1934 Act Registration No. 1-14700

SECURITIES AND EXCHANGE

COMMISSION

Washington, DC 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

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

THE SECURITIES EXCHANGE ACT OF 1934

For the month of August 2011

Taiwan Semiconductor Manufacturing Company Ltd.

(Translation of Registrant’s Name Into English)

No. 8, Li-Hsin Rd. 6,

Hsinchu Science Park,

Taiwan

(Address of Principal Executive Offices)

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

Form 20-F   x                                                  Form 40-F   ¨

(Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)

Yes  ¨                                                              No   x

(If “Yes” is marked, indicated below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82:             .)

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Taiwan Semiconductor Manufacturing

Company Limited

Financial Statements for the

Six Months Ended June 30, 2011 and 2010 and

Independent Auditors’ Report

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INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders

Taiwan Semiconductor Manufacturing Company Limited

We have audited the accompanying balance sheets of Taiwan Semiconductor Manufacturing Company Limited as of June 30, 2011 and 2010, and the related statements of income, changes in shareholders’ equity and cash flows for the six months then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the Rules Governing the Audit of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Those rules and standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Taiwan Semiconductor Manufacturing Company Limited as of June 30, 2011 and 2010, and the results of its operations and its cash flows for the six months then ended in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, requirements of the Business Accounting Law and Guidelines Governing Business Accounting with respect to financial accounting standards, and accounting principles generally accepted in the Republic of China.

We have also audited, in accordance with the Rules Governing the Audit of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China, the consolidated financial statements of Taiwan Semiconductor Manufacturing Company Limited and subsidiaries as of and for the six months ended June 30, 2011 on which we have issued an unqualified opinion.

July 25, 2011

Notice to Readers

The accompanying financial statements are intended only to present the financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdictions. The standards, procedures and practices to audit such financial statements are those generally accepted and applied in the Republic of China.

For the convenience of readers, the auditors’ report and the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language auditors’ report and financial statements shall prevail.

 

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Taiwan Semiconductor Manufacturing Company Limited

BALANCE SHEETS

JUNE 30, 2011 AND 2010

(In Thousands of New Taiwan Dollars, Except Par Value)

 

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

 

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Taiwan Semiconductor Manufacturing Company Limited

STATEMENTS OF INCOME

FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND 2010

(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

 

 

		2011								2010
		Amount				%				Amount				%
GROSS SALES (Notes 2 and 24)		$	212,301,752							$	196,370,319
SALES RETURNS AND ALLOWANCES (Notes 2 and 8)			1,907,979								5,560,054
NET SALES			210,393,773				100				190,810,265				100
COST OF SALES (Notes 9, 19 and 24)			113,265,613				54				98,822,613				52
GROSS PROFIT			97,128,160				46				91,987,652				48
REALIZED GROSS PROFIT FROM AFFILIATES (Note 2)			249,480				-				1,646				-
REALIZED GROSS PROFIT			97,377,640				46				91,989,298				48
OPERATING EXPENSES (Notes 19 and 24)
Research and development			15,283,607				7				12,596,905				7
General and administrative			6,029,204				3				4,809,249				2
Marketing			1,211,366				1				1,358,880				1
Total operating expenses			22,524,177				11				18,765,034				10
INCOME FROM OPERATIONS			74,853,463				35				73,224,264				38
NON-OPERATING INCOME AND GAINS
Equity in earnings of equity method investees, net (Notes 2 and 10)			2,914,860				2				2,179,835				1
Settlement income (Note 27)			433,425				-				1,278,400				1
Interest income			402,293				-				388,318				-
Foreign exchange gain, net (Note 2)			322,334				-				92,744				-
Technical service income (Note 24)			224,238				-				236,790				-
Valuation gain on financial instruments, net (Notes 2, 5 and 23)			-				-				29,739				-
Others (Notes 2 and 24)			461,096				-				169,924				-
Total non-operating income and gains			4,758,246				2				4,375,750				2

(Continued)

 

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Taiwan Semiconductor Manufacturing Company Limited

STATEMENTS OF INCOME

FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND 2010

(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

 

 

		2011										2010
		Amount					%					Amount					%
NON-OPERATING EXPENSES AND LOSSES
Valuation loss on financial instruments, net (Notes 2, 5 and 23)			$	197,255					-				$	-					-
Loss on disposal of property, plant and equipment (Note 2)				153,131					-					-					-
Interest expense				146,374					-					79,188					-
Casualty loss (Note 9)				-					-					194,137					-
Others				122,232					-					76,974					-
Total non-operating expenses and losses				618,992					-					350,299					-
INCOME BEFORE INCOME TAX				78,992,717					37					77,249,715					40
INCOME TAX EXPENSE (Notes 2 and 18)				6,764,610					3					3,304,682					1
NET INCOME			$	72,228,107					34				$	73,945,033					39

 

		2011										2010
		Before Income Tax					After Income Tax					Before Income Tax					After Income Tax
EARNINGS PER SHARE (NT$, Note 22)
Basic earnings per share			$	3.05				$	2.79				$	2.98				$	2.85
Diluted earnings per share			$	3.05				$	2.79				$	2.98				$	2.85

 

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

 

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Taiwan Semiconductor Manufacturing Company Limited

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND 2010

(In Thousands of New Taiwan Dollars, Except Dividends Per Share)

 

 

																																						Others
		Capital Stock -Common Stock															Retained Earnings																				Cumulative					Unrealized Gain (Loss)					Total
		Shares										Capital					Legal					Special					Unappropriated										Translation					On Financial					Shareholders’
		(In Thousands)					Amount					Surplus					Capital Reserve					Capital Reserve					Earnings					Total					Adjustments					Instruments					Equity
BALANCE, JANUARY 1, 2011				25,910,078				$	259,100,787				$	55,698,434				$	86,239,494				$	1,313,047				$	178,227,030				$	265,779,571				$	(6,543,163	)			$	109,289				$	574,144,918
Appropriations of prior year’s earnings
Legal capital reserve				-					-					-					16,160,501					-					(16,160,501	)				-					-					-					-
Special capital reserve				-					-					-					-					5,120,827					(5,120,827	)				-					-					-					-
Cash dividends to shareholders -NT$3.00 per share				-					-					-					-					-					(77,730,236	)				(77,730,236	)				-					-					(77,730,236	)
Net income for the six months ended June 30, 2011				-					-					-					-					-					72,228,107					72,228,107					-					-					72,228,107
Adjustment arising from changes in percentage of ownership in equity method investees				-					-					14,643					-					-					-					-					-					-					14,643
Translation adjustments				-					-					-					-					-					-					-					(4,917,884	)				-					(4,917,884	)
Issuance of stock from exercising employee stock options				4,205					42,044					89,310					-					-					-					-					-					-					131,354
Net changes of valuation gain/loss on available-for-sale financial assets				-					-					-					-					-					-					-					-					176,970					176,970
Net change in shareholders’ equity from equity method investees				-					-					-					-					-					-					-					-					(98,351	)				(98,351	)
BALANCE, JUNE 30, 2011				25,914,283				$	259,142,831				$	55,802,387				$	102,399,995				$	6,433,874				$	151,443,573				$	260,277,442				$	(11,461,047)				$	187,908				$	563,949,521
BALANCE, JANUARY 1, 2010				25,902,706				$	259,027,066				$	55,486,010				$	77,317,710				$	-				$	104,564,972				$	181,882,682				$	(1,766,667)				$	453,621				$	495,082,712
Appropriations of prior year’s earnings
Legal capital reserve				-					-					-					8,921,784					-					(8,921,784	)				-					-					-					-
Special capital reserve				-					-					-					-					1,313,047					(1,313,047	)				-					-					-					-
Cash dividends to shareholders -NT$3.00 per share				-					-					-					-					-					(77,708,120	)				(77,708,120	)				-					-					(77,708,120	)
Net income for the six months ended June 30, 2010				-					-					-					-					-					73,945,033					73,945,033					-					-					73,945,033
Adjustment arising from changes in percentage of ownership in equity method investees				-					-					711					-					-					-					-					-					-					711
Translation adjustments				-					-					-					-					-					-					-					732,411					-					732,411
Issuance of stock from exercising employee stock options				2,311					23,106					62,508					-					-					-					-					-					-					85,614
Net changes of valuation gain/loss on available-for-sale financial assets				-					-					-					-					-					-					-					-					(6,756	)				(6,756	)
Net change in shareholders’ equity from equity method investees				-					-					17,766					-					-					-					-					-					535,013					552,779
BALANCE, JUNE 30, 2010				25,905,017				$	259,050,172				$	55,566,995				$	86,239,494				$	1,313,047				$	90,567,054				$	178,119,595				$	(1,034,256)				$	981,878				$	492,684,384

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

 

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Taiwan Semiconductor Manufacturing Company Limited

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND 2010

(In Thousands of New Taiwan Dollars)

 

 

		2011				2010
CASH FLOWS FROM OPERATING ACTIVITIES
Net income		$	72,228,107			$	73,945,033
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			49,954,937				39,684,919
Realized gross profit from affiliates			(249,480	)			(1,646	)
Amortization of premium/discount of financial assets			7,757				8,666
Gain on disposal of available-for-sale financial assets, net			(35,151	)			-
Loss on disposal of financial assets carried at cost			-				1,263
Equity in earnings of equity method investees, net			(2,914,860	)			(2,179,835	)
Cash dividends received from equity method investees			1,914,392				-
Loss (gain) on disposal of property, plant and equipment and other assets, net			10,251				(9,334	)
Deferred income tax			336,498				(990,530	)
Changes in operating assets and liabilities:
Decrease (increase) in:
Financial assets and liabilities at fair value through profit or loss			(25,289	)			355,343
Receivables from related parties			(1,668,051	)			(2,280,308	)
Notes and accounts receivable			(1,546,839	)			(7,377,040	)
Allowance for doubtful receivables			-				92,000
Allowance for sales returns and others			(1,699,667	)			(2,601,004	)
Other receivables from related parties			(64,293	)			33,182
Other financial assets			(5,588	)			385,164
Inventories			(2,758,344	)			(3,292,305	)
Prepaid expenses and other current assets			284,243				(230,184	)
Increase (decrease) in:
Accounts payable			(2,091,732	)			492,889
Payables to related parties			811,641				1,178,788
Income tax payable			(1,032,551	)			(5,276,124	)
Accrued profit sharing to employees and bonus to directors			4,900,168				5,006,322
Accrued expenses and other current liabilities			(1,875,486	)			(4,941,797	)
Accrued pension cost			35,858				(2,132	)
Deferred credits			-				(47,873	)
Net cash provided by operating activities			114,516,521				91,953,457
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of:
Property, plant and equipment			(139,147,091	)			(98,190,906	)
Investments accounted for using equity method			(511,390	)			(8,018,146	)
Financial assets carried at cost			-				(480	)
Proceeds from disposal or redemption of:
Available-for-sale financial assets			1,035,151				-
Held-to-maturity financial assets			2,675,000				11,595,000

(Continued)

 

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Taiwan Semiconductor Manufacturing Company Limited

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND 2010

(In Thousands of New Taiwan Dollars)

 

 

		2011				2010
Financial assets carried at cost		$	-			$	3,370
Property, plant and equipment and other assets			2,068,298				20,903
Increase in deferred charges			(788,025	)			(585,185	)
Decrease in refundable deposits			3,841,898				316,659
Increase in other assets			(22,600	)			-
Net cash used in investing activities			(130,848,759	)			(94,858,785	)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short-term loans			2,232,244				17,759,356
Decrease in guarantee deposits			(245,004	)			(129,045	)
Proceeds from exercise of employee stock options			131,354				85,614
Net cash provided by financing activities			2,118,594				17,715,925
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			(14,213,644	)			14,810,597
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			109,511,130				117,043,543
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	95,297,486			$	131,854,140
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid		$	221,853			$	145,179
Income tax paid		$	7,417,035			$	9,452,574
INVESTING ACTIVITIES AFFECTING BOTH CASH AND NON-CASH ITEMS
Acquisition of property, plant and equipment		$	133,768,114			$	94,612,614
Decrease in payables to contractors and equipment suppliers			5,379,459				3,701,212
Nonmonetary exchange trade-out price			(482	)			(122,920	)
Cash paid		$	139,147,091			$	98,190,906
Disposal of property, plant and equipment and other assets		$	2,905,302			$	143,823
Increase in other receivables to related parties			(836,522	)			-
Nonmonetary exchange trade-out price			(482	)			(122,920	)
Cash received		$	2,068,298			$	20,903
NON-CASH FINANCING ACTIVITIES
Current portion of bonds payable		$	4,500,000			$	-
Current portion of other long-term payables (under accrued expenses and other current liabilities)		$	897,298			$	569,149

 

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

 

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Taiwan Semiconductor Manufacturing Company Limited

NOTES TO FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND 2010

(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)

 

 

1.

GENERAL

Taiwan Semiconductor Manufacturing Company Limited (the “Company” or “TSMC”), a Republic of China (R.O.C.) corporation, was incorporated on February 21, 1987. The Company is a dedicated foundry in the semiconductor industry which engages mainly in the manufacturing, selling, packaging, testing and computer-aided design of integrated circuits and other semiconductor devices and the manufacturing of masks. Beginning in 2010, the Company also engages in the researching, developing, designing, manufacturing and selling of solid state lighting devices and related applications products and systems, and renewable energy and efficiency related technologies and products. On September 5, 1994, its shares were listed on the Taiwan Stock Exchange (TSE). On October 8, 1997, TSMC listed some of its shares of stock on the New York Stock Exchange (NYSE) in the form of American Depositary Shares (ADSs).

As of June 30, 2011 and 2010, the Company had 30,364 and 24,882 employees, respectively.

 

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial statements are presented in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers, Business Accounting Law, Guidelines Governing Business Accounting, and accounting principles generally accepted in the R.O.C.

For the convenience of readers, the accompanying financial statements have been translated into English from the original Chinese version prepared and used in the R.O.C. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language financial statements shall prevail.

Significant accounting policies are summarized as follows:

Foreign-currency Transactions

Foreign-currency transactions other than derivative contracts are recorded in New Taiwan dollars at the rates of exchange in effect when the transactions occur. Exchange gains or losses derived from foreign-currency transactions or monetary assets and liabilities denominated in foreign currencies are recognized in earnings.

At the balance sheet date, monetary assets and liabilities denominated in foreign currencies are revalued at prevailing exchange rates with the resulting gains or losses recognized in earnings.

Use of Estimates

The preparation of financial statements in conformity with the aforementioned guidelines, law and principles requires management to make reasonable assumptions and estimates of matters that are inherently uncertain. The actual results may differ from management’s estimates.

 

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Classification of Current and Noncurrent Assets and Liabilities

Current assets are assets held for trading purposes and assets expected to be converted to cash, sold or consumed within one year from the balance sheet date. Current liabilities are obligations incurred for trading purposes and obligations expected to be settled within one year from the balance sheet date. Assets and liabilities that are not classified as current are noncurrent assets and liabilities, respectively.

Cash Equivalents

Repurchase agreements collateralized by government bonds acquired with maturities of less than three months from the date of purchase are classified as cash equivalents. The carrying amount approximates fair value due to their short term nature.

Financial Assets/Liabilities at Fair Value Through Profit or Loss

Derivatives that do not meet the criteria for hedge accounting are initially recognized at fair value, with transaction costs expensed as incurred. The derivatives are remeasured at fair value subsequently with changes in fair value recognized in earnings. A regular way purchase or sale of financial assets is accounted for using settlement date accounting.

Fair value is estimated using valuation techniques incorporating estimates and assumptions that are consistent with prevailing market conditions. When the fair value is positive, the derivative is recognized as a financial asset; when the fair value is negative, the derivative is recognized as a financial liability.

Available-for-sale Financial Assets

Available-for-sale financial assets are initially recognized at fair value plus transaction costs that are directly attributable to the acquisition. Changes in fair value from subsequent remeasurement are reported as a separate component of shareholders’ equity. The corresponding accumulated gains or losses are recognized in earnings when the financial asset is derecognized from the balance sheet. A regular way purchase or sale of financial assets is accounted for using settlement date accounting.

