighted average shares outstanding under U.S. GAAP (Thousands) | 24,135,050 | 24,311,396 | 24,570,872 | |||||||||||||
Diluted number of weighted average shares outstanding under U.S. GAAP (Thousands) | 24,145,156 | 24,317,880 | 24,584,037 | |||||||||||||
Basic earnings per ADS | 7.97 | 15.68 | 15.35 | 0.47 | ||||||||||||
Diluted earnings per ADS | 7.97 | 15.68 | 15.34 | 0.47 | ||||||||||||
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December 31 | ||||||||||||
2004 | 2005 | |||||||||||
NT$ | NT$ | US$ | ||||||||||
(Note 3) | ||||||||||||
(In Millions) | ||||||||||||
Shareholders’ equity | ||||||||||||
Equity attributable to shareholders of the parent based on R.O.C. GAAP | 398,965.3 | 445,630.3 | 13,586.3 | |||||||||
Adjustments: | ||||||||||||
Adjustment of unrealized gain on trading securities | 813.9 | 1,682.6 | 51.3 | |||||||||
U.S. GAAP adjustments on equity-method investees | (463.1 | ) | (463.8 | ) | (14.1 | ) | ||||||
Unrealized gain on available-for-sale marketable securities | ||||||||||||
The Company | 33.6 | (99.7 | ) | (3.0 | ) | |||||||
Equity-method investees | 242.7 | 21.3 | 0.6 | |||||||||
Reversal of R.O.C. GAAP unrealized loss on marketable securities | 75.2 | 412.4 | 12.6 | |||||||||
Loss on impairment of assets | (10,335.7 | ) | (10,740.7 | ) | (327.5 | ) | ||||||
Reversal of depreciation on assets impaired under U.S. GAAP | 5,529.7 | 7,223.0 | 220.2 | |||||||||
Effect of U.S. GAAP adjustments on income tax | 41.9 | 194.2 | 5.9 | |||||||||
Goodwill | ||||||||||||
Carrying amount difference from 68% of TASMC’s share purchase acquisition | 52,212.7 | 52,212.7 | 1,591.9 | |||||||||
Reversal of amortization of goodwill recognized under R.O.C. GAAP | (12,545.0 | ) | (11,230.0 | ) | (342.4 | ) | ||||||
Derivative financial instruments | (103.0 | ) | (328.2 | ) | (10.0 | ) | ||||||
Bonuses to employees, directors and supervisors | (6,403.9 | ) | (7,121.7 | ) | (217.1 | ) | ||||||
10% tax on undistributed earnings | (878.1 | ) | — | — | ||||||||
Accrued pension expense | (37.7 | ) | (47.7 | ) | (1.5 | ) | ||||||
Minority interest effect of U.S. GAAP adjustments | (23.7 | ) | (47.5 | ) | (1.5 | ) | ||||||
Net increase in equity attributable to shareholders of the parent | 28,159.5 | 31,666.9 | 965.4 | |||||||||
Equity attributable to shareholders of the parent based on U.S. GAAP | 427,124.8 | 477,297.2 | 14,551.7 | |||||||||
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Year Ended December 31 | ||||||||||||||||
2003 | 2004 | 2005 | ||||||||||||||
NT$ | NT$ | NT$ | US$ | |||||||||||||
(Note 3) | ||||||||||||||||
(In Millions) | ||||||||||||||||
Changes in equity attributable to shareholders of the parent based on U.S. GAAP | ||||||||||||||||
Balance, beginning of year | 310,622.7 | 357,173.1 | 427,124.8 | 13,022.1 | ||||||||||||
Net income for the year | 38,661.4 | 76,253.4 | 75,418.3 | 2,299.3 | ||||||||||||
Unrealized gain on available-for-sale marketable securities | ||||||||||||||||
The Company | 361.1 | (346.1 | ) | (133.3 | ) | (4.1 | ) | |||||||||
Equity-method investees | 317.8 | 112.0 | (221.4 | ) | (6.8 | ) | ||||||||||
Common shares issued as bonus to employees | ||||||||||||||||
TSMC | 7,980.1 | 15,677.5 | 16,881.6 | 514.7 | ||||||||||||
Equity-method investees | — | — | 54.4 | 1.6 | ||||||||||||
Adjustment arising from changes of ownership percentage in investees | (158.9 | ) | 34.6 | 73.2 | 2.3 | |||||||||||
Translation adjustments | (991.4 | ) | (2,273.6 | ) | 1,574.5 | 48.0 | ||||||||||
Proceeds from sales of treasury stock | 300.3 | 39.9 | 899.5 | 27.4 | ||||||||||||
Retirement of treasury stock | — | (7,059.8 | ) | — | — | |||||||||||
Cash dividends received by subsidiaries from parent company | — | 22.8 | 84.3 | 2.6 | ||||||||||||
Cash dividends to preferred shareholders | (455.0 | ) | (184.5 | ) | — | — | ||||||||||