The fair value of overseas publicly traded stock is determined using the closing prices at the end of the period. The fair value of debt securities is determined using the average of bid and asked prices at the end of the period.

Any difference between the initial carrying amount of a debt security and the amount due at maturity is amortized using the effective interest method, with the amortization recognized in earnings.

If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. If, in a subsequent period, the amount of the impairment loss decreases, for equity securities, the previously recognized impairment loss is reversed to the extent of the decrease and recorded as an adjustment to shareholders’ equity; for debt securities, the amount of the decrease is recognized in earnings, provided that the decrease is clearly attributable to an event which occurred after the impairment loss was recognized.

Held-to-maturity Financial Assets

Debt securities for which the Company has a positive intention and ability to hold to maturity are categorized as held-to-maturity financial assets and are carried at amortized cost. Those financial assets are initially recognized at fair value plus transaction costs that are directly attributable to the acquisition. Gains or losses are recognized at the time of derecognition, impairment or amortization. A regular way purchase or sale of financial assets is accounted for using settlement date accounting.

 

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If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. If, in a subsequent period, the amount of the impairment loss decreases and the decrease is clearly attributable to an event which occurred after the impairment loss was recognized, the previously recognized impairment loss is reversed to the extent of the decrease. The reversal may not result in a carrying amount that exceeds the amortized cost that would have been determined as if no impairment loss had been recognized.

Financial Assets Carried at Cost

Investments for which the Company does not exercise significant influence and that do not have a quoted market price in an active market and whose fair value cannot be reliably measured, such as non-publicly traded stocks and mutual funds, are carried at their original cost. The costs of non-publicly traded stocks and mutual funds are determined using the weighted-average method. If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. A subsequent reversal of such impairment loss is not allowed.

Cash dividends are recognized as investment income upon resolution of shareholders of an investee but are accounted for as a reduction to the original cost of investment if such dividends are declared on the earnings of the investee attributable to the period prior to the purchase of the investment. Stock dividends are recorded as an increase in the number of shares held and do not affect investment income. The cost per share is recalculated based on the new total number of shares.

Allowance for Doubtful Receivables

An allowance for doubtful receivables is provided based on a review of the collectability of receivables. The Company assesses the collectability of receivables by performing the account aging analysis and examining current trends in the credit quality of its customers.

The Company’s provision was originally set at 1% of the amount of outstanding receivables. On January 1, 2011, the Company adopted the third revision of Statement of Financial Accounting Standards (SFAS) No. 34, “Financial Instruments: Recognition and Measurement.” One of the main revisions is that the impairment of receivables originated by the Company is subject to the provisions of SFAS No. 34. Companies are required to evaluate for indication of impairment of accounts receivable based on an individual and collective basis at the end of each reporting period. When objective evidence indicates that the estimated future cash flow of accounts receivable decreases as a result of one or more events that occurred after the initial recognition of the accounts receivable, such accounts receivable are deemed to be impaired.

Because of the Company’s short average collection period, the amount of the impairment loss recognized is the difference between the carrying amount of accounts receivable and estimated future cash flows without considering the discounting effect. Changes in the carrying amount of the allowance account are recognized as bad debt in loss which is recorded in the operating expenses - general and administrative. When accounts receivable are considered uncollectable, the amount is written off against the allowance account.

Inventories

Inventories are recorded at standard cost and adjusted to approximate weighted-average cost on the balance sheet date.

Inventories are stated at the lower of cost or net realizable value. Inventory write-downs are made on an item-by-item basis, except where it may be appropriate to group similar or related items. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and necessary selling costs.

 

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Investments Accounted for Using Equity Method

Investments in companies wherein the Company exercises significant influence over the operating and financial policy decisions are accounted for using the equity method. The Company’s share of the net income or net loss of an investee is recognized in the “equity in earnings/losses of equity method investees, net” account. The cost of an investment shall be analyzed and the cost of investment in excess of the fair value of identifiable net assets acquired, representing goodwill, shall not be amortized. If the fair value of identifiable net assets acquired exceeds the cost of investment, the excess shall be proportionately allocated as reductions to fair values of non-current assets (except for financial assets other than investments accounted for using the equity method and deferred income tax assets). When an indication of impairment is identified, the carrying amount of the investment is reduced, with the related impairment loss recognized in earnings.

When the Company subscribes for additional investee’s shares at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment in the investee differs from the amount of the Company’s share of the investee’s equity. The Company records such a difference as an adjustment to long-term investments with the corresponding amount charged or credited to capital surplus.

Gains or losses on sales from the Company to equity method investees are deferred in proportion to the Company’s ownership percentages in the investees until such gains or losses are realized through transactions with third parties. The entire amount of the gains or losses on sales to investees over which the Company has a controlling interest is deferred until such gains or losses are realized through subsequent sales of the related products to third parties. Gains or losses on sales from equity method investees to the Company are deferred in proportion to the Company’s ownership percentages in the investees until they are realized through transactions with third parties. Gains or losses on sales between equity method investees over each of which the Company has control are deferred in proportion to the Company’s weighted-average ownership percentage in the investee which records gains or losses. In transactions between equity method investees over either or both of which the Company has no control, gains or losses on sales are deferred in proportion to the multiplication of the Company’s weighted-average ownership percentages in the investees. Such gains or losses are deferred until they are realized through transactions with third parties.

If an investee’s functional currency is a foreign currency, differences will result from the translation of the investee’s financial statements into the reporting currency of the Company. Such differences are charged or credited to cumulative translation adjustments, a separate component of shareholders’ equity.

Property, Plant and Equipment and Assets Leased to Others

Property, plant and equipment and assets leased to others are stated at cost less accumulated depreciation. When an indication of impairment is identified, any excess of the carrying amount of an asset over its recoverable amount is recognized as a loss. If the recoverable amount increases in a subsequent period, the amount previously recognized as impairment would be reversed and recognized as a gain. However, the adjusted amount may not exceed the carrying amount that would have been determined, net of depreciation, as if no impairment loss had been recognized. Significant additions, renewals and betterments incurred during the construction period are capitalized. Maintenance and repairs are expensed as incurred.

Depreciation is computed using the straight-line method over the following estimated service lives: buildings - 10 to 20 years; machinery and equipment - 5 years; and office equipment - 3 to 5 years.

Upon sale or disposal of property, plant and equipment and assets leased to others, the related cost and accumulated depreciation are deducted from the corresponding accounts, with any gain or loss recorded as non-operating gains or losses in the period of sale or disposal.

 

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Intangible Assets

Goodwill represents the excess of the consideration paid for acquisition over the fair value of identifiable net assets acquired. Goodwill is no longer amortized and instead is tested for impairment annually, or more frequently if events or changes in circumstances suggest that the carrying amount may not be recoverable. If an event occurs or circumstances change which indicate that the fair value of goodwill is more likely than not below its carrying amount, an impairment loss is recognized. A subsequent reversal of such impairment loss is not allowed.

Deferred charges consist of technology license fees, software and system design costs and patent and others. The amounts are amortized over the following periods: Technology license fees - the estimated life of the technology or the term of the technology transfer contract; software and system design costs - 3 years; patent and others - the economic life or contract period. When an indication of impairment is identified, any excess of the carrying amount of an asset over its recoverable amount is recognized as a loss. If the recoverable amount increases in a subsequent period, the previously recognized impairment loss would be reversed and recognized as a gain. However, the adjusted amount may not exceed the carrying amount that would have been determined, net of amortization, as if no impairment loss had been recognized.

Expenditures related to research activities and those related to development activities that do not meet the criteria for capitalization are charged to expense when incurred.

Pension Costs

For employees who participate in defined contribution pension plans, pension costs are recorded based on the actual contributions made to employees’ individual pension accounts during their service periods. For employees who participate in defined benefit pension plans, pension costs are recorded based on actuarial calculations.

Income Tax

The Company applies an inter-period allocation for its income tax whereby deferred income tax assets and liabilities are recognized for the tax effects of temporary differences and unused tax credits. Valuation allowances are provided to the extent, if any, that it is more likely than not that deferred income tax assets will not be realized. A deferred tax asset or liability is classified as current or noncurrent in accordance with the classification of its related asset or liability. However, if a deferred tax asset or liability does not relate to an asset or liability in the financial statements, then it is classified as either current or noncurrent based on the expected length of time before it is realized or settled.

Any tax credits arising from purchases of machinery and equipment, research and development expenditures and personnel training expenditures are recognized using the flow-through method.

Adjustments of prior years’ tax liabilities are added to or deducted from the current period’s tax provision.

Income tax on unappropriated earnings at a rate of 10% is expensed in the year of shareholder approval which is the year subsequent to the year the earnings are generated.

 

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Stock-based Compensation

Employee stock options that were granted or modified in the period from January 1, 2004 to December 31, 2007 are accounted for by the interpretations issued by the Accounting Research and Development Foundation of the Republic of China. The Company adopted the intrinsic value method and any compensation cost determined using this method is recognized in earnings over the employee vesting period. Employee stock option plans that were granted or modified after December 31, 2007 are accounted for using fair value method in accordance with Statement of Financial Accounting Standards No. 39, “Accounting for Share-based Payment.” The Company did not grant or modify any employee stock options since January 1, 2008.

Revenue Recognition and Allowance for Sales Returns and Others

The Company recognizes revenue when evidence of an arrangement exists, the rewards of ownership and significant risk of the goods has been transferred to the buyer, price is fixed or determinable, and collectability is reasonably assured. Provisions for estimated sales returns and other allowances are recorded in the period the related revenue is recognized, based on historical experience, management’s judgment, and any known factors that would significantly affect the allowance.

Sales prices are determined using fair value taking into account related sales discounts agreed to by the Company and its customers. Sales agreements typically provide that payment is due 30 days from invoice date for a majority of the customers and 30 to 45 days after the end of the month in which sales occur for some customers. Since the receivables from sales are collectible within one year and such transactions are frequent, fair value of the receivables is equivalent to the nominal amount of the cash to be received.

 

3.

ACCOUNTING CHANGES

On January 1, 2011, the Company prospectively adopted the newly revised Statement of Financial Accounting Standards (SFAS) No. 34, “Financial Instruments: Recognition and Measurement.” The main revisions include (1) finance lease receivables are now covered by SFAS No. 34; (2) the scope of the applicability of SFAS No. 34 to insurance contracts is amended; (3) loans and receivables originated by the Company are now covered by SFAS No. 34; (4) additional guidelines on impairment testing of financial assets carried at amortized cost when the debtor has financial difficulties and the terms of obligations have been modified; and (5) accounting treatment by a debtor for modifications in the terms of obligations. This accounting change did not have a significant effect on the Company’s financial statements as of and for the period ended June 30, 2011.

On January 1, 2011, the Company adopted the newly issued SFAS No. 41, “Operating Segments.” The statement requires identification and disclosure of operating segments on the basis of how the Company’s chief operating decision maker regularly reviews information in order to allocate resources and assess performance. This statement supersedes SFAS No. 20, “Segment Reporting.” The Company conformed to the disclosure requirements as of and for the six months ended June 30, 2011. The information for the six months ended June 30, 2010 has been recast to reflect the new segment reporting requirement.

 

4.

CASH AND CASH EQUIVALENTS

 

 

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5.

FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

 

The Company entered into derivative contracts during the six months ended June 30, 2011 and 2010 to manage exposures due to fluctuations of foreign exchange rates. The derivative contracts entered into by the Company did not meet the criteria for hedge accounting. Therefore, the Company did not apply hedge accounting treatment for its derivative contracts.

Outstanding forward exchange contracts consisted of the following:

 

Outstanding cross currency swap contracts consisted of the following:

 

For the six months ended June 30, 2011 and 2010, changes in fair value related to derivative financial instruments recognized in earnings was a net loss of NT$197,255 thousand and a net gain of NT$29,739 thousand, respectively.

 

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6.

AVAILABLE-FOR-SALE FINANCIAL ASSETS

 

 

7.

HELD-TO-MATURITY FINANCIAL ASSETS

 

Structured time deposits categorized as held-to-maturity financial assets consisted of the following:

 

 

8.

ALLOWANCES FOR DOUBTFUL RECEIVABLES, SALES RETURNS AND OTHERS

Movements of the allowance for doubtful receivables were as follows:

 

Movements of the allowance for sales returns and others were as follows:

 

 

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9.

INVENTORIES

 

Write-down of inventories to net realizable value in the amount of NT$258,871 thousand and NT$47,183 thousand, respectively, were included in the cost of sales for the six months ended June 30, 2011 and 2010. Inventories losses related to earthquake in the amount of NT$194,137 thousand were classified under non-operating expenses and losses for the six months ended June 30, 2010.

 

10.

INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

 

 

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For the renewable energy and efficiency related businesses development, the Company established wholly-owned subsidiaries, TSMC Solar NA, TSMC Solar Europe and TSMC Lighting NA, in the third quarter of 2010. In addition, the Company will transfer solar and solid state lighting businesses to its wholly-owned, newly incorporated subsidiaries as part of the strategic planning in the third quarter of 2011.

For the year ended December 31, 2010, the Company increased its investment in VTAF III for the amount of NT$1,862,278 thousand, and the Company’s percentage of ownership in VTAF III increased from 98% to 99%.

In February 2010, the Company subscribed to 75,316 thousand shares of Motech through a private placement for NT$6,228,661 thousand; after the subscription, the Company’s percentage of ownership in Motech was 20%. Transfer of the aforementioned common shares within three years is prohibited according to the related regulations.

For the six months ended June 30, 2011 and 2010, equity in earnings of equity method investees was a net gain of NT$2,914,860 thousand and NT$2,179,835 thousand, respectively. Related equity in earnings/losses of equity method investees were determined based on the audited financial statements, except those of TSMC Solar Europe, Emerging Alliance, TSMC Europe, TSMC Japan, TSMC Solar NA, TSMC Korea and TSMC Lighting NA for the six months ended June 30, 2011 and those of Emerging Alliance, TSMC Europe, TSMC Japan and TSMC Korea for the six months ended June 30, 2010. The Company believes that, had the aforementioned equity method investees’ financial statements been audited, any adjustments arising would have no material effect on the Company’s financial statements.

As of June 30, 2011 and 2010, the quoted market price of publicly traded stocks in unrestricted investments accounted for using the equity method (VIS and GUC) were NT$14,691,013 thousand and NT$13,692,207 thousand, respectively.

Movements of the difference between the cost of investments and the Company’s share in investees’ net assets allocated to depreciable assets were as follows:

 

Movements of the difference allocated to goodwill were as follows:

 

 

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11.

FINANCIAL ASSETS CARRIED AT COST

 

			00000000				00000000
		June 30
		2011				2010
Non-publicly traded stocks		$	338,584			$	338,584
Mutual funds			159,251				159,251
		$	497,835			$	497,835

 

12.

PROPERTY, PLANT AND EQUIPMENT

 

No interest was capitalized during the six months ended June 30, 2011 and 2010.

 

13.

DEFERRED CHARGES, NET

 

 

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14.

SHORT-TERM LOANS

 

 

15.

BONDS PAYABLE

 

 

16.

OTHER LONG-TERM PAYABLES

The Company’s other long-term payables mainly resulted from license agreements for certain semiconductor-related patents.

As of June 30, 2011, future payments for other long-term payables (classified under accrued expenses and other current liabilities) due within one year amounted to NT$897,298 thousand.

 

17.

PENSION PLANS

The pension mechanism under the Labor Pension Act (the “Act”) is deemed a defined contribution plan. Pursuant to the Act, the Company has made monthly contributions equal to 6% of each employee’s monthly salary to employees’ pension accounts and recognized pension costs of NT$555,524 thousand and NT$408,072 thousand for the six months ended June 30, 2011 and 2010, respectively.

The Company has a defined benefit plan under the Labor Standards Law that provides benefits based on an employee’s length of service and average monthly salary for the six-month period prior to retirement. The Company contributes an amount equal to 2% of salaries paid each month to a pension fund (the Fund), which is administered by the Labor Pension Fund Supervisory Committee (the Committee) and deposited in the Committee’s name in the Bank of Taiwan. The Company recognized pension costs of NT$150,832 thousand and NT$118,159 thousand for the six months ended June 30, 2011 and 2010, respectively.

 

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Movements of the Fund and accrued pension cost under the defined benefit plan were summarized as follows:

 

 

18.

INCOME TAX

 

a.

A reconciliation of income tax expense based on “income before income tax” at the statutory rate and income tax currently payable was as follows:

 

 

b.

Income tax expense consisted of the following:

 

 

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c.

Net deferred income tax assets consisted of the following:

 

Effective in June 2010, the Article 5 of the Income Tax Law of the Republic of China was amended, in which the income tax rate of profit-seeking enterprises would be reduced from 20% to 17%. The last amended income tax rate of 17% is retroactively applied on January 1, 2010. The Company recalculated its deferred tax assets in accordance with the new amended Article and adjusted the resulting difference as an income tax expense in 2010. Furthermore, due to the reduced corporate income tax rate, the Company anticipated a decrease in future tax credits allowed for deduction, therefore resulting in higher adjustment to the valuation allowance balance.

Under Article 10 of the Statute for Industrial Innovation (SII) legislated and effective in May 2010, a profit-seeking enterprise may deduct up to 15% of its research and development expenditures from its income tax payable for the period in which these expenditures are incurred, but this deduction should not exceed 30% of the income tax payable for that period. This incentive is retroactive to January 1, 2010 and effective until December 31, 2019.

 

d.

Integrated income tax information:

The balance of the imputation credit account as of June 30, 2011 and 2010 was NT$8,826,775 thousand and NT$10,284,010 thousand, respectively.

The estimated and actual creditable ratios for distribution of earnings of 2010 and 2009 were 4.95% and 9.85%, respectively.

The imputation credit allocated to shareholders is based on its balance as of the date of the dividend distribution. The estimated creditable ratio may change when the actual distribution of the imputation credit is made.

 

e.

All earnings generated prior to December 31, 1997 have been appropriated.

 

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f.

As of June 30, 2011, investment tax credits consisted of the following:

 

 

g.

The profits generated from the following projects are exempt from income tax for a five-year period:

 

 

h.

The tax authorities have examined income tax returns of the Company through 2008. All investment tax credit adjustments assessed by the tax authorities have been recognized accordingly.

 

19.

LABOR COST, DEPRECIATION AND AMORTIZATION

 

 

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20.

SHAREHOLDERS’ EQUITY

As of June 30, 2011, 1,093,731 thousand ADSs of the Company were traded on the NYSE. The number of common shares represented by the ADSs was 5,468,654 thousand (one ADS represents five common shares).

Capital surplus can only be used to offset a deficit under the Company Law. However, the capital surplus generated from donations and the excess of the issuance price over the par value of capital stock (including the stock issued for new capital, mergers, convertible bonds and the surplus from treasury stock transactions) may be appropriated as stock dividends, which are limited to a certain percentage of the Company’s paid-in capital. In addition, the capital surplus from long-term investments may not be used for any purpose.

Capital surplus consisted of the following:

 

The Company’s Articles of Incorporation provide that, when allocating the net profits for each fiscal year, the Company shall first offset its losses in previous years and then set aside the following items accordingly:

 

a.

Legal capital reserve at 10% of the profits left over, until the accumulated legal capital reserve equals the Company’s paid-in capital;

 

b.

Special capital reserve in accordance with relevant laws or regulations or as requested by the authorities in charge;

 

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c.

Bonus to directors and profit sharing to employees of the Company of not more than 0.3% and not less than 1% of the remainder, respectively. Directors who also serve as executive officers of the Company are not entitled to receive the bonus to directors. The Company may issue profit sharing to employees in stock of an affiliated company meeting the conditions set by the Board of Directors or, by the person duly authorized by the Board of Directors;

 

d.

Any balance left over shall be allocated according to the resolution of the shareholders’ meeting.

The Company’s Articles of Incorporation also provide that profits of the Company may be distributed by way of cash dividend and/or stock dividend. However, distribution of profits shall be made preferably by way of cash dividend. Distribution of profits may also be made by way of stock dividend; provided that the ratio for stock dividend shall not exceed 50% of the total distribution.

Any appropriations of the profits are subject to shareholders’ approval in the following year.

The Company accrued profit sharing to employees based on certain percentage of net income during the period, which amounted to NT$4,873,630 thousand and NT$4,988,630 thousand for the six months ended June 2011 and 2010, respectively. Bonuses to directors were accrued based on estimated amount of payment. If the actual amounts subsequently resolved by the shareholders differ from the estimated amounts, the differences are recorded in the year of shareholders’ resolution as a change in accounting estimate. If profit sharing is resolved to be distributed to employees in stock, the number of shares is determined by dividing the amount of profit sharing by the closing price (after considering the effect of dividends) of the shares on the day preceding the shareholders’ meeting.

The Company no longer has supervisors since January 1, 2007. The required duties of supervisors are being fulfilled by the Audit Committee.

The appropriation for legal capital reserve shall be made until the reserve equals the Company’s paid-in capital. The reserve may be used to offset a deficit, or be distributed as dividends and bonuses for the portion in excess of 50% of the paid-in capital if the Company has no unappropriated earnings and the reserve balance has exceeded 50% of the Company’s paid-in capital. The Company Law also prescribes that, when the reserve has reached 50% of the Company’s paid-in capital, up to 50% of the reserve may be transferred to capital.

A special capital reserve equivalent to the net debit balance of the other components of shareholders’ equity (for example, cumulative translation adjustments and unrealized loss on financial instruments, but excluding treasury stock) shall be made from unappropriated earnings pursuant to existing regulations promulgated by the Securities and Futures Bureau (SFB). Any special reserve appropriated may be reversed to the extent that the net debit balance reverses.

The appropriations of earnings for 2010 and 2009 had been approved in the shareholders’ meeting held on June 9, 2011 and June 15, 2010, respectively. The appropriations and dividends per share were as follows:

 

		Appropriation of Earnings								Dividends Per  Share (NT$)
		For Fiscal				For Fiscal				For Fiscal		For Fiscal
		Year 2010				Year 2009				Year 2010		Year 2009
Legal capital reserve		$	16,160,501			$	8,921,784
Special capital reserve			5,120,827				1,313,047
Cash dividends to shareholders			77,730,236				77,708,120			$3.00		$3.00
		$	99,011,564			$	87,942,951

 

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TSMC’s profit sharing to employees to be paid in cash and bonus to directors in the amounts of NT$10,908,338 thousand and NT$51,131 thousand for 2010, respectively, and profit sharing to employees to be paid in cash and bonus to directors in the amounts of NT$6,691,338 thousand and NT$67,692 thousand for 2009, respectively, had been approved in the shareholders’ meeting held on June 9, 2011 and June 15, 2010, respectively. The resolved amounts of the profit sharing to employees and bonus to directors were consistent with the resolutions of meeting of the Board of Directors held on February 15, 2011 and February 9, 2010 and same amount had been charged against earnings of 2010 and 2009, respectively.

The information about the appropriations of profit sharing to employees and bonus to directors is available at the Market Observation Post System website.

Under the Integrated Income Tax System that became effective on January 1, 1998, R.O.C. resident shareholders are allowed a tax credit for their proportionate share of the income tax paid by the Company on earnings generated since January 1, 1998.

 

21.

STOCK-BASED COMPENSATION PLANS

The Company’s Employee Stock Option Plans, consisting of the 2004 Plan, 2003 Plan and 2002 Plan, were approved by the SFB on January 6, 2005, October 29, 2003 and June 25, 2002, respectively. The maximum number of options authorized to be granted under the 2004 Plan, 2003 Plan and 2002 Plan was 11,000 thousand, 120,000 thousand and 100,000 thousand, respectively, with each option eligible to subscribe for one common share when exercised. The options may be granted to qualified employees of the Company or any of its domestic or foreign subsidiaries, in which the Company’s shareholding with voting rights, directly or indirectly, is more than fifty percent (50%). The options of all the plans are valid for ten years and exercisable at certain percentages subsequent to the second anniversary of the grant date. Under the terms of the plans, the options are granted at an exercise price equal to the closing price of the Company’s common shares listed on the TSE on the grant date.

Options of the plans that had never been granted or had been granted but subsequently canceled had expired as of June 30, 2011.

Information about outstanding options for the six months ended June 30, 2011 and 2010 was as follows:

 

The number of outstanding options and exercise prices have been adjusted to reflect the distribution of earnings in accordance with the plans.

 

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As of June 30, 2011, information about outstanding options was as follows:

 

As of June 30, 2011, all of the above outstanding options were exercisable.

No compensation cost was recognized under the intrinsic value method for the six months ended June 30, 2011 and 2010. Had the Company used the fair value based method to evaluate the options using the Black-Scholes model, the assumptions at the various grant dates and pro forma results of the Company for the six months ended June 30, 2011 and 2010 would have been as follows:

 

 

 

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22.

EARNINGS PER SHARE

EPS is computed as follows:

 

If the Company may settle the obligation by cash, by issuing shares, or in combination of both cash and shares, profit sharing to employees which will be settled in shares should be included in the weighted average number of shares outstanding in calculation of diluted EPS, if the shares have a dilutive effect. The number of shares is estimated by dividing the amount of profit sharing to employees in stock by the closing price (after considering the dilutive effect of dividends) of the common shares on the balance sheet date. Such dilutive effect of the potential shares needs to be included in the calculation of diluted EPS until the shares of profit sharing to employees are resolved in the shareholders’ meeting in the following year.

The average number of shares outstanding for EPS calculation has been considered for the effect of retrospective adjustments. This adjustment caused each of the basic and diluted after income tax EPS for the six months ended June 30, 2010 to remain at NT$2.85.

 

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23.

DISCLOSURES FOR FINANCIAL INSTRUMENTS

 

a.

Fair values of financial instruments were as follows:

 

 

b.

Methods and assumptions used in the estimation of fair values of financial instruments

 

1)

The aforementioned financial instruments do not include cash and cash equivalents, receivables, other financial assets, refundable deposits, short-term loans, payables and guarantee deposits. The carrying amounts of these financial instruments approximate their fair values due to their short maturities.

 

2)

Except for derivatives and structured time deposits, available-for-sale and held-to-maturity financial assets were based on their quoted market prices.

 

3)

The fair values of those derivatives and structured time deposits are determined using valuation techniques incorporating estimates and assumptions that were consistent with prevailing market conditions.

 

4)

Financial assets carried at cost have no quoted prices in an active market and entail an unreasonably high cost to obtain verifiable fair values. Therefore, no fair value is presented.

 

5)

Fair value of bonds payable was based on their quoted market price.

 

6)

Fair value of other long-term payables was based on the present value of expected cash flows, which approximates their carrying amount.

 

c.

The changes in fair value of derivatives contracts for the six months ended June 30, 2011 and 2010 estimated using valuation techniques were recognized as a net gain of NT$17,455 thousand and a net loss of NT$173,600 thousand, respectively.

 

d.

As of June 30, 2011 and 2010, financial assets exposed to fair value interest rate risk were NT$3,536,985 thousand and NT$11,600,526 thousand, respectively, financial liabilities exposed to fair value interest rate risk were NT$37,640,881 thousand and NT$22,433,334 thousand, respectively.

 

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e.

Movements of the unrealized gains or losses on financial instruments for the six months ended June 30, 2011 and 2010 were as follows:

 

 

f.

Information about financial risks

 

1)

Market risk. The derivative financial instruments categorized as financial assets/liabilities at fair value through profit or loss are mainly used to hedge the market exchange rate fluctuations of foreign-currency assets and liabilities; therefore, the market exchange rate risk of derivatives will be offset by the foreign exchange risk of these hedged items. Available-for-sale financial assets and held-to-maturity financial assets held by the Company are mainly fixed-interest-rate debt securities and overseas publicly traded stock; therefore, the fluctuations in market interest rates and market price will result in changes in fair values of these debt securities.

 

2)

Credit risk. Credit risk represents the potential loss that would be incurred by the Company if the counter-parties or third-parties breached contracts. Financial instruments with positive fair values at the balance sheet date are evaluated for credit risk. The Company evaluated whether the financial instruments for any possible counter-party or third-parties are reputable financial institutions, business enterprises, and government agencies and accordingly, the Company believed that the Company’s exposure to credit risk was not significant.

 

3)

Liquidity risk. The Company has sufficient operating capital and bank facilities to meet cash needs upon settlement of derivative financial instruments and bonds payable. Therefore, the liquidity risk is low.

 

4)

Cash flow interest rate risk. The Company mainly invests in fixed-interest-rate debt securities. Therefore, cash flows are not expected to fluctuate significantly due to changes in market interest rates.

 

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24.

RELATED PARTY TRANSACTIONS

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

 

a.

Subsidiaries

TSMC North America

TSMC China

TSMC Europe

TSMC Japan

 

b.

Investees

GUC (with a controlling financial interest)

Xintec (with a controlling financial interest)

VIS (accounted for using equity method)

SSMC (accounted for using equity method)

Motech (accounted for using equity method)

 

c.

Indirect subsidiaries

WaferTech, LLC (WaferTech)

TSMC Technology, Inc. (TSMC Technology)

TSMC Design Technology Canada Inc. (TSMC Canada)

 

d.

Indirect investee

VisEra Technology Company, Ltd. (VisEra), an indirect investee accounted for using equity method.

 

e.

Others

Related parties over which the Company has control or exercises significant influence but with which the Company had no material transactions.

Transactions with the aforementioned parties, other than those disclosed in other notes, are summarized as follows:

 

 

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The sales prices and payment terms to related parties were not significantly different from those of sales to third parties. For other related party transactions, prices and terms were determined in accordance with mutual agreements.

The Company leased certain buildings, facilities, and machinery and equipment from Xintec. The lease terms and prices were determined in accordance with mutual agreements. The rental expense was paid monthly and the related expenses were classified under manufacturing expenses.

The Company leased certain office space and facilities from VIS. The lease terms and prices were determined in accordance with mutual agreements. The rental expense was paid monthly and the related expenses were classified under research and development expenses and manufacturing expenses.

The Company leased certain machinery and equipment to VisEra. The lease terms and prices were determined in accordance with mutual agreements. The rental income was received monthly and the related income was classified under non-operating income and gains.

The Company deferred the disposal losses (classified under other assets) derived from sales of property, plant and equipment to TSMC China, and then recognized such losses (classified under non-operating gains and losses) over the depreciable lives of the disposed assets.

 

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25.

PLEDGED OR MORTGAGED ASSETS

As of June 30, 2011, the Company had no assets set aside as collateral. As of June 30, 2010, the Company had pledged time deposits of NT$352,354 thousand (classified as other financial assets) as collateral for land lease agreements and customs duty guarantee.

 

26.

SIGNIFICANT LONG-TERM LEASES

The Company leases several parcels of land from the Science Park Administration. These operating leases expire on various dates from July 2011 to July 2030 and can be renewed upon expiration.

As of June 30, 2011, future lease payments were as follows:

 

 

27.

SIGNIFICANT COMMITMENTS AND CONTINGENCIES

Significant commitments and contingencies of the Company as of June 30, 2011, excluding those disclosed in other notes, were as follows:

 

a.

Under a technical cooperation agreement with ITRI, the R.O.C. Government or its designee approved by the Company can use up to 35% of the Company’s capacity if the Company’s outstanding commitments to its customers are not prejudiced. The term of this agreement is for five years beginning from January 1, 1987 and is automatically renewed for successive periods of five years unless otherwise terminated by either party with one year prior notice.

 

b.

Under several foundry agreements, the Company shall reserve a portion of its production capacity for certain major customers that have guarantee deposits with the Company. As of June 30, 2011, the Company had a total of US$15,317 thousand of guarantee deposits.