Cash dividends to common shareholders | — | (12,160.0 | ) | (46,504.1 | ) | ( 1,417.8 | ) | |||||||||
Deferred stock-based compensation | 545.3 | (168.1 | ) | 896.4 | 27.3 | |||||||||||
Issuance of stock from exercising stock options | — | 3.6 | 270.9 | 8.3 | ||||||||||||
Adjustment of prior year accrual of 10% tax on undistributed earnings | — | — | 878.1 | 26.8 | ||||||||||||
Capital stock payment for technology transfer | (10.1 | ) | — | — | — | |||||||||||
Balance, end of year | 357,173.1 | 427,124.8 | 477,297.2 | 14,551.7 | ||||||||||||
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December 31 | ||||||||||||
2004 | 2005 | |||||||||||
NT$ | NT$ | US$ | ||||||||||
(Note 3) | ||||||||||||
(In Millions) | ||||||||||||
Assets | ||||||||||||
Current assets | 186,379.7 | 214,141.3 | 6,528.7 | |||||||||
Long-term investments | 37,509.5 | 42,292.1 | 1,289.4 | |||||||||
Property, plant and equipment, net | 254,446.4 | 241,305.7 | 7,356.9 | |||||||||
Goodwill | 46,756.6 | 46,993.3 | 1,432.7 | |||||||||
Other assets | 11,193.6 | 14,186.6 | 432.5 | |||||||||
Total assets | 536,285.8 | 558,919.0 | 17,040.2 | |||||||||
Liabilities | ||||||||||||
Current liabilities | 71,861.3 | 42,765.4 | 1,303.9 | |||||||||
Long-term liabilities | 32,275.9 | 30,410.2 | 927.1 | |||||||||
Other liabilities | 4,279.1 | 7,786.1 | 237.4 | |||||||||
Minority interest in subsidiaries | 744.7 | 660.1 | 20.1 | |||||||||
Equity attributable to shareholders of the parent | 427,124.8 | 477,297.2 | 14,551.7 | |||||||||
Total Liabilities and Shareholders’ equity | 536,285.8 | 558,919.0 | 17,040.2 | |||||||||
Year Ended December 31 | ||||||||||||||||
2003 | 2004 | 2005 | ||||||||||||||
NT$ | NT$ | NT$ | US$ | |||||||||||||
(Note 3) | ||||||||||||||||
(In Millions) | ||||||||||||||||
Net sales | 203,599.6 | 260,035.0 | 267,027.7 | 8,141.1 | ||||||||||||
Cost of sales | 133,492.6 | 154,785.3 | 161,808.4 | 4,933.2 | ||||||||||||
Gross profit | 70,107.0 | 105,249.7 | 105,219.3 | 3,207.9 | ||||||||||||
Operating expenses | 25,744.2 | 32,423.3 | 32,604.8 | 994.0 | ||||||||||||
Income from operations | 44,362.8 | 72,826.4 | 72,614.5 | 2,213.9 | ||||||||||||
Non-operating income (expenses), net | (1,922.1 | ) | 4,011.6 | 3,368.1 | 102.7 | |||||||||||
Income before income tax and minority interest | 42,440.7 | 76,838.0 | 75,982.6 | 2,316.6 | ||||||||||||
Net income attributable to shareholders of the parent | 38,661.4 | 76,253.4 | 75,418.3 | 2,299.3 | ||||||||||||
Cumulative preferred dividends | (184.5 | ) | — | — | — | |||||||||||
Income attributable to common shareholders of the parent | 38,476.9 | 76,253.4 | 75,418.3 | 2,299.3 | ||||||||||||
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unrealised gains and losses relating to the translation of financial statements maintained in foreign currencies and unrealized gains and losses relating to the Company’s investments in available-for-sale securities. | ||
Statements of comprehensive income for the years ended December 31, 2003, 2004 and 2005 are as follows: |
Year Ended December 31 | ||||||||||||||||
2003 | 2004 | 2005 | ||||||||||||||
NT$ | NT$ | NT$ | US$ | |||||||||||||
(Note 3) | ||||||||||||||||
(In Millions) | ||||||||||||||||
Net income attributable to shareholders of the parent based on U.S. GAAP | 38,661.4 | 76,253.4 | 75,418.3 | 2,299.3 | ||||||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||
Adjustment of available-for-sale marketable securities | ||||||||||||||||
TSMC | 361.1 | (346.1 | ) | (133.3 | ) | (4.1 | ) | |||||||||
Equity-method investees | 317.8 | 112.0 | (221.4 | ) | (6.8 | ) | ||||||||||
Translation adjustments | (991.4 | ) | (2,273.6 | ) | 1,574.5 | 48.0 | ||||||||||
(312.5 | ) | (2,507.7 | ) | 1,219.8 | 37.1 | |||||||||||
Comprehensive income | 38,348.9 | 73,745.7 | 76,638.1 | 2,336.4 | ||||||||||||
The Company applies R.O.C. SFAS No. 17, “Statement of Cash Flows”. Its objectives and principles are similar to those set out in the U.S. SFAS No. 95, “Statement of Cash Flows”. The principal differences between the standards relate to classification. Cash flows from changes in trading securities investments, deferred charges, other assets-miscellaneous, guarantee deposits and other liabilities and bonuses to directors and supervisors are included as operating activities under U.S. SFAS No. 95. Summarized cash flow data by operating, investing and financing activities in accordance with U.S. SFAS No. 95 are as follows: |
Year Ended December 31 | ||||||||||||||||
2003 | 2004 | 2005 | ||||||||||||||
NT$ | NT$ | NT$ | US$ | |||||||||||||
(Note 3) | ||||||||||||||||
(In Millions) | ||||||||||||||||
Net cash inflow (outflow) from: | ||||||||||||||||
Operating activities | 102,372.4 | 109,352.7 | 158,307.3 | 4,826.4 | ||||||||||||
Investing activities | (40,557.7 | ) | (104,887.5 | ) | (76,505.9 | ) | (2,332.5 | ) | ||||||||
Financing activities | (26,115.0 | ) | (31,691.0 | ) | (60,198.0 | ) | (1,835.2 | ) | ||||||||
Change in cash and cash equivalents | 35,699.7 | (27,225.8 | ) | 21,603.4 | 658.7 | |||||||||||
Cash and cash equivalents at the beginning of year | 67,790.2 | 103,427.0 | 74,531.4 | 2,272.3 | ||||||||||||
Effect of changes in foreign exchange rate | (62.9 | ) | (1,669.8 | ) | 348.9 | 10.6 | ||||||||||
Cash and cash equivalents at the end of year | 103,427.0 | 74,531.4 | 96,483.7 | 2,941.6 | ||||||||||||
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28. | ADDITIONAL DISCLOSURES REQUIRED BY U.S. GAAP |
a. | Recent accounting pronouncements | ||
In March 2004, the Financial Accounting Standards Board (FASB) approved the consensus reached on the EITF Issue No. 03-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments.” The Issue’s objective is to provide guidance for identifying other-than-temporarily impaired investments. EITF 03-1 also provides new disclosure requirements for investments that are deemed to be temporarily impaired. In September 2004, the FASB issued a FASB Staff Position (FSP) EITF 03-1-1 that delays the effective date of the measurement and recognition guidance in EITF 03-1 until further notice. In November 2005, the FASB issued a FASB Staff Position (FSP) FAS 115-1/124-1 that addresses the measurement and recognition guidance for identifying other-than-temporarily impaired investments. This FSP also includes accounting consideration subsequent to the recognition and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairment. The disclosure requirements of EITF 03-1 and FSP 115-1/124-1 are effective with this annual report for fiscal 2004 and 2005. | |||
In December 2004, the FASB issued SFAS No. 123(R) “Share-Based Payment.” SFAS No. 123(R) requires that companies recognize compensation expense equal to the fair value of employee share-based equity awards for the annual reporting period that begins after June 15, 2005. SFAS No. 123(R) applies to all awards granted after June 15, 2005, and prior period’s awards that are modified, repurchased, or cancelled after June 15, 2005. SFAS No. 123(R) eliminated the ability to account for these instruments under the intrinsic value method prescribed by APB Opinion No. 25 and allowed under the original provisions of SFAS No. 123. The impact on the Company’s net income will include the remaining amortization of the fair value of existing options currently disclosed as pro forma expense in Note 29.c. and is contingent upon the number of future options granted, the selected transition method and the selection of either the Black-Scholes or the binominal lattice model for valuing options. The effect of adopting the standard is currently being evaluated but is not expected to have a material effect on the Company’s financial position or overall trends in results of operations. | |||