 

c.

Under a Shareholders Agreement entered into with Philips and EDB Investments Pte Ltd. on March 30, 1999, the parties formed a joint venture company, SSMC, which is an integrated circuit foundry in Singapore. The Company’s equity interest in SSMC was 32%. Nevertheless, Philips parted with its semiconductor company which was renamed as NXP B.V. in September 2006. The Company and NXP B.V. purchased all the SSMC shares owned by EDB Investments Pte Ltd. pro rata according to the Shareholders Agreement on November 15, 2006. After the purchase, the Company and NXP B.V. currently own approximately 39% and 61% of the SSMC shares respectively. The Company and Philips (now NXP B.V.) are required, in the aggregate, to purchase at least 70% of SSMC’s capacity, but the Company alone is not required to purchase more than 28% of the capacity. If any party defaults on the commitment and the capacity utilization of SSMC fall below a specific percentage of its capacity, the defaulting party is required to compensate SSMC for all related unavoidable costs.

 

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d.

In August 2006, TSMC filed a lawsuit against Semiconductor Manufacturing International Corporation, SMIC (Shanghai) and SMIC Americas (aggregately referred to as “SMIC”) in the Superior Court of California for Alameda County for breach of a 2005 agreement that settled an earlier trade secret misappropriation and patent infringement litigation between the parties, as well as for trade secret misappropriation, seeking injunctive relief and monetary damages. In September 2006, SMIC filed a cross-complaint against TSMC in the same court alleging breach of settlement agreement, implied covenant of good faith and fair dealing. SMIC also filed a civil action against TSMC in November 2006 with the Beijing People’s High Court alleging defamation and breach of good faith. On June 10, 2009, the Beijing People’s High Court ruled in favor of TSMC and dismissed SMIC’s lawsuit. On November 4, 2009, after a two-month trial, a jury in the California action found SMIC to have both breached the 2005 settlement agreement and misappropriated TSMC’s trade secrets. TSMC has subsequently settled both lawsuits with SMIC. Pursuant to the new settlement agreement, the parties have agreed to the entry of a stipulated judgment in favor of TSMC in the California action, and to the dismissal of SMIC’s appeal against the Beijing High Court’s finding in favor of TSMC. Under the new settlement agreement and the related stipulated judgment, SMIC has agreed to make cash payments by installments to TSMC totaling US$200 million, which are in addition to the US$135 million previously paid to TSMC under the 2005 settlement agreement, and, conditional upon relevant government regulatory approvals, to issue to TSMC a total of 1,789,493,218 common shares of Semiconductor Manufacturing International Corporation and a three-year warrant to purchase 695,914,030 common shares (subject to adjustment) of Semiconductor Manufacturing International Corporation at HK$1.30 per share (subject to adjustment). TSMC has received the approval from the Investment Commission of Ministry of Economic Affairs and acquired the above mentioned common shares in July 2010 and obtained the subsequent cash settlement income in accordance with the agreement.

 

e.

In June 2010, Keranos, LLC. filed a lawsuit in the U.S. District Court for the Eastern District of Texas alleging that TSMC, TSMC North America, and several other leading technology companies infringe three expired U.S. patents. In response, TSMC, TSMC North America, and several co-defendants in the Texas case filed a lawsuit against Keranos in the U.S. District Court for the Northern District of California in November 2010, seeking a judgment declaring that they did not infringe the asserted patents, and that those patents are invalid. The outcome of these two litigations cannot be determined at this time.

 

f.

In December 2010, Ziptronix, Inc. filed a complaint in the U.S. District Court for the Northern District of California accusing TSMC, TSMC North America and one other company of allegedly infringing six U.S. patents. This litigation is in its very early stages and therefore the outcome of the case cannot be determined at this time.

 

28.

OTHERS

The significant financial assets and liabilities denominated in foreign currencies were as follows:

 

(Continued)

 

- 34 -

---

(Concluded)

Note: Exchange rate represents the number of N.T. dollars for which one foreign currency could be exchanged.

 

29.

ADDITIONAL DISCLOSURES

Following are the additional disclosures required by the SFB for the Company and its investees:

 

a.

Financing provided: Please see Table 1 attached;

 

b.

Endorsement/guarantee provided: None;

 

c.

Marketable securities held: Please see Table 2 attached;

 

d.

Marketable securities acquired or disposed of at costs or prices of at least NT$100 million or 20% of the paid-in capital: Please see Table 3 attached;

 

e.

Acquisition of individual real estate properties at costs of at least NT$100 million or 20% of the paid-in capital: Please see Table 4 attached;

 

f.

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

 

g.

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

 

h.

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

 

i.

Names, locations, and related information of investees over which the Company exercises significant influence: Please see Table 7 attached;

 

- 35 -

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j.

Information about derivatives of investees over which the Company has a controlling interest:

Do not meet the criteria for hedge accounting

TSMC China entered into forward exchange contracts during the six months ended June 30, 2011 to manage exposures due to foreign exchange rate fluctuations. Outstanding forward exchange contracts as of June 30, 2011 consisted of the following:

 

For the six months ended June 30, 2011, net losses arising from forward exchange contracts of TSMC China amounted to NT$54,832 thousand.

Xintec entered into forward exchange contracts during the six months ended June 30, 2011 to manage exposures due to foreign exchange rate fluctuations. Outstanding forward exchange contracts as of June 30, 2011 consisted of the following:

 

For the six months ended June 30, 2011, net gains arising from forward exchange contracts of Xintec amounted to NT$12,677 thousand.

TSMC Partners entered into forward exchange contracts during the six months ended June 30, 2011 to manage exposures due to foreign exchange rate fluctuations. Outstanding forward exchange contracts as of June 30, 2011 consisted of the following:

 

For the six months ended June 30, 2011, net losses arising from forward exchange contracts of TSMC Partners amounted to NT$41,219 thousand.

Meet the criteria for hedge accounting

Xintec monitors and manages the financial risk through the analysis of business environment and evaluation of entity’s financial risks. Further, Xintec seeks to reduce the effects of future cash flow related interest rate exposures by primarily using derivative financial instruments.

 

- 36 -

---

Xintec is exposed to interest rate risk because its long-term bank loans bear floating interest rates. Accordingly, Xintec enters into interest rate swap contract to hedge such a cash flow interest rate risk. As of June 30, 2011, the outstanding interest rate swap contract of Xintec consisted of the following:

 

For the six months ended June 30, 2011, the adjustment for current period to shareholders’ equity amounted to a loss of NT$51 thousand for the above Xintec’s interest rate swap contract. The amount removed from shareholders’ equity and recognized as a loss amounted to NT$417 thousand.

 

k.

Information on investment in Mainland China

 

1)

The name of the investee in Mainland China, the main businesses and products, its issued capital, method of investment, information on inflow or outflow of capital, percentage of ownership, equity in the net gain or net loss, ending balance, amount received as dividends from the investee, and the limitation on investee: Please see Table 8 attached.

 

2)

Significant direct or indirect transactions with the investee, its prices and terms of payment, unrealized gain or loss, and other related information which is helpful to understand the impact of investment in Mainland China on financial reports: Please see Note 24.

 

30.

OPERATING SEGMENTS INFORMATION

The Company has provided the operating segments disclosure in the consolidated financial statements.

 

- 37 -

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TABLE 1

Taiwan Semiconductor Manufacturing Company Limited and Investees

FINANCINGS PROVIDED

FOR THE SIX MONTHS ENDED JUNE 30, 2011

(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)

 

 

No.		Financing Name		Financial statement Account		Counter-party				Financing Limit for Each Borrowing Company		Maximum Balance for the Period (US$ in Thousands)				Ending Balance (US$ in Thousands)				Interest Rate		Reason for Financing				Allowance for Bad Debt				Collateral								Transaction Amounts				Financing Company’s Financing Amount Limits (Note 2)
																														Item				Value
1		TSMC Partners		Long-term receivables from related parties			TSMC China			(Note 1)		$ (US$	7,175,000 250,000	)		$ (US$	7,175,000 250,000	)		0.25%-0.26%			Purchase equipment			$	-				-			$	-			$	-			$	32,657,501

 

Note 1:

The total amount for lending to a company for funding for a short-term period shall not exceed ten percent (10%) of the net worth of TSMC Partners. In addition, the total amount lendable to any one borrower shall be no more than thirty percent (30%) of the borrower’s net worth. While offshore subsidiaries whose voting shares are 100% owned, directly or indirectly, by TSMC will not subjected to this restriction.

 

Note 2:

The total amount available for lending purpose shall not exceed the net worth of TSMC Partners.

 

- 38 -

---

TABLE 2

Taiwan Semiconductor Manufacturing Company Limited and Investees

MARKETABLE SECURITIES HELD

JUNE 30, 2011

(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)

 

 

Held  Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		June 30, 2011																Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)				Market Value or Net Asset Value (Foreign Currencies in Thousands)
TSMC		Corporate bond
		Nan Ya Plastics Corporation		-		Held-to-maturity financial assets			-			$	1,303,484				N/A			$	1,334,550
		Taiwan Power Company		-		”			-				860,303				N/A				861,061
		Formosa Plastics Corporation		-		”			-				575,212				N/A				577,236
		Formosa Petrochemical Corporation		-		”			-				475,445				N/A				476,512
		China Steel Corporation		-		”			-				305,086				N/A				305,179
		Stock
		Semiconductor Manufacturing International Corporation		-		Available-for-sale financial assets			1,789,493				4,171,309				7				4,171,309
		TSMC Global		Subsidiary		Investments accounted for using equity method			1				41,617,880				100				41,617,880
		TSMC Partners		Subsidiary		”			988,268				32,657,501				100				32,657,501
		VIS		Investee accounted for using equity method		”			628,223				9,110,898				38				9,391,941
		Motech		Investee accounted for using equity method		”			76,069				6,132,395				20				4,245,447
		SSMC		Investee accounted for using equity method		”			314				5,519,534				39				5,239,884
		TSMC North America		Subsidiary		”			11,000				2,830,777				100				2,830,777
		Xintec		Investee with a controlling financial interest		”			93,081				1,596,809				41				1,596,809
		GUC		Investee with a controlling financial interest		”			46,688				1,064,925				35				5,299,072
		TSMC Solar Europe		Subsidiary		”			-				391,148				100				391,148
		TSMC Europe		Subsidiary		”			-				201,892				100				201,892
		TSMC Japan		Subsidiary		”			6				146,863				100				146,863
		TSMC Solar NA		Subsidiary		”			1				83,704				100				83,704
		TSMC Korea		Subsidiary		”			80				22,622				100				22,622
		TSMC Lighting NA		Subsidiary		”			1				2,872				100				2,872
		United Industrial Gases Co., Ltd.		-		Financial assets carried at cost			16,783				193,584				10				310,107
		Shin-Etsu Handotai Taiwan Co., Ltd.		-		”			10,500				105,000				7				340,983
		W.K. Technology Fund IV		-		”			4,000				40,000				2				42,704
		Fund
		Horizon Ventures Fund		-		Financial assets carried at cost			-				103,992				12				103,992
		Crimson Asia Capital		-		”			-				55,259				1				55,259
		Capital
		TSMC China		Subsidiary		Investments accounted for using equity method			-				5,198,868				100				5,230,389
		VTAF III		Subsidiary		”			-				2,587,484				99				2,567,506
		VTAF II		Subsidiary		”			-				1,015,748				98				1,009,979
		Emerging Alliance		Subsidiary		”			-				277,059				99				277,059
TSMC Partners		Corporate bond
		General Elec Cap Corp. Mtn		-		Held-to-maturity financial assets			-			US$	20,150				N/A			US$	20,650
		General Elec Cap Corp. Mtn		-		”			-			US$	20,101				N/A			US$	21,176

(Continued)

 

- 39 -

---

Held Company  Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		June 30, 2011																Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)				Market Value or Net Asset Value (Foreign Currencies in Thousands)
TSMC Partners		Common stock
		TSMC Development, Inc. (TSMC Development)		Subsidiary		Investments accounted for using equity method			1			US$	436,801				100			US$	436,801
		VisEra Holding Company		Investee accounted for using equity method		”			43,000			US$	90,180				49			US$	90,180
		InveStar Semiconductor Development Fund, Inc. (ISDF)		Subsidiary		”			787			US$	14,191				97			US$	14,191
		InveStar Semiconductor Development Fund, Inc. (II) LDC. (ISDF II)		Subsidiary		”			14,153			US$	10,781				97			US$	10,781
		TSMC Technology		Subsidiary		”			1			US$	10,271				100			US$	10,271
		TSMC Canada		Subsidiary		”			2,300			US$	4,010				100			US$	4,010
		Mcube Inc.		Investee accounted for using equity method		”			5,333				-				83				-
		Preferred stock
		Mcube Inc.		Investee accounted for using equity method		Investments accounted for using equity method			1,000				-				6				-
		Fund
		Walden Venture Capital Enterprise		-		Financial assets carried at cost			-			US$	5,000				8			US$	5,000
TSMC Development		Corporate bond
		GE Capital Corp.		-		Held-to-maturity financial assets			-			US$	20,154				N/A			US$	21,176
		JP Morgan Chase & Co.		-		”			-			US$	15,000				N/A			US$	15,070
		Stock
		WaferTech		Subsidiary		Investments accounted for using equity method			293,640			US$	197,757				100			US$	197,757
Emerging Alliance		Common stock
		RichWave Technology Corp.		-		Financial assets carried at cost			4,074			US$	1,545				10			US$	1,545
		Global Investment Holding Inc.		-		”			11,124			US$	3,065				6			US$	3,065
		Preferred stock
		Audience, Inc.		-		Financial assets carried at cost			1,654			US$	250				-			US$	250
		Next IO, Inc.		-		”			8			US$	500				-			US$	500
		Pixim, Inc.		-		”			4,641			US$	1,137				2			US$	1,137
		QST Holdings, LLC		-		”			-			US$	142				4			US$	142
		Capital
		VentureTech Alliance Holdings, LLC (VTA Holdings)		Subsidiary		Investments accounted for using equity method			-				-				7				-
VTAF II		Common stock
		Aether Systems, Inc.		-		Financial assets carried at cost			1,600			US$	1,503				25			US$	1,503
		RichWave Technology Corp.		-		”			1,267			US$	1,036				3			US$	1,036
		Sentelic		-		”			1,806			US$	2,607				9			US$	2,607
		Preferred stock
		5V Technologies, Inc.		-		Financial assets carried at cost			2,890			US$	2,168				4			US$	2,168
		Aquantia		-		”			4,556			US$	4,316				3			US$	4,316
		Audience, Inc.		-		”			12,378			US$	2,378				3			US$	2,378
		Impinj, Inc.		-		”			475			US$	1,000				-			US$	1,000
		Next IO, Inc.		-		”			132			US$	1,110				2			US$	1,110
		Pixim, Inc.		-		”			33,347			US$	1,878				2			US$	1,878
		Power Analog Microelectronics		-		”			7,027			US$	3,383				19			US$	3,383
		QST Holdings, LLC		-		”			-			US$	593				13			US$	593
		Xceive		-		”			4,615			US$	1,611				3			US$	1,611

(Continued)

 