In November 2004, SFAS Statement No. 151 amended the guidance in ARB No. 43, Chapter 4, “Inventory Pricing,” to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage), SFAS No.151 requires that those items should be recognized as current period charges and requires the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities. The guidance is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The Company is currently evaluating the potential impact of this standard on its financial position and the result of operations, but does not believe the adoption of SFAS No. 151 will have a material effect on the result of operations or financial position of the Company. | |||
In May 2005, the FASB issued SFAS No. 154 “Accounting Changes and Error Corrections”. SFAS No. 154 replaces APB Opinion No. 20 “Accounting Change”, and SFAS No. 3 “Reporting Accounting Changes in Interim Financial Statements” and changes the requirements for the accounting for and reporting of a change in accounting principle. SFAS No. 154 also applies to all voluntary changes in accounting principle and changes required by an accounting pronouncement in the unusual instance that the pronouncement |
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does not include specific transition provision. The statement also defines “retrospective application” and “restatement”. The retrospective application of a change in accounting principles is limited to the direct effects of the changes. The statement should be affective for accounting changes made in fiscal years beginning after December 15, 2005. The Company believes that there is no impact on earnings or financial position of the Company after adopting SFAS No. 154. | |||
In February 2006, the FASB issued SFAS No. 155 “ Accounting for Certain Hybrid Financial Instruments – An Amendment of SFAS No. 133 and 140”. The Statement permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation; establish a requirement to evaluate interests in securitized financial assets and allow a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. The statement is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. The Company is currently evaluating the potential impact of this standard on its financial position and the result of operations, but does not believe the adoption of SFAS No. 155 will have a material effect on the result of operations or financial position of the Company. | |||
b. | Marketable securities | ||
On December 31, 2004 and 2005, certain investments carried at the lower of cost or market value under R.O.C. GAAP were adjusted to fair value for purposes of U.S. GAAP presentation: |
(R.O.C. GAAP) | (U.S. GAAP) | |||||||||||||||
Carrying Amount | Fair Value | |||||||||||||||
2004 | 2005 | 2004 | 2005 | |||||||||||||
NT$ | NT$ | NT$ | NT$ | |||||||||||||
(In Millions) | ||||||||||||||||
Marketable securities – trading | 401.7 | 389.5 | 1,215.6 | 2,265.4 | ||||||||||||
Marketable securities – available-for- sale | 52,965.2 | 50,175.4 | 53,044.7 | 50,079.9 | ||||||||||||
Marketable securities – held-to- maturity | 29,894.9 | 28,975.0 | 29,837.4 | 29,081.9 |
The Company uses the average cost method for trading securities and available-for-sale securities when determining cost basis. Proceeds from sales of available-for-sale securities for the years ended December 31, 2003, 2004 and 2005 were NT$11,151.5 million, NT$28,954.6 million and NT$101,651.9 million, respectively. Net realized gains on these sales were NT$74.5 million and NT$ 154.5 million for the years ended December 31, 2003 and 2004, respectively. Net realized losses on these sales were NT$137.9 million for the year ended December 31, 2005. |
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As of December 31, 2004 and 2005, available-for-sale and held-to-maturity investments of the Company were as follows: |
2004 | ||||||||||||||||
Gross | Gross | Estimated | ||||||||||||||
Adjusted | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
NT$ | NT$ | NT$ | NT$ | |||||||||||||
(In Millions) | ||||||||||||||||
Corporate bonds | 18,464.3 | 8.4 | (124.4 | ) | 18,348.3 | |||||||||||
Corporate issued asset-backed securities | 11,766.9 | 9.9 | (51.0 | ) | 11,725.8 | |||||||||||
Bond funds | 10,662.7 | 100.1 | — | 10,762.8 | ||||||||||||
Agency bonds | 8,633.9 | 6.6 | (30.2 | ) | 8,610.3 | |||||||||||
Government bonds | 17,607.3 | 3.4 | (27.3 | ) | 17,583.4 | |||||||||||
Money market funds | 1,641.0 | — | — | 1,641.0 | ||||||||||||
Government bonds acquired under repurchase agreements | 249.4 | 2.2 | — | 251.6 | ||||||||||||
Publicly-traded common stocks | 34.1 | 115.5 | (15.0 | ) | 134.6 | |||||||||||
Commercial papers | 95.7 | — | — | 95.7 | ||||||||||||
Corporate notes | 63.8 | — | — | 63.8 | ||||||||||||
Non-publicly traded common stock | 1,226.5 | — | — | 1,226.5 | ||||||||||||
Preferred stock | 1,677.9 | — | — | 1,677.9 | ||||||||||||
Funds | 290.1 | — | — | 290.1 | ||||||||||||
Structured time deposits | 10,521.7 | 23.3 | (74.7 | ) | 10,470.3 | |||||||||||
Total | 82,935.3 | 269.4 | (322.6 | ) | 82,882.1 | |||||||||||
Reported as: | ||||||||||||||||
Short-term investments | 53,946.9 | |||||||||||||||
Long-term investments | 28,935.2 | |||||||||||||||
82,882.1 | ||||||||||||||||
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2005 | ||||||||||||||||
Gross | Gross | Estimated | ||||||||||||||
Adjusted | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
NT$ | NT$ | NT$ | NT$ | |||||||||||||
(In Millions) | ||||||||||||||||
Corporate bonds | 21,089.1 | 10.3 | (313.9 | ) | 20,785.5 | |||||||||||
Corporate issued asset-backed securities | 11,724.1 | 2.5 | (144.0 | ) | 11,582.6 | |||||||||||
Bond funds | 6,055.6 | 143.4 | — | 6,199.0 | ||||||||||||
Agency bonds | 14,607.7 | 7.6 | (118.6 | ) | 14,496.7 | |||||||||||
Government bonds | 12,010.3 | 1.6 | (21.3 | ) | 11,990.6 | |||||||||||
Money market funds | 260.7 | — | — | 260.7 | ||||||||||||
Publicly traded common stocks | 122.5 | 323.3 | — | 445.8 | ||||||||||||
Corporate notes | 263.2 | — | — | 263.2 | ||||||||||||
Non-publicly traded common stocks | 903.6 | — | — | 903.6 | ||||||||||||
Preferred stocks | 1,964.0 | — | — | 1,964.0 | ||||||||||||
Funds | 335.0 | — | — | 335.0 | ||||||||||||
Structured time deposits | 10,227.0 | 4.5 | (296.4 | ) | 9,935.1 | |||||||||||
Total | 79,562.8 | 493.2 | (894.2 | ) | 79,161.8 | |||||||||||
Reported as: | ||||||||||||||||
Short-term investments | 47,056.1 | |||||||||||||||
Long-term investments | 32,105.7 | |||||||||||||||
79,161.8 | ||||||||||||||||
The following table shows the gross unrealized losses and fair value of the investments with unrealized losses that are not deemed to be other-than-temporary impaired, aggregated by investment category and length of time that have been in a continuous unrealized loss position on December 31, 2005: |
Less than 12 Months | 12 Months or Greater | Total | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
Value | Losses | Value | Losses | Value | Losses | |||||||||||||||||||
NT$ | NT$ | NT$ | NT$ | NT$ | NT$ | |||||||||||||||||||
(In Millions) | ||||||||||||||||||||||||
Corporate bonds | 8,978.9 | (102.1 | ) | 5,631.4 | (211.8 | ) | 14,610.3 | (313.9 | ) | |||||||||||||||
Structured time deposits | 1,640.9 | (16.1 | ) | 6,289.6 | (280.3 | ) | 7,930.5 | (296.4 | ) | |||||||||||||||
Corporate issued asset-backed securities | 4,407.8 | (122.8 | ) | 4,979.5 | (21.2 | ) | 9,387.3 | (144.0 | ) | |||||||||||||||
Government bonds | 3,682.6 | (10.5 | ) | 7,136.8 | (10.8 | ) | 10,819.4 | (21.3 | ) | |||||||||||||||