-40-

---

Held Company  Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		June 30, 2011																Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)				Market Value or Net Asset Value (Foreign Currencies in Thousands)
VTAF II		Capital
		VTA Holdings		Subsidiary		Investments accounted for using equity method			-			$	-				31			$	-
VTAF III		Common stock
		Mutual-Pak Technology Co., Ltd.		Subsidiary		Investments accounted for using equity method			11,868			US$	1,687				57			US$	1,687
		Accton Wireless Broadband Corp.		-		Financial assets carried at cost			2,249			US$	315				6			US$	315
		Preferred stock
		BridgeLux, Inc.		-		Financial assets carried at cost			6,771			US$	8,745				4			US$	8,745
		Exclara, Inc.		-		”			59,695			US$	5,897				15			US$	5,897
		GTBF, Inc.		-		”			1,154			US$	1,500				N/A			US$	1,500
		InvenSense, Inc.		-		”			816			US$	1,000				1			US$	1,000
		LiquidLeds Lighting Corp.		-		”			1,600			US$	800				11			US$	800
		Neoconix, Inc.		-		”			3,801			US$	4,748				4			US$	4,748
		Powervation, Ltd.		-		”			380			US$	5,797				16			US$	5,797
		Silicon Technical Services, LLC		-		”			1,055			US$	1,208				-			US$	1,208
		Stion Corp.		-		”			7,347			US$	50,000				23			US$	50,000
		Tilera, Inc.		-		”			3,890			US$	3,025				2			US$	3,025
		Validity Sensors, Inc.		-		”			9,340			US$	3,456				4			US$	3,456
		Capital
		Growth Fund Limited (Growth Fund)		Subsidiary		Investments accounted for using equity method			-			US$	825				100			US$	825
		VTA Holdings		Subsidiary		”			-				-				62				-
Growth Fund		Common stock
		SiliconBlue Technologies, Inc.		-		Financial assets carried at cost			5,107			US$	762				1			US$	762
		Veebeam		-		”			10			US$	25				-			US$	25
ISDF		Common stock
		Integrated Memory Logic, Inc.		-		Available-for-sale financial assets			2,977			US$	11,971				4			US$	11,971
		Memsic, Inc.		-		”			1,286			US$	4,397				5			US$	4,397
		Preferred stock
		Sonics, Inc.		-		Financial assets carried at cost			230			US$	497				2			US$	497
ISDF II		Common stock
		Memsic, Inc.		-		Available-for-sale financial assets			1,072			US$	3,666				5			US$	3,666
		Alchip Technologies Limited		-		Financial assets carried at cost			7,520			US$	3,664				14			US$	3,664
		Sonics, Inc.		-		”			278			US$	10				3			US$	10
		Goyatek Technology, Corp.		-		”			932			US$	361				6			US$	361
		Auden Technology MFG. Co., Ltd.		-		”			1,049			US$	223				3			US$	223
		Preferred stock
		FangTek, Inc.		-		Financial assets carried at cost			1,032			US$	148				6			US$	148
		Sonics, Inc.		-		”			264			US$	455				3			US$	455
GUC		Open-end mutual fund
		Jhi Sun Money Market Fund		-		Available-for-sale financial assets			9,875			$	140,307				-			$	140,307
		Mega Diamond Money Market Fund		-		”			10,009				120,305				-				120,305
		PCA Well Pool Money Market Fund		-		”			6,141				80,205				-				80,205
		Capital Money Market Fund		-		”			3,873				60,043				-				60,043
		Hua Nan Phoenix Money Market Fund		-		”			3,194				50,036				-				50,036

(Continued)

 

- 41 -

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Held Company Name		Marketable Securities Type  and Name		Relationship with the  Company		Financial Statement Account		June 30, 2011																Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies     in Thousands)				Percentage of Ownership (%)				Market Value or Net Asset Value (Foreign Currencies in Thousands)
GUC		Common stock
		GUC-NA		Subsidiary		Investments accounted for using equity method			800			$	61,706				100			$	61,706
		GUC-Japan		Subsidiary		”			1				15,129				100				15,129
		GUC-BVI		Subsidiary		”			550				8,684				100				8,684
		GUC-Europe		Subsidiary		”			-				3,746				100				3,746
GUC-BVI		Capital
		Global Unichip (Shanghai) Company, Limited (GUC-Shanghai)		Subsidiary		Investments accounted for using equity method			-				7,430				100				7,430
Xintec		Capital
		Compositech Ltd.		-		Financial assets carried at cost			587				-				3				-
TSMC Solar Europe		Stock
		TSMC Solar Europe GmbH		Subsidiary		Investments accounted for using equity method			1			EUR	9,263				100			EUR	9,263
TSMC Global		Corporate bond
		Aust + Nz Banking Group		-		Held-to-maturity financial assets			20,000			US$	20,000				N/A			US$	20,003
		Commonwealth Bank of Australia		-		”			25,000			US$	25,000				N/A			US$	24,835
		Commonwealth Bank of Australia		-		”			25,000			US$	25,000				N/A			US$	25,021
		JP Morgan Chase + Co.		-		”			35,000			US$	35,052				N/A			US$	35,016
		Nationwide Building Society-UK Government Guarantee		-		”			8,000			US$	8,000				N/A			US$	8,006
		Westpac Banking Corp.		-		”			25,000			US$	25,000				N/A			US$	24,709
		Westpac Banking Corp. 12/12 Frn		-		”			5,000			US$	5,000				N/A			US$	5,012
		Government bond
		Societe De Financement De Lec		-		Held-to-maturity financial assets			15,000			US$	15,000				N/A			US$	15,022
		Money market fund
		Ssga Cash Mgmt Global Offshore		-		Available-for-sale financial assets			333			US$	333				N/A			US$	333

(Concluded)

 

- 42 -

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TABLE 3

Taiwan Semiconductor Manufacturing Company Limited and Investees

MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL

FOR THE SIX MONTHS ENDED JUNE 30, 2011

(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)

 

 

Company Name		Marketable Securities Type and Name		Financial Statement      Account		Counter-party		Nature of Relationship				Beginning Balance								Acquisition								Disposal (Note 2)																Ending Balance (Note 3)
												Shares/Units (In Thousands)				Amount (Foreign Currencies in Thousands)				Shares/Units (In Thousands) (Note 1)				Amount (Foreign Currencies in Thousands)				Shares/Units (In Thousands)				Amount (Foreign Currencies in Thousands)				Carrying Value (Foreign Currencies in Thousands)				Gain (Loss) or Disposal (Foreign Currencies in Thousands)				Shares/Units (In Thousands)				Amount (Foreign Currencies in Thousands)
TSMC		Stock
		TSMC Soalr Europe		Investments accounted for using equity method		-			Subsidiary				-			$	23,971				-			$	385,682				-			$	-			$	-			$	-				-			$	391,148
TSMC Solar		Stock
Europe		TSMC Solar Europe GmbH		Inv1estments accounted for using equity method		-			Subsidiary				1				EUR 90				-				EUR 9,800				-				-				-				-				1				EUR 9,263
GUC		Open-end mutual fund
		Jhi Sun Money Market Fund		Available-for-sale financial assets		Jih Sun Investment Trust Co., Ltd.			-				-				-				9,875				140,000				-				-				-				-				9,875				140,307
		Mega Diamond Money Market Fund		”		Mega Investment International Trust Co., Ltd.			-				-				-				10,009				120,000				-				-				-				-				10,009				120,305
		Hua Nan Phoenix Money Market Fund		”		Hua Nan Investment Trust Corp.			-				-				-				6,393				100,000				3,199				50,053				50,000				53				3,194				50,036
TSMC Global		Corporate bond
		Allstate Life Gbl Fdg Secd		Available-for-sale financial assets		-			-				4,430			US$	4,824				-				-				4,430			US$	4,787			US$	4,834			US$	(47	)			-				-
		American Honda Fin Corp. Mtn		”		-			-				4,000			US$	3,995				-				-				4,000			US$	4,005			US$	3,985			US$	20				-				-
		Anz National Intl Ltd.		”		-			-				3,500			US$	3,554				-				-				3,500			US$	3,555			US$	3,515			US$	40				-				-
		Archer Daniels Midland Co.		”		-			-				-				-				7,000			US$	7,000				7,000			US$	7,010			US$	7,000			US$	10				-				-
		Astrazeneca Plc		”		-			-				3,150			US$	3,397				-				-				3,150			US$	3,356			US$	3,456			US$	(100	)			-				-
		AT+T Wireless		”		-			-				3,500			US$	3,823				-				-				3,500			US$	3,762			US$	3,979			US$	(217	)			-				-
		Banco Bilbao Vizcaya P R		”		-			-				3,250			US$	3,249				-				-				3,250			US$	3,251			US$	3,250			US$	1				-				-
		Bank of Nova Scotia		”		-			-				5,000			US$	5,000				-				-				5,000			US$	5,012			US$	5,000			US$	12				-				-
		Barclays Bank Plc		”		-			-				12,000			US$	11,997				-				-				12,000			US$	12,022			US$	12,035			US$	(13	)			-				-
		Barclays Bk Plc UK Govt Cr		”		-			-				-				-				5,000			US$	5,108				5,000			US$	5,099			US$	5,108			US$	(9	)			-				-
		Bb+T Corporation		”		-			-				-				-				3,840			US$	3,990				3,840			US$	3,977			US$	3,990			US$	(13	)			-				-
		Bear Stearns Cos Inc.		”		-			-				3,500			US$	3,494				-				-				3,500			US$	3,465			US$	3,360			US$	105				-				-
		Berkshire Hathaway Inc. Del		”		-			-				3,500			US$	3,517				-				-				3,500			US$	3,521			US$	3,500			US$	21				-				-
		Bhp Billiton Fin USA Ltd.		”		-			-				-				-				4,000			US$	4,443				4,000			US$	4,447			US$	4,443			US$	4				-				-
		Bnp Paribas SA		”		-			-				3,810			US$	3,844				-				-				3,810			US$	3,838			US$	3,844			US$	(6	)			-				-
		Boeing Cap Corp.		”		-			-				2,925			US$	3,192				-				-				2,925			US$	3,180			US$	3,235			US$	(55	)			-				-
		Bp Capital Markets Plc		”		-			-				3,900			US$	3,988				-				-				3,900			US$	3,992			US$	3,969			US$	23				-				-
		Bp Capital Markets Plc		”		-			-				-				-				7,160			US$	7,160				7,160			US$	7,201			US$	7,160			US$	41				-				-
		Chevron Corp.		”		-			-				-				-				4,000			US$	4,305				4,000			US$	4,286			US$	4,305			US$	(19	)			-				-
		Cie Financement Foncier		”		-			-				4,000			US$	4,019				-				-				4,000			US$	4,034			US$	4,029			US$	5				-				-
		Cisco Systems Inc.		”		-			-				-				-				7,050			US$	7,050				7,050			US$	7,073			US$	7,050			US$	23				-				-
		Citigroup Funding Inc.		”		-			-				16,000			US$	16,323				-				-				16,000			US$	16,337			US$	16,262			US$	75				-				-
		Citigroup Funding Inc.		”		-			-				7,300			US$	7,446				-				-				7,300			US$	7,440			US$	7,448			US$	(8	)			-				-
		Citigroup Inc.		”		-			-				5,000			US$	5,490				-				-				5,000			US$	5,478			US$	5,360			US$	118				-				-
		Coca Cola Co.		”		-			-				4,000			US$	4,002				-				-				4,000			US$	4,003			US$	4,000			US$	3				-				-

(Continued)

 

 

- 43 -

---

Company Name		Marketable Securities Type and Name		Financial Statement Account		Counter-party		Nature of Relationship		Beginning Balance								Acquisition								Disposal (Note 2)																Ending Balance (Note 3)
										Shares/Units (In Thousands)				Amount (Foreign Currencies in Thousands)				Shares/Units (In Thousands) (Note 1)				Amount (Foreign Currencies in Thousands)				Shares/Units (In Thousands)				Amount (Foreign Currencies in Thousands)				Carrying Value (Foreign Currencies in Thousands)				Gain (Loss) or Disposal (Foreign Currencies in Thousands)				Shares/Units (In Thousands)				Amount (Foreign Currencies in Thousands)
TSMC Global		Countrywide Finl Corp.		Available-for-sale financial assets		-		-			4,000			US$	4,208				-			US$	-				4,000			US$	4,221			US$	4,291			US$	(70	)			-			US$	-
		Credit Suisse New York		”		-		-			3,945			US$	4,090				-				-				3,945			US$	4,069			US$	4,073			US$	(4	)			-				-
		Credit Suisse New York		”		-		-			-				-				3,200			US$	3,200				3,200			US$	3,238			US$	3,200			US$	38				-				-
		Dexia Credit Local		”		-		-			6,000			US$	5,976				-				-				6,000			US$	5,983			US$	6,000			US$	(17	)			-				-
		Dexia Credit Local		”		-		-			4,000			US$	3,984				-				-				4,000			US$	3,927			US$	4,000			US$	(73	)			-				-
		Dexia Credit Local S.A		”		-		-			4,000			US$	3,992				-				-				4,000			US$	3,976			US$	4,000			US$	(24	)			-				-
		Dexia Credit Local SA NY		”		-		-			5,000			US$	4,983				-				-				5,000			US$	4,952			US$	5,000			US$	(48	)			-				-
		Finance for Danish Ind		”		-		-			3,800			US$	3,799				-				-				3,800			US$	3,808			US$	3,801			US$	7				-				-
		General Elec Cap Corp.		”		-		-			7,000			US$	7,002				-				-				7,000			US$	7,005			US$	7,002			US$	3				-				-
		General Elec Cap Corp.		”		-		-			4,000			US$	4,110				-				-				4,000			US$	4,095			US$	4,117			US$	(22	)			-				-
		General Elec Cap Corp.		”		-		-			-				-				5,000			US$	5,000				5,000			US$	5,037			US$	5,000			US$	37				-				-
		Georgia Pwr Co.		”		-		-			4,000			US$	4,006				-				-				4,000			US$	4,002			US$	4,024			US$	(22	)			-				-
		Gmac LLC		”		-		-			4,600			US$	4,731				-				-				4,600			US$	4,715			US$	4,726			US$	(11	)			-				-
		Goldman Sachs Group Inc.		”		-		-			-				-				3,400			US$	3,400				3,400			US$	3,425			US$	3,400			US$	25				-				-
		Hewlett Packard Co.		”		-		-			3,000			US$	3,003				-				-				3,000			US$	3,004			US$	2,995			US$	9				-				-
		Household Fin Corp.		”		-		-			4,330			US$	4,694				-				-				4,330			US$	4,662			US$	4,781			US$	(119	)			-				-
		HSBC Bank Plc		”		-		-			3,400			US$	3,405				-				-				3,400			US$	3,407			US$	3,407				-				-				-
		HSBC Fin Corp.		”		-		-			2,900			US$	3,074				-				-				2,900			US$	3,074			US$	3,142			US$	(68	)			-				-
		IBM Corp.		”		-		-			6,800			US$	6,775				-				-				6,800			US$	6,781			US$	6,772			US$	9				-				-
		Inc Bk Nv Neth St Cr Gtee		”		-		-			-				-				8,500			US$	8,668				8,500			US$	8,655			US$	8,668			US$	(13	)			-				-
		John Deer Capital Corp. Fdic GT		”		-		-			3,500			US$	3,616				-				-				3,500			US$	3,601			US$	3,634			US$	(33	)			-				-
		JP Morgan Chase + Co.		”		-		-			5,000			US$	5,021				-				-				5,000			US$	5,032			US$	5,000			US$	32				-				-
		Lloyds Tsb Bank Plc Ser 144A		”		-		-			5,950			US$	6,009				-				-				5,950			US$	6,007			US$	6,077			US$	(70	)			-				-
		Macquarie Bk Ltd. Sr		”		-		-			3,900			US$	3,975				9,300			US$	9,472				13,200			US$	13,423			US$	13,455			US$	(32	)			-				-
		Massmutual Global Fdg II Mediu		”		-		-			4,000			US$	3,955				-				-				4,000			US$	3,991			US$	3,926			US$	65				-				-
		Mellon Fdg Corp.		”		-		-			3,500			US$	3,475				-				-				3,500			US$	3,479			US$	3,404			US$	75				-				-
		Merck + Co. Inc.		”		-		-			4,000			US$	4,032				-				-				4,000			US$	4,013			US$	4,066			US$	(53	)			-				-
		Merrill Lynch + Co. Inc.		”		-		-			4,691			US$	4,647				-				-				4,691			US$	4,669			US$	4,603			US$	66				-				-
		Merrill Lynch + Co. Inc.		”		-		-			-				-				4,000			US$	4,335				4,000			US$	4,319			US$	4,335			US$	(16	)			-				-
		Met Life Glob Funding I		”		-		-			-				-				3,000			US$	3,000				3,000			US$	3,004			US$	3,000			US$	4				-				-
		Metlife Inc.		”		-		-			6,500			US$	6,600				-				-				6,500			US$	6,584			US$	6,527			US$	57				-				-
		Microsoft Corp.		”		-		-			3,250			US$	3,232				-				-				3,250			US$	3,224			US$	3,249			US$	(25	)			-				-
		Morgan Stanley		”		-		-			-				-				9,000			US$	9,000				9,000			US$	9,140			US$	9,000			US$	140				-				-
		Morgan Stanley Dean Witter		”		-		-			8,000			US$	8,524				-				-				8,000			US$	8,513			US$	8,797			US$	(284	)			-				-
		National Australia Bank		”		-		-			-				-				3,000			US$	3,035				3,000			US$	3,040			US$	3,034			US$	6				-				-
		Pepsiamericas Inc.		”		-		-			-				-				4,000			US$	4,329				4,000			US$	4,308			US$	4,329			US$	(21	)			-				-
		Philip Morris Intl Inc.		”		-		-			-				-				4,000			US$	4,640				4,000			US$	4,591			US$	4,640			US$	(49	)			-				-
		Princoa Global Fdg I Medium		”		-		-			5,050			US$	5,011				-				-				5,050			US$	5,042			US$	4,921			US$	121				-				-
		Rabobank Nederland		”		-		-			5,000			US$	5,000				-				-				5,000			US$	5,000			US$	4,997			US$	3				-				-
		Royal Bk of Scotland Plc		”		-		-			5,000			US$	5,052				-				-				5,000			US$	5,045			US$	5,106			US$	(61	)			-				-
		Royal Bk Scotlnd Grp Plc 144A		”		-		-			9,450			US$	9,516				-				-				9,450			US$	9,517			US$	9,596			US$	(79	)			-				-
		Sanofi Aventis		”		-		-			-				-				4,000			US$	4,000				4,000			US$	4,003			US$	4,000			US$	3				-				-
		Sanofi Aventis		”		-		-			-				-				3,870			US$	3,870				3,870			US$	3,884			US$	3,870			US$	14				-				-
		Shell International Fin		”		-		-			4,515			US$	4,536				-				-				4,515			US$	4,533			US$	4,527			US$	6				-				-
		Shell International Fin		”		-		-			3,200			US$	3,248				-				-				3,200			US$	3,256			US$	3,227			US$	29				-				-
		Standard Chartered BK NY		”		-		-			-				-				3,000			US$	3,000				3,000			US$	3,001			US$	3,000			US$	1				-				-
		State Str Corp.		”		-		-			6,420			US$	6,417				-				-				6,420			US$	6,423			US$	6,382			US$	41				-				-
		Sun Life Finl Global		”		-		-			4,400			US$	4,332				-				-				4,400			US$	4,351			US$	4,304			US$	47				-				-
		Suncorp Metway Ltd.		”		-		-			8,800			US$	8,982				-				-				8,800			US$	8,937			US$	9,125			US$	(188	)			-				-
		Swedbank Hypotek AB		”		-		-			4,000			US$	3,993				-				-				4,000			US$	3,998			US$	4,002			US$	(4	)			-				-
		Swedbank Hypotek AB		”		-		-			-				-				4,100			US$	4,100				4,100			US$	4,086			US$	4,100			US$	(14	)			-				-

(Continued)

 

- 44 -

---

Company Name		Marketable Securities Type and Name		Financial Statement Account		Counter-party		Nature of Relationship		Beginning Balance								Acquisition								Disposal (Note 2)																Ending Balance (Note 3)
										Shares/Units (In Thousands)				Amount (Foreign Currencies in Thousands)				Shares/Units (In Thousands) (Note 1)				Amount (Foreign Currencies in Thousands)				Shares/Units (In Thousands)				Amount (Foreign Currencies in Thousands)				Carrying Value (Foreign Currencies in Thousands)				Gain (Loss) or Disposal (Foreign Currencies in Thousands)				Shares/Units (In Thousands)				Amount (Foreign Currencies in Thousands)
TSMC Global		Teva Pharm Fin III		Available-for-sale financial assets		-		-			-			US$	-				4,000			US$	4,000				4,000			US$	4,019			US$	4,000			US$	19				-			US$	-
		Teva Pharma Fin III LLC		”		-		-			4,000			US$	4,016				-				-				4,000			US$	4,011			US$	4,000			US$	11				-				-
		Total Capital Canada Ltd.		”		-		-			-				-				4,000			US$	4,000				4,000			US$	4,013			US$	4,000			US$	13				-				-
		United Technologies Corp.		”		-		-			-				-				4,000			US$	4,265				4,000			US$	4,244			US$	4,266			US$	(22	)			-				-
		US Central Federal Cred		”		-		-			4,000			US$	4,084				4,500			US$	4,599				8,500			US$	8,664			US$	8,692			US$	(28	)			-				-
		Verizon Communications		”		-		-			-				-				7,725			US$	7,725				7,725			US$	7,785			US$	7,725			US$	60				-				-
		Virginia Elec + Pwr Co.		”		-		-			-				-				3,250			US$	3,489				3,250			US$	3,461			US$	3,489			US$	(28	)			-				-
		Volkswagen Intl Fin NV		”		-		-			-				-				4,000			US$	4,000				4,000			US$	4,010			US$	4,000			US$	10				-				-
		Wachovia Corp. Global Medium		”		-		-			5,000			US$	5,141				-				-				5,000			US$	5,142			US$	5,138			US$	4				-				-
		Wal Mart Stores Inc.		”		-		-			4,000			US$	3,964				-				-				4,000			US$	3,968			US$	3,986			US$	(18	)			-				-
		Wal Mart Stores Inc.		”		-		-			3,770			US$	4,325				-				-				3,770			US$	4,261			US$	4,383			US$	(122	)			-				-
		Westpac Banking Corp.		”		-		-			3,500			US$	3,514				-				-				3,500			US$	3,511			US$	3,500			US$	11				-				-
		Westpac Banking Corp.		”		-		-			4,000			US$	4,005				-				-				4,000			US$	4,022			US$	4,044			US$	(22	)			-				-
		Wyeth		”		-		-			3,345			US$	3,657				638			US$	697				3,983			US$	4,325			US$	4,397			US$	(72	)			-				-
		Government bond
		US Treasury N/B		Available-for-sale financial assets		-		-			41,700			US$	42,042				-				-				41,700			US$	42,042			US$	41,729			US$	313				-				-
		US Treasury N/B		”		-		-			11,100			US$	10,976				-				-				11,100			US$	10,941			US$	11,084			US$	(143	)			-				-
		US Treasury N/B		”		-		-			7,000			US$	7,079				-				-				7,000			US$	7,077			US$	7,078			US$	(1	)			-				-
		US Treasury N/B		”		-		-			5,250			US$	5,212				30,175			US$	29,906				35,425			US$	35,154			US$	35,101			US$	53				-				-
		US Treasury N/B		”		-		-			-				-				19,900			US$	19,872				19,900			US$	19,888			US$	19,872			US$	16				-				-
		US Treasury N/B		”		-		-			-				-				10,000			US$	10,084				10,000			US$	10,073			US$	10,084			US$	(11	)			-				-
		US Treasury N/B		”		-		-			-				-				10,000			US$	10,042				10,000			US$	10,046			US$	10,042			US$	4				-				-
		US Treasury N/B		”		-		-			-				-				10,000			US$	10,024				10,000			US$	10,035			US$	10,024			US$	11				-				-
		US Treasury N/B		”		-		-			-				-				10,000			US$	9,988				10,000			US$	9,990			US$	9,988			US$	2				-				-
		US Treasury N/B		”		-		-			-				-				3,300			US$	3,301				3,300			US$	3,298			US$	3,301			US$	(3	)			-				-
		Agency bond
		Fannie Mae		Available-for-sale financial assets		-		-			16,104			US$	16,102				-				-				16,104			US$	16,116			US$	16,098			US$	18				-				-
		Fannie Mae		”		-		-			11,100			US$	11,096				-				-				11,100			US$	11,109			US$	11,096			US$	13				-				-
		Fannie Mae		”		-		-			8,765			US$	8,763				11,500			US$	11,503				20,265			US$	20,280			US$	20,262			US$	18				-				-
		Fannie Mae		”		-		-			4,600			US$	4,589				-				-				4,600			US$	4,606			US$	4,598			US$	8				-				-
		Fannie Mae		”		-		-			3,900			US$	3,861				-				-				3,900			US$	3,851			US$	3,899			US$	(48	)			-				-
		Fannie Mae		”		-		-			3,000			US$	2,994				-				-				3,000			US$	3,000			US$	3,009			US$	(9	)			-				-
		Fannie Mae		”		-		-			-				-				20,300			US$	20,269				20,300			US$	20,301			US$	20,269			US$	32				-				-
		Fannie Mae		”		-		-			-				-				11,045			US$	12,104				11,045			US$	12,044			US$	12,104			US$	(60	)			-				-
		Fannie Mae		”		-		-			-				-				7,500			US$	7,500				7,500			US$	7,508			US$	7,500			US$	8				-				-
		Fannie Mae		”		-		-			-				-				3,000			US$	3,000				3,000			US$	3,008			US$	3,000			US$	8				-				-
		Federal Farm Credit Bank		”		-		-			4,000			US$	3,994				-				-				4,000			US$	4,002			US$	3,995			US$	7				-				-
		Federal Farm Credit Bank		”		-		-			4,000			US$	3,984				-				-				4,000			US$	3,986			US$	3,998			US$	(12	)			-				-
		Federal Farm Credit Bank		”		-		-			-				-				4,000			US$	4,002				4,000			US$	4,003			US$	4,002			US$	1				-				-
		Federal Home Loan Bank		”		-		-			5,000			US$	5,007				-				-				5,000			US$	5,007			US$	5,009			US$	(2	)			-				-
		Federal Home Loan Bank		”		-		-			6,800			US$	6,817				-				-				6,800			US$	6,817			US$	6,811			US$	6				-				-
		Federal Home Loan Bank		”		-		-			8,000			US$	8,040				-				-				8,000			US$	8,033			US$	7,990			US$	43				-				-
		Federal Home Loan Bank		”		-		-			10,000			US$	9,998				-				-				10,000			US$	10,001			US$	9,985			US$	16				-				-
		Federal Home Loan Bank		”		-		-			8,400			US$	8,397				-				-				8,400			US$	8,400			US$	8,399			US$	1				-				-
		Federal Home Ln Bks		”		-		-			5,000			US$	5,046				-				-				5,000			US$	5,043			US$	5,098			US$	(55	)			-				-
		Federal Home Ln Mtg Corp.		”		-		-			3,732			US$	3,727				-				-				3,340			US$	3,340			US$	3,341			US$	(1	)			-				-
		Federal Home Ln Mtg Corp.		”		-		-			3,324			US$	3,453				-				-				3,161			US$	3,288			US$	3,360			US$	(72	)			-				-

(Continued)

 

- 45 -

---

Company Name		Marketable Securities Type and Name		Financial Statement Account		Counter-party		Nature of Relationship		Beginning Balance								Acquisition								Disposal (Note 2)																Ending Balance (Note 3)
										Shares/Units (In Thousands)				Amount (Foreign Currencies in Thousands)				Shares/Units (In Thousands) (Note 1)				Amount (Foreign Currencies in Thousands)				Shares/Units (In Thousands)				Amount (Foreign Currencies in Thousands)				Carrying Value (Foreign Currencies in Thousands)				Gain (Loss) or Disposal (Foreign Currencies in Thousands)				Shares/Units (In Thousands)				Amount (Foreign Currencies in Thousands)
TSMC Global		Federal Home Loan Mtg Corp.		Available-for-sale financial assets		-		-			5,183			US$	5,168				-			US$	-				4,634			US$	4,634			US$	4,632			US$	2				-			US$	-
		Fhr 2953 Da		”		-		-			3,284			US$	3,466				-				-				2,846			US$	3,028			US$	2,993			US$	35				-				-
		Fhr 3184 Fa		”		-		-			4,096			US$	4,084				-				-				3,810			US$	3,807			US$	3,806			US$	1				-				-
		Fnma Tba Jan 15 Single Fam		”		-		-			-				-				3,000			US$	3,147				3,000			US$	3,142			US$	3,147			US$	(5	)			-				-
		Fnma Tba Feb 15 Single Fam		”		-		-			-				-				3,000			US$	3,138				3,000			US$	3,117			US$	3,138			US$	(21	)			-				-
		Fnma Tba Mar 15 Single Fam		”		-		-			-				-				3,000			US$	3,110				3,000			US$	3,140			US$	3,110			US$	30				-				-
		Fnma Tba Apr 15 Single Fam		”		-		-			-				-				3,000			US$	3,131				3,000			US$	3,164			US$	3,131			US$	33				-				-
		Fnr 2006 60 CO		”		-		-			3,485			US$	3,483				-				-				3,274			US$	3,274			US$	3,272			US$	2				-				-
		Fnr 2009 116 A		”		-		-			4,271			US$	4,640				-				-				3,841			US$	4,137			US$	4,122			US$	15				-				-
		Freddie Mac		”		-		-			5,750			US$	5,764				-				-				5,750			US$	5,761			US$	5,771			US$	(10	)			-				-
		Freddie Mac		”		-		-			4,300			US$	4,316				-				-				4,300			US$	4,312			US$	4,308			US$	4				-				-
		Freddie Mac		”		-		-			10,420			US$	10,411				-				-				10,420			US$	10,414			US$	10,412			US$	2				-				-
		Freddie Mac		”		-		-			-				-				19,000			US$	18,981				19,000			US$	18,986			US$	18,981			US$	5				-				-
		Freddie Mac		”		-		-			-				-				3,550			US$	3,549				3,550			US$	3,553			US$	3,549			US$	4				-				-
		Freddie Mac		”		-		-			-				-				14,200			US$	14,196				14,200			US$	14,204			US$	14,196			US$	8				-				-
		Gnr 2009 45 AB		”		-		-			4,417			US$	4,496				-				-				3,082			US$	3,129			US$	3,215			US$	(86	)			-				-
		Government Natl Mtg Assn		”		-		-			3,050			US$	3,285				-				-				3,050			US$	3,202			US$	3,278			US$	(76	)			-				-
		Ngn 2010 R2 1A		”		-		-			3,732			US$	3,731				-				-				3,490			US$	3,492			US$	3,490			US$	2				-				-
		Ngn 2011 R4 1A		”		-		-			-				-				4,000			US$	4,000				3,914			US$	3,914			US$	3,914				-				-				-
		Money market fund
		Ssga Cash Mgmt Global Offshore		Available-for-sale financial assets		-		-			12,387			US$	12,387				764,056			US$	764,056				776,110			US$	776,110			US$	776,110				-				333			US$	333

 

Note 1:

The shares/units and amount of marketable securities acquired do not include stock dividends from investees.

 

Note 2:

The data for marketable securities disposed exclude bonds maturities and redemption by the issuer.

 

Note 3:

The ending balance includes the amortization of premium/discount on bonds investments, unrealized valuation gains/losses on financial assets, translation adjustments, equity in earnings/losses of equity method investees and other adjustments to long-term investment using equity method.

(Concluded)

 

- 46 -

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TABLE 4

Taiwan Semiconductor Manufacturing Company Limited and Investees

ACQUISITION OF INDIVIDUAL REAL ESTATE PROPERTIES AT COSTS OF AT LEAST NT$100 MILLION  OR 20% OF THE PAID-IN CAPITAL

FOR THE SIX MONTHS ENDED JUNE 30, 2011

(Amounts in Thousands of New Taiwan Dollars)

 

 

Company Name

Types of Property

Transaction Date

Transaction Amount

Payment Term

Counter-party

Nature of Relationships

Prior Transaction of Related Counter-party

Price Reference

Purpose of Acquisition

Other Terms

Owner

Relationships

Transfer Date

Amount

TSMC

Fab

January 5, 2011 to February 24, 2011

$

260,171

By the construction progress

China Steel Structure Co., Ltd.