Agency bonds | 9,034.3 | (94.4 | ) | 2,463.7 | (24.2 | ) | 11,498.0 | (118.6 | ) | |||||||||||||||
27,744.5 | (345.9 | ) | 26,501.0 | (548.3 | ) | 54,245.5 | (894.2 | ) | ||||||||||||||||
The gross unrealized losses related to bonds, asset-backed securities and structured time deposits were due to changes in interest rates. Management believes that none of the |
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unrealized losses represented an other-than-temporary impairment based on its evaluation of available evidence as of December 31, 2005. | |||
As of December 31, 2005, the amortized cost and fair value of the Company’s available-for-sale and held-to-maturity investments in debt securities by contractual maturity were as follows: |
Amortized | ||||||||
Cost | Fair Value | |||||||
NT$ | NT$ | |||||||
(In Millions) | ||||||||
Due in one year or less | 15,057.2 | 14,946.4 | ||||||
Due after one year through two years | 14,470.6 | 14,363.5 | ||||||
Due after two years through five years | 19,707.1 | 19,479.1 | ||||||
Due after five years | 10,459.6 | 10,329.7 | ||||||
59,694.5 | 59,118.7 | |||||||
Net holding gains on trading security assets were NT$814 million in 2004 and NT$1,876 million in 2005. The net holding gain included a gain that resulted from the transfer of formerly available-for-sale securities to trading securities as they became marketable, which was NT$64 million and NT$221 million in 2004 and 2005, respectively. The cumulative difference between their cost and fair market value at the time they became marketable was recorded as a gain in 2004 and 2005. | |||
c. | Stock-based compensation plans | ||
The Company applies U.S. APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related Interpretations in accounting for its stock-based compensation plans. Accordingly, the Company records expense for employee stock-based compensation plans equal to the excess of the market price of the underlying TSMC shares at the date of grant over the exercise price of the stock-related award, if any (known as the intrinsic value). | |||
Certain characteristics of the stock options granted under TSMC 2002 Plan and GUC 2004 Plan are not reasonably estimable using appropriate valuation methodologies as prescribed under U.S. SFAS No. 123. Accordingly, the expenses for the stock options granted under the TSMC 2002 Plan and GUC 2004 Plan were determined using the variable accounting method as prescribed under U.S. APB Opinion No. 25. No additional expense would be required if the Company were to adopt U.S. SFAS No. 123. | |||
With respect to TSMC 2003 Plan, TSMC 2004 Plan, GUC 2002 Plan and GUC 2003 Plan which qualify as fixed plans under U.S. APB Opinion No. 25, all employee stock options are issued with the exercise price equal to the market price of the underlying shares at the date of grant and therefore, no compensation expense is recorded. | |||
The following table summarizes the pro forma operating results of the Company for the year ended December 31, 2003, 2004 and 2005 had compensation expense for stock options granted been determined in accordance with the fair value based method prescribed by U.S. SFAS No. 123: |
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2003 | 2004 | 2005 | ||||||||||
NT$ | NT$ | NT$ | ||||||||||
(In Millions) | ||||||||||||
Net income attributable to shareholders of the parent based on U.S. GAAP, as reported | 38,661.4 | 76,253.4 | 75,418.3 | |||||||||
Add stock-based compensation expense (gain) included in reported net income attributable to shareholders of the parent under U.S. APB Opinion No.25, net of tax | 463.7 | (156.2 | ) | 753.5 | ||||||||
Less stock-based compensation expense determined under U.S. SFAS No.123, net of tax | (464.2 | ) | (61.6 | ) | (846.8 | ) | ||||||