-

N/A

N/A

N/A

N/A

Public bidding

Manufacturing purpose

None

Fab

January 7, 2011 to June 28, 2011

109,337

By the construction progress

Lead Fu Industrials Corp.

-

N/A

N/A

N/A

N/A

Public bidding

Manufacturing purpose

None

Fab

January 27, 2011 to June 27, 2011

473,947

By the construction progress

Tasa Construction Corporation

-

N/A

N/A

N/A

N/A

Public bidding

Manufacturing purpose

None

Fab

January 27, 2011 to June 28, 2011

1,665,100

By the construction progress

Da Cin Construction Co., Ltd.

-

N/A

N/A

N/A

N/A

Public bidding

Manufacturing purpose

None

Fab

January 27, 2011 to June 28, 2011

928,324

By the construction progress

Fu Tsu Construction Co., Ltd.

-

N/A

N/A

N/A

N/A

Public bidding

Manufacturing purpose

None

Fab

January 27, 2011 to June 28, 2011

134,924

By the construction progress

Edg Corporation Ltd.

-

N/A

N/A

N/A

N/A

Public bidding

Manufacturing purpose

None

Fab

February 24, 2011 to June 28, 2011

176,655

By the construction progress

Yankey Engineering Co., Ltd.

-

N/A

N/A

N/A

N/A

Public bidding

Manufacturing purpose

None

Xintec

Fab

February 17, 2011

1,050,000

Based on the agreement

Vertex Precision Electronics Inc.

-

N/A

N/A

N/A

N/A

Pricing report

Manufacturing purpose

None

 

- 47 -

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TABLE 5

Taiwan Semiconductor Manufacturing Company Limited and Investees

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

FOR THE SIX MONTHS ENDED JUNE 30, 2011

(Amounts in Thousands of New Taiwan Dollars)

 

 

Company Name		Related Party		Nature of Relationships		Transaction Details										Abnormal Transaction				Notes/Accounts Payable  or Receivable						Note
						Purchases/ Sales		Amount				% to Total		Payment Terms		Unit Price (Note)		Payment Terms (Note)		Ending Balance				% to Total
TSMC		TSMC North America GUC		Subsidiary		Sales		$	115,627,277			54		Net 30 days after invoice date		-		-		$	27,063,064			53
				Investee with a controlling financial interest		Sales			1,158,302			1		Net 30 days after monthly closing		-		-			289,461			1
		VIS		Investee accounted for using equity method		Sales			157,325			-		Net 30 days after monthly closing		-		-			-			-
		TSMC Solar Europe GmbH		Indirect subsidiary		Sales			148,898			-		Net 60 days after invoice date		-		-			49,185			-
		TSMC China		Subsidiary		Purchases			4,935,280			19		Net 30 days after monthly closing		-		-			(955,093	)		7
		WaferTech		Indirect subsidiary		Purchases			3,763,210			15		Net 30 days after monthly closing		-		-			(620,389	)		5
		VIS		Investee accounted for using equity method		Purchases			2,829,238			11		Net 30 days after monthly closing		-		-			(1,087,485	)		8
		SSMC		Investee accounted for using equity method		Purchases			1,994,243			8		Net 30 days after monthly closing		-		-			(440,314	)		3
		Motech		Investee accounted for using equity method		Purchases			124,673			-		Net 30 days after monthly closing		-		-			-			-
GUC		TSMC North America		Same parent company		Purchases			296,462			20		Net 30 days after invoice date/net 30 days after monthly closing		-		-			(55,372	)		7
Xintec		OmniVision		Parent company of director (represented for Xintec)		Sales			822,450			42		Net 30 days after monthly closing		-		-			170,622			36

Note:     The sales prices and payment terms to related parties were not significantly different from those of sales to third parties. For other related party transactions, prices and terms were determined in accordance with mutual agreements.

 

- 48 -

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TABLE 6

Taiwan Semiconductor Manufacturing Company Limited and Investees

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

JUNE 30, 2011

(Amounts in Thousands of New Taiwan Dollars)

 

 

Company Name		Related Party		Nature of Relationships		Ending Balance				Turnover Days     (Note 1)		Overdue						Amounts Received in Subsequent Period				Allowance for Bad Debts
												Amounts				Action Taken
TSMC		TSMC North America		Subsidiary		$	27,078,019			42		$	8,406,618			-		$	11,121,720			$	-
		TSMC China		Subsidiary			1,979,030			(Note 2)			-			-			-				-
		VIS		Investee accounted for using   equity method			512,256			(Note 2)			21,935			Accelerate demand on accounts receivable			20,944				-
		Motech		Investee accounted for using   equity method			436,600			(Note 2)			-			-			-				-
		GUC		Investee with a controlling   financial interest			432,404			35			-			-			-				-
Xintec		OmniVision		Parent company of director   (represented for Xintec)			170,622			32			-			-			-				-

Note 1:     The calculation of turnover days excludes other receivables from related parties.

Note 2:     The ending balance primarily consisted of other receivables, which is not applicable for the calculation of turnover days.

 

- 49 -

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TABLE 7

Taiwan Semiconductor Manufacturing Company Limited and Investees

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

JUNE 30, 2011

(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)

 

 

Investor Company		Investee Company		Location		Main Businesses and Products		Original Investment Amount								Balance as of June 30, 2011												Net Income (Losses) of the Investee (Foreign Currencies in Thousands)				Equity in the Earnings (Losses) (Note 1) (Foreign Currencies in Thousands)				Note
								June 30, 2011 (Foreign Currencies in Thousands)				December 31, 2010 (Foreign Currencies in Thousands)				Shares (In Thousands)				Percentage of   Ownership				Carrying Value (Foreign Currencies in Thousands)
TSMC		TSMC Global		Tortola, British Virgin Islands		Investment activities		$	42,327,245			$	42,327,245				1				100			$	41,617,880			$	180,565			$	180,565			Subsidiary
		TSMC Partners		Tortola, British Virgin Islands		Investing in companies involved in the design, manufacture, and other related business in the semiconductor industry			31,456,130				31,456,130				988,268				100				32,657,501				844,360				844,360			Subsidiary
		VIS		Hsin-Chu, Taiwan		Research, design, development, manufacture, packaging, testing and sale of memory integrated circuits, LSI, VLSI and related parts			13,232,288				13,232,288				628,223				38				9,110,898				759,616				88,401			Investee accounted for using equity method
		Motech		Taipei, Taiwan		Manufacturing and sales of solar cells, crystalline silicon solar cell, and test and measurement instruments and design and construction of solar power systems			6,228,661				6,228,661				76,069				20				6,132,395				33,669				(155,363	)		Investee accounted for using equity method
		SSMC		Singapore		Fabrication and supply of integrated circuits			5,120,028				5,120,028				314				39				5,519,534				1,952,120				658,729			Investee accounted for using equity method
		TSMC China		Shanghai, China		Manufacturing and selling of integrated circuits at the order of and pursuant to product design specifications provided by customers			12,180,367				12,180,367				-				100				5,198,868				1,100,853				1,095,078			Subsidiary
		TSMC North America		San Jose, California, U.S.A.		Selling and marketing of integrated circuits and semiconductor devices			333,718				333,718				11,000				100				2,830,777				109,373				109,373			Subsidiary
		VTAF III		Cayman Islands		Investing in new start-up technology companies			3,604,425				3,565,441				-				99				2,587,484				(80,858	)			(79,308	)		Subsidiary
		Xintec		Taoyuan, Taiwan		Wafer level chip size packaging service			1,357,890				1,357,890				93,081				41				1,596,809				108,942				31,644			Investee with a controlling financial interest
		GUC		Hsin-Chu, Taiwan		Researching, developing, manufacturing, testing and marketing of integrated circuits			386,568				386,568				46,688				35				1,064,925				267,626				93,624			Investee with a controlling financial interest
		VTAF II		Cayman Islands		Investing in new start-up technology companies			1,166,470				1,166,470				-				98				1,015,748				91,555				89,723			Subsidiary
		TSMC Solar Europe		Amsterdam, the Netherlands		Investing in solar related business			411,032				25,350				-				100				391,148				(25,675	)			(25,675	)		Subsidiary (Note 3)
		Emerging Alliance		Cayman Islands		Investing in new start-up technology companies			971,785				971,785				-				99				277,059				(11,423	)			(11,366	)		Subsidiary (Note 3)
		TSMC Europe		Amsterdam, the Netherlands		Marketing and engineering supporting activities			15,749				15,749				-				100				201,892				18,767				18,767			Subsidiary (Note 3)
		TSMC Japan		Yokohama, Japan		Marketing activities			83,760				83,760				6				100				146,863				2,607				2,607			Subsidiary (Note 3)
		TSMC Solar NA		Delaware, U.S.A.		Selling and marketing of solar related products			147,686				60,962				1				100				83,704				(28,031	)			(28,031	)		Subsidiary (Note 3)
		TSMC Korea		Seoul, Korea		Customer service and technical supporting activities			13,656				13,656				80				100				22,622				1,737				1,737			Subsidiary (Note 3)
		TSMC Lighting NA		Delaware, U.S.A.		Selling and marketing of solid state lighting related products			3,133				3,133				1				100				2,872				(5	)			(5	)		Subsidiary (Note 3)
TSMC Partners		TSMC Development		Delaware, U.S.A.		Investment activities		US$	0.001			US$	0.001				1				100			US$	436,801			US$	33,545				Note 2			Subsidiary
		VisEra Holding Company		Cayman Islands		Investing in companies involved in the design, manufacturing, and other related businesses in the semiconductor industry		US$	43,000			US$	43,000				43,000				49			US$	90,180			US$	12,660				Note 2			Investee accounted for using equity method
		ISDF		Cayman Islands		Investing in new start-up technology companies		US$	787			US$	4,088				787				97			US$	14,191			US$	1,318				Note 2			Subsidiary
		ISDF II		Cayman Islands		Investing in new start-up technology companies		US$	14,153			US$	16,532				14,153				97			US$	10,781			US$	(536	)			Note 2			Subsidiary (Note 3)
		TSMC Technology		Delaware, U.S.A.		Engineering support activities		US$	0.001			US$	0.001				1				100			US$	10,271			US$	393				Note 2			Subsidiary (Note 3)
		TSMC Canada		Ontario, Canada		Engineering support activities		US$	2,300			US$	2,300				2,300				100			US$	4,010			US$	170				Note 2			Subsidiary (Note 3)

(Continued)

 

- 50 -

---

Investor Company

Investee Company

Location

Main Businesses and  Products

Original Investment Amount

Balance as of June 30, 2011

Net Income (Losses) of the Investee (Foreign Currencies in Thousands)

Equity in the Earnings (Losses) (Note 1) (Foreign Currencies in Thousands)

Note

June 30, 2011 (Foreign Currencies in Thousands)

December 31, 2010 (Foreign Currencies in Thousands)

Shares (In Thousands)

Percentage of Ownership

Carrying Value (Foreign Currencies in Thousands)

TSMC Partners

Mcube Inc. (Common Stock)

Delaware, U.S.A.

Research, development, and sale of micro-semiconductor device

US$

800

US$

800

5,333

83

US$

-

US$

(6,750

)

Note 2

Investee accounted for using equity method (Note 3)

Mcube Inc. (Preferred Stock)

Delaware, U.S.A.

Research, development, and sale of micro-semiconductor device

US$

1,000

US$

1,000

1,000

6

–

US$

(6,750

)

Note 2

Investee accounted for using equity method (Note 3)

TSMC Development

WaferTech

Washington, U.S.A.

Manufacturing, selling, testing and computer-aided designing of integrated circuits and other semiconductor devices

US

$280,000

US$

280,000

293,640

100

US$

197,757

US$

32,546

Note 2

Subsidiary

VTAF III

Mutual-Pak Technology Co., Ltd.

Taipei, Taiwan

Manufacturing and selling of electronic parts and researching, developing, and testing of RFID

US$

3,937

US$

3,937

11,868

57

US$

1,687

US$

(707

)

Note 2

Subsidiary (Note 3)

Growth Fund

Cayman Islands

Investing in new start-up technology companies

US$

1,740

US$

1,700

–

100

US$

825

US$

(61

)

Note 2

Subsidiary (Note 3)

VTA Holdings

Delaware, U.S.A.

Investing in new start-up technology companies

–

–

–

62

–

–

Note 2

Subsidiary (Note 3)

VTAF II

VTA Holdings

Delaware, U.S.A.

Investing in new start-up technology companies

–

–

–

31

–

–

Note 2

Subsidiary (Note 3)

GUC

GUC-NA

U.S.A.

Consulting services in main products

US$

1,256

US$

1,249

800

100

$

61,706

$

4,312

Note 2

Subsidiary

GUC-Japan

Japan

Consulting services in main products

JPY

30,000

JPY

30,000

1

100

15,129

457

Note 2

Subsidiary (Note 3)

GUC-BVI

British Virgin Islands

Investment activities

US$

550

US$

550

550

100

8,684

(128

)

Note 2

Subsidiary (Note 3)

GUC-Europe

The Netherlands

Consulting services in main products

EUR

100

EUR

100

–

100

3,746

(257

)

Note 2

Subsidiary (Note 3)

GUC-BVI

GUC-Shanghai

Shanghai, China

Consulting services in main products

US$

500

US$

500

–

100

7,430

(105

)

Note 2

Subsidiary (Note 3)

Emerging Alliance

VTA Holdings

Delaware, U.S.A.

Investing in new start-up technology companies

–

–

–

7

–

–

Note 2

Subsidiary (Note 3)

TSMC Solar Europe

TSMC Solar Europe GmbH

Hamburg, Germany

Selling of solar related products and providing customer service

EUR

9,900

EUR

100

1

100

EUR

9,263

EUR

(637

)

Note 2

Subsidiary (Note 3)

 

Note 1:

Equity in earnings/losses of investees include the effect of unrealized gross profit from affiliates.

 

Note 2:

The equity in the earnings/losses of the investee company is not reflected herein as such amount is already included in the equity in the earnings/losses of the investor company.

 

Note 3:

Equity in earnings/losses was determined based on the unaudited financial statements.

(Concluded)

 

- 51 -

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TABLE 8

Taiwan Semiconductor Manufacturing Company Limited and Investees

INFORMATION OF INVESTMENT IN MAINLAND CHINA

FOR THE SIX MONTHS ENDED JUNE 30, 2011

(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)

 

 

Investor Company		Investee Company		Main Businesses and Products		Total Amount of Paid-in Capital (Thousand)				Method of Investment		Accumulated Outflow of Investment from Taiwan as of January 1, 2011 (US$ in Thousand)				Investment Flows								Accumulated Outflow of Investment from Taiwan as of June 30, 2011 (US$ in Thousand)				Percentage of Ownership				Equity in the Earnings (Losses)				Carrying Value as of June 30, 2011				Accumulated Inward Remittance of Earnings as of June 30, 2011
																Outflow				Inflow
TSMC		TSMC China		Manufacturing and selling of integrated circuits at the order of and pursuant to product design specifications provided by customers		$	12,180,367 (RMB 3,070,623	)		(Note 1)		$ (US$	12,180,367 371,000	)		$	–			$	–			$ (US$	12,180,367 371,000	)			100	%		$	1,095,078 (Note 3	)		$	5,198,868			$	–
GUC		GUC-Shanghai		Consulting services in main products		(US$	16,160 500	)		(Note 2)		(US$	16,160 500	)			–				–			(US$	16,160 500	)			100	%			(105 (Note 4	)  )			7,430				–

 

Investor Company		Accumulated Investment in Mainland China as of June 30, 2011 (US$ in Thousand)		Investment Amounts Authorized by Investment Commission, MOEA (US$ in Thousand)		Upper Limit on Investment (US$ in Thousand)
TSMC		$    12,180,367 (US$    371,000)		$    12,180,367 (US$    371,000)		$    12,180,367 (US$    371,000)
GUC		16,160 (US$          500)		16,160 (US$          500)		1,834,379             (Note 5)

 

Note 1:

TSMC directly invested US$371,000 thousand in TSMC China.