Pro forma net income attributable to shareholders of the parent | 38,660.9 | 76,035.6 | 75,325.0 | |||||||||
Earnings per shares: | ||||||||||||
Pro forma basic earnings per share | 1.91 | 3.28 | 3.07 | |||||||||
Pro forma diluted earnings per share | 1.91 | 3.28 | 3.06 | |||||||||
Basic and diluted earnings per share as reported | 1.91 | 3.29 | 3.07 | |||||||||
Pro forma basic earnings per ADS | 9.55 | 16.42 | 15.33 | |||||||||
Pro forma diluted earnings per ADS | 9.54 | 16.42 | 15.32 | |||||||||
Basic earnings per ADS as reported | 9.55 | 16.47 | 15.35 | |||||||||
Diluted earnings per ADS as reported | 9.54 | 16.46 | 15.34 |
The fair values of the options granted under the TSMC 2003 Plan, TSMC 2004 Plan, GUC 2002 Plan and GUC 2003 Plan were estimated using the Black-Scholes model with the following assumptions: |
2003 | 2004 | 2005 | ||||||
TSMC | Expected dividend yield | 0.00% | 0.00%~1.00% | 0.00%-3.44% | ||||
Expected volatility | 45% | 43.77%~46.70% | 43.77%-46.70% | |||||
Risk free interest rate | 3.29% | 3.07%~3.85% | 3.07%-3.85% | |||||
Expected life | 5 years | 5 years | 5 years | |||||
GUC | Expected dividend yield | — | — | — | ||||
Expected volatility | 22.51%~22.53% | 22.51%~41.74% | 22.51%-41.74% | |||||
Risk free interest rate | 2.56% | 2.56% | 2.56% | |||||
Expected life | 6 years | 6 years | 6 years |
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(a) | See Item 18 for a list of the financial statements filed as part of this annual report. | |||||
(b) | Exhibits to this Annual Report: | |||||
1.1(1) | Articles of Incorporation of Taiwan Semiconductor Manufacturing Company Limited, as amended and restated on May 10, 2005. | |||||
2b.1 | The Company hereby agrees to furnish to the Securities and Exchange Commission, upon request, copies of instruments defining the rights of holders of long-term debt of the Company and its subsidiaries. | |||||
3.1(2) | Rules for Election of Directors and Supervisors, as amended and restated on May 7, 2002. | |||||
3.2(2) | Rules and Procedures of Shareholders’ Meetings, as amended and restated on May 7, 2002. | |||||
4.1(3) | Land Lease with Southern Taiwan Science Park Administration (formerly Tainan Science Park Administration) relating to the fabs located in Southern Taiwan Science Park (effective August 1, 1997 to July 31, 2017) (in Chinese with English summary). | |||||
4.2(3) | Land Lease with Southern Taiwan Science Park Administration (formerly Tainan Science Park Administration) relating to the fabs located in Southern Taiwan Science Park (effective May 1, 1998 to April 30, 2018) (in Chinese with English summary). | |||||
4.3(3) | Land Lease with Southern Taiwan Science Park Administration (formerly Tainan Science Park Administration) relating to the fabs located in Southern Taiwan Science Park (effective November 1, 1999 to October 31, 2019) (in Chinese with English summary). | |||||
4.4(3) | Land Lease with Hsinchu Science Park Administration relating to Fab 7 (effective December 4, 1989 to December 3, 2009) (in Chinese with English summary). | |||||
4.5(2) | Land Lease with Hsinchu Science Park Administration relating to the Fab 7 (effective July 1, 1995 to June 30, 2015) (in Chinese with English summary). | |||||
4.6(2) | Land Lease with Hsinchu Science Park Administration relating to Fab. 8 (effective March 15, 1997 to March 14, 2017) (in Chinese with English summary). | |||||
4.7(3) | Land Lease with Hsinchu Science Park Administration relating to Fab 12 (Phase I) (effective December 1, 1999 to November 30, 2019) (in Chinese with English summary). | |||||
+4.8(1) | Technology Cooperation Agreement between Taiwan Semiconductor Manufacturing Company Ltd. and Philips Electronics N.V., as amended and restated on June 20, 2004. | |||||
4.9a(4) | Taiwan Semiconductor Manufacturing Company Limited 2002 Employee Stock Option Plan, as revised by the board of directors on March 4, 2003. | |||||
4.9aa(5) | Taiwan Semiconductor Manufacturing Company Limited 2003 Employee Stock Option Plan. |
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4.9aaa(6) | Taiwan Semiconductor Manufacturing Company Limited 2004 Employee Stock Option Plan. | |||||
4.9aaaa(1) | Taiwan Semiconductor Manufacturing Company Limited 2004 Employee Stock Option Plan, as revised on February 22, 2005. | |||||
4.9b(4) | TSMC North America 2002 Employee Stock Option Plan, as revised on June 5, 2003. | |||||
4.9bb(5) | TSMC North America 2003 Employee Stock Option Plan. | |||||
4.9c(4) | WaferTech, LLC 2002 Employee Stock Option Plan, as revised on June 5, 2003. | |||||
4.9cc(5) | Wafer Tech, LLC 2003 Employee Stock Option Plan. | |||||
4.9ccc(6) | Wafer Tech, LLC 2004 Employee Stock Option Plan. | |||||
4.9cccc(1) | Wafer Tech, LLC 2004 Employee Stock Option Plan, as revised on February 22, 2005. | |||||
+4.10(7) | Shareholders Agreement, dated as of March 15, 1999, by and among EDB Investments Pte. Ltd., Koninklijke Philips Electronics N.V. and Taiwan Semiconductor Manufacturing Company Ltd. | |||||
4.11(9) | Land Lease with Hsinchu Science Park Administration relating to Fabs 2 and 5 and Corporate Headquarters (effective April 1, 1988 to March 31, 2008) (in Chinese with English summary). | |||||
4.12(9) | Land Lease with Hsinchu Science Park Administration relating to Fabs 3 and 4 (effective May 16, 1993 to May 15, 2013) (in Chinese with English summary). | |||||
4.13(8) | Land Lease with Hsinchu Science Park Administration relating to Fab 12 (Phase II) (effective May 1, 2001 to December 31, 2020) (English summary). | |||||
4.14(8) | Land Lease with Southern Taiwan Science Park Administration relating to fabs located in Southern Taiwan Science Park (effective November 1, 2000 to October 31, 2020) (English summary). | |||||
8.1 | List of subsidiaries of Taiwan Semiconductor Manufacturing Company Limited. | |||||
12.1 | Certification of Chief Executive Officer required by Rule 13a-14(a) under the Exchange Act. | |||||
12.2 | Certification of Chief Financial Officer required by Rule 13a-14(a) under the Exchange Act. | |||||
13.1 | Certification of Chief Executive Officer required by Rule 13a-14(b) under the Exchange Act. | |||||
13.2 | Certification of Chief Financial Officer required by Rule 13a-14(b) under the Exchange Act. | |||||
99.1 | Consent of Deloitte & Touche. |
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(1) | Previously filed in TSMC’s annual report on Form 20-F for the fiscal year ended December 31, 2004, filed by TSMC on May 16, 2005. | ||
(2) | Previously filed in TSMC’s annual report on Form 20-F for the fiscal year ended December 31, 2001, filed by TSMC on May 9, 2002. | ||
(3) | Previously filed in TSMC’s annual report on Form 20-F for the fiscal year ended December 31, 1999, filed by TSMC on June 29, 2000. | ||
(4) | Previously filed in TSMC’s annual report on Form 20-F for the fiscal year ended December 31, 2002, filed by TSMC on June 23, 2003. | ||
(5) | Previously filed in TSMC’s registration statement on Form S-8, filed by TSMC on October 20, 2003. | ||
(6) | Previously filed in TSMC’s registration statement on Form S-8, filed by TSMC on January 6, 2005. | ||
(7) | Previously filed in TSMC’s annual report on Form 20-F for the fiscal year ended December 31, 1998, filed by TSMC on April 30, 1999. | ||
(8) | Previously filed in TSMC’s annual report on Form 20-F for the fiscal year ended December 31, 2003, filed by TSMC on May 28, 2004. | ||
(9) | Previously filed in TSMC’s registration statement on Form F-1, filed by TSMC on September 15, 1997. | ||
+ | Contains portions for which confidential treatment has been requested. |