 

Note 2:

GUC, TSMC’s investee with a controlling financial interest, indirectly invested in GUC-Shanghai through GUC-BVI.

 

Note 3:

Amount was recognized based on the audited financial statements.

 

Note 4:

Amount was determined based on the unaudited financial statements.

 

Note 5:

Subject to 60% of net asset value of GUC according to the revised “Guidelines Governing the Approval of Investment or Technical Cooperation in Mainland China” issued by the Investment Commission.

 

- 52 -

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Taiwan Semiconductor Manufacturing

Company Limited and Subsidiaries

Consolidated Financial Statements for the

Six Months Ended June 30, 2011 and 2010 and

Independent Auditors’ Report

---

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders

Taiwan Semiconductor Manufacturing Company Limited

We have audited the accompanying consolidated balance sheets of Taiwan Semiconductor Manufacturing Company Limited and subsidiaries as of June 30, 2011 and 2010, and the related consolidated statements of income, changes in shareholders’ equity and cash flows for the six months then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the Rules Governing the Audit of Financial Statements by Certified Public Accountants and auditing standards generally accepted in the Republic of China. Those rules and standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Taiwan Semiconductor Manufacturing Company Limited and subsidiaries as of June 30, 2011 and 2010, and the results of their consolidated operations and their consolidated cash flows for the six months then ended in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers and accounting principles generally accepted in the Republic of China.

July 25, 2011

Notice to Readers

The accompanying consolidated financial statements are intended only to present the consolidated financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in the Republic of China and not those of any other jurisdiction. The standards, procedures and practices to audit such consolidated financial statements are those generally accepted and applied in the Republic of China.

For the convenience of readers, the auditors’ report and the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the Republic of China. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language auditors’ report and consolidated financial statements shall prevail.

 

- 1 -

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Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED BALANCE SHEETS

JUNE 30, 2011 AND 2010

(In Thousands of New Taiwan Dollars, Except Par Value)

 

 

		2011								2010										2011								2010
		Amount				%				Amount				%						Amount				%				Amount				%
ASSETS																		LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT ASSETS																		CURRENT LIABILITIES
Cash and cash equivalents (Notes 2 and 4)		$	150,978,778				19			$	172,486,218				25			Short-term loans (Note 15)		$	33,140,881				4			$	18,082,602				3
Financial assets at fair value through profit or loss (Notes 2, 5 and 25)			19,781				-				479				-			Financial liabilities at fair value through profit or loss (Notes 2, 5 and 25)			15,052				-				176,809				-
Available-for-sale financial assets (Notes 2, 6, and 25)			5,208,149				1				27,024,422				4			Hedging derivative financial liabilities (Notes 2, 11, 25)			448				-				761				-
Held-to-maturity financial assets (Notes 2, 7 and 25)			2,924,804				1				7,031,587				1			Accounts payable			11,710,578				1				11,552,093				2
Receivables from related parties			2,367				-				30,800				-			Payables to related parties (Note 26)			1,542,011				-				1,314,545				-
Notes and accounts receivable (Note 3)			52,491,604				7				54,791,750				8			Income tax payable (Notes 2 and 20)			6,104,840				1				3,521,100				-
Allowance for doubtful receivables (Notes 2, 3 and 8)			(494,000	)			-				(597,941	)			-			Cash dividends payable (Note 22)			78,127,227				10				77,892,232				11
Allowance for sales returns and others (Notes 2 and 8)			(5,811,952	)			(1	)			(6,162,562	)			(1	)		Accrued profit sharing to employees and bonus to directors and supervisors (Notes 2 and 22)			15,999,671				2				11,897,471				2
Other receivables from related parties (Notes 3 and 26)			999,772				-				495,804				-
Other financial assets (Note 27)			1,054,744				-				1,473,377				-			Payables to contractors and equipment suppliers			36,805,112				5				25,921,742				4
Inventories (Notes 2 and 9)			31,523,206				4				24,799,896				4			Accrued expenses and other current liabilities (Notes 18, 25 and 29)			17,542,781				2				15,016,671				2
Deferred income tax assets (Notes 2 and 20)			1,173,482				-				3,394,104				1			Current portion of bonds payable and long-term bank loans (Notes 16, 17, 25 and 27)			4,500,000				1				889,275				-
Prepaid expenses and other current assets			2,481,073				-				1,846,918				-
Total current assets			242,551,808				31				286,614,852				42			Total current liabilities			205,488,601				26				166,265,301				24
LONG-TERM INVESTMENTS (Notes 2, 6, 7, 10, 12 and 25)																		LONG-TERM LIABILITIES
Investments accounted for using equity method			23,357,209				3				24,598,350				4			Bonds payable (Notes 16 and 25)			-				-				4,500,000				1
Available-for-sale financial assets			-				-				1,039,916				-			Long-term bank loans (Notes 17, 25 and 27)			1,500,000				-				424,671				-
Held-to-maturity financial assets			7,311,037				1				10,757,937				1			Other long-term payables (Notes 18, 25 and 29)			3,040,747				1				6,963,248				1
Financial assets carried at cost			4,176,134				1				4,565,416				1			Obligations under capital leases (Notes 2, 13 and 25)			670,865				-				717,600				-
Total long-term investments			34,844,380				5				40,961,619				6			Total long-term liabilities			5,211,612				1				12,605,519				2
PROPERTY, PLANT AND EQUIPMENT (Notes 2, 13, 26 and 27)																		OTHER LIABILITIES
Cost																		Accrued pension cost (Notes 2 and 19)			3,847,450				-				3,793,716				1
Land and land improvements			1,501,628				-				940,536				-			Guarantee deposits (Note 29)			521,598				-				893,629				-
Buildings			166,481,044				22				144,574,839				22			Deferred credits			30,530				-				138,767				-
Machinery and equipment			1,012,617,056				129				865,253,621				127			Others			353,357				-				205,923				-
Office equipment			15,976,394				2				14,427,983				2
Leased assets			677,086				-				724,579				-			Total other liabilities			4,752,935				-				5,032,035				1
			1,197,253,208				153				1,025,921,558				151
Accumulated depreciation			(819,490,993	)			(105	)			(734,445,083	)			(108	)		Total liabilities			215,453,148				27				183,902,855				27
Advance payments and construction in progress			100,125,197				13				36,993,851				5
																		EQUITY ATTRIBUTABLE TO SHAREHOLDERS OF THE PARENT
Net property, plant and equipment			477,887,412				61				328,470,326				48			Capital stock - NT$10 par value (Note 22)
																		Authorized: 28,050,000 thousand shares
INTANGIBLE ASSETS																		Issued: 25,914,283 thousand shares in 2011
																		25,905,017 thousand shares in 2010			259,142,831				33				259,050,172				38
Goodwill (Note 2)			5,487,060				-				5,965,104				1
Deferred charges, net (Notes 2 and 14)			5,690,862				1				6,162,111				1
																		Capital surplus (Notes 2 and 22)			55,802,387				7				55,566,995				8
Total intangible assets			11,177,922				1				12,127,215				2			Retained earnings (Note 22)
																		Appropriated as legal capital reserve			102,399,995				13				86,239,494				13
OTHER ASSETS																		Appropriated as special capital reserve			6,433,874				1				1,313,047				-
Deferred income tax assets (Notes 2 and 20)			11,092,048				1				9,820,064				2			Unappropriated earnings			151,443,573				19				90,567,054				13
Refundable deposits			4,834,381				1				2,419,820				-						260,277,442				33				178,119,595				26
Others (Notes 2 and 27)			1,427,662				-				361,696				-			Others (Notes 2, 11 and 25)
																		Cumulative translation adjustments			(11,461,047	)			(1	)			(1,034,256	)			-
Total other assets			17,354,091				2				12,601,580				2			Unrealized gain on financial instruments			187,908				-				981,878				-
																					(11,273,139	)			(1	)			(52,378	)			-
																		Equity attributable to shareholders of the parent			563,949,521				72				492,684,384				72
																		MINORITY INTERESTS (Note 2)			4,412,944				1				4,188,353				1
																		Total shareholders’ equity			568,362,465				73				496,872,737				73
TOTAL		$	783,815,613				100			$	680,775,592				100			TOTAL		$	783,815,613				100			$	680,775,592				100

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

 

- 2 -

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Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME

FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND 2010

(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

 

 

		2011								2010
		Amount				%				Amount				%
GROSS SALES (Notes 2 and 26)		$	217,895,876							$	202,881,161
SALES RETURNS AND ALLOWANCES (Notes 2 and 8)			2,010,014								5,732,158
NET SALES			215,885,862				100				197,149,003				100
COST OF SALES (Notes 9, 21 and 26)			113,359,191				52				101,037,403				51
GROSS PROFIT			102,526,671				48				96,111,600				49
OPERATING EXPENSES (Notes 21 and 26)
Research and development			16,456,677				8				13,599,891				7
General and administrative			6,781,342				3				5,403,158				3
Marketing			2,259,365				1				2,512,196				1
Total operating expenses			25,497,384				12				21,515,245				11
INCOME FROM OPERATIONS			77,029,287				36				74,596,355				38
NON-OPERATING INCOME AND GAINS
Interest income			780,503				1				831,500				1
Equity in earnings of equity method investees, net (Notes 2 and 10)			765,485				—				706,236				—
Settlement income (Note 29)			433,425				—				1,278,400				1
Foreign exchange gain, net (Note 2)			419,535				—				101,313				—
Technical service income (Notes 26 and 29)			224,372				—				241,884				—
Gain on disposal of property, plant and equipment and other assets (Notes 2 and 26)			189,020				—				92,288				—
Gain on settlement and disposal of financial assets, net (Notes 2 and 25)			145,908				—				202,114				—
Valuation gain on financial instruments, net (Notes 2, 5 and 25)			—				—				20,468				—
Others (Note 2)			383,128				1				287,693				—
Total non-operating income and gains			3,341,376				2				3,761,896				2

(Continued)

 

- 3 -

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Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME

FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND 2010

(In Thousands of New Taiwan Dollars, Except Earnings Per Share)

 

 

		2011								2010
		Amount				%				Amount				%
NON-OPERATING EXPENSES AND LOSSES
Valuation loss on financial instruments, net (Notes 2, 5 and 25)		$	280,630				1			$	-				-
Interest expense			243,261				-				184,947				-
Loss on disposal of property, plant and equipment (Note 2)			156,761				-				943				-
Impairment loss on idle assets (Note 2)			58,478				-				319				-
Impairment of financial assets (Notes 2, 12 and 25)			58,096				-				112,313				-
Casualty loss (Note 9)			-				-				194,137				-
Others (Note 2)			206,318				-				152,685				-
Total non-operating expenses and losses			1,003,544				1				645,344				-
INCOME BEFORE INCOME TAX			79,367,119				37				77,712,907				40
INCOME TAX EXPENSE (Notes 2 and 20)			6,911,828				3				3,421,357				2
NET INCOME		$	72,455,291				34			$	74,291,550				38
ATTRIBUTABLE TO:
Shareholders of the parent		$	72,228,107				34			$	73,945,033				38
Minority interests			227,184				-				346,517				-
		$	72,455,291				34			$	74,291,550				38

 

		2011				2010
		Income Attributable  to Shareholders of the Parent				Income Attributable  to Shareholders of the Parent
		Before Income Tax		After Income Tax		Before Income Tax		After Income Tax
EARNINGS PER SHARE (NT$, Note 24)
Basic earnings per share		$        3.05		$        2.79		$        2.99		$        2.85
Diluted earnings per share		$        3.05		$        2.79		$        2.98		$        2.85

 

The accompanying notes are an integral part of the consolidated financial statements.			(Concluded)

 

- 4 -

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Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND 2010

(In Thousands of New Taiwan Dollars, Except Dividends Per Share)

 

 

		Equity Attributable to Shareholders of the Parent
																														Others
		Capital Stock - Common Stock												Retained Earnings																Cumulative				Unrealized Gain (Loss)												Total
		Shares (In Thousands)				Amount				Capital Surplus				Legal Capital Reserve				Special Capital Reserve				Unappropriated Earnings				Total				Translation Adjustments				On Financial Instruments				Total				Minority Interests				Shareholders’ Equity
BALANCE, JANUARY 1, 2011			25,910,078			$	259,100,787			$	55,698,434			$	86,239,494			$	1,313,047			$	178,227,030			$	265,779,571			$	(6,543,163	)		$	109,289			$	574,144,918			$	4,559,487			$	578,704,405
Appropriations of prior year’s earnings
Legal capital reserve			-				-				-				16,160,501				-				(16,160,501	)			-				-				-				-				-				-
Special capital reserve			-				-				-				-				5,120,827				(5,120,827	)			-				-				-				-				-				-
Cash dividends to shareholders - NT$3.00 per share			-				-				-				-				-				(77,730,236	)			(77,730,236	)			-				-				(77,730,236	)			-				(77,730,236	)
Net income for the six months ended June 30, 2011			-				-				-				-				-				72,228,107				72,228,107				-				-				72,228,107				227,184				72,455,291
Adjustment arising from changes in percentage of ownership in equity method investees			-				-				14,643				-				-				-				-				-				-				14,643				(11,995	)			2,648
Translation adjustments			-				-				-				-				-				-				-				(4,917,884	)			-				(4,917,884	)			18,400				(4,899,484	)
Issuance of stock from exercising employee stock options			4,205				42,044				89,310				-				-				-				-				-				-				131,354				-				131,354
Net changes of valuation gain/loss on available-for-sale financial assets			-				-				-				-				-				-				-				-				95,888				95,888				(1,958	)			93,930
Net change in shareholders’ equity from equity method investees			-				-				-				-				-				-				-				-				(17,419	)			(17,419	)			-				(17,419	)
Net change in unrealized loss on hedging derivative financial instruments			-				-				-				-				-				-				-				-				150				150				216				366
Decrease in minority interests			-				-				-				-				-				-				-				-				-				-				(378,390	)			(378,390	)
BALANCE, JUNE 30, 2011			25,914,283			$	259,142,831			$	55,802,387			$	102,399,995			$	6,433,874			$	151,443,573			$	260,277,442			$	(11,461,047	)		$	187,908			$	563,949,521			$	4,412,944			$	568,362,465
BALANCE, JANUARY 1, 2010			25,902,706			$	259,027,066			$	55,486,010			$	77,317,710			$	-			$	104,564,972			$	181,882,682			$	(1,766,667	)		$	453,621			$	495,082,712			$	3,965,836			$	499,048,548
Appropriations of prior year’s earnings
Legal capital reserve			-				-				-				8,921,784				-				(8,921,784	)			-				-				-				-				-				-
Special capital reserve			-				-				-				-				1,313,047				(1,313,047	)			-				-				-				-				-				-
Cash dividends to shareholders - NT$3.00 per share			-				-				-				-				-				(77,708,120	)			(77,708,120	)			-				-				(77,708,120	)			-				(77,708,120	)
Net income for the six months ended June 30, 2010			-				-				-				-				-				73,945,033				73,945,033				-				-				73,945,033				346,517				74,291,550
Adjustment arising from changes in percentage of ownership in equity method investees			-				-				711				-				-				-				-				-				-				711				1,063				1,774
Translation adjustments			-				-				-				-				-				-				-				732,411				-				732,411				(6,137	)			726,274
Issuance of stock from exercising employee stock options			2,311				23,106				62,508				-				-				-				-				-				-				85,614				-				85,614
Net changes of valuation gain/loss on available-for-sale financial assets			-				-				-				-				-				-				-				-				501,091				501,091				15,894				516,985
Net change in shareholders’ equity from equity method investees			-				-				17,766				-				-				-				-				-				27,478				45,244				31,702				76,946
Net change in unrealized loss on hedging derivative financial instruments			-				-				-				-				-				-				-				-				(312	)			(312	)			(449	)			(761	)
Decrease in minority interests			-				-				-				-				-				-				-				-				-				-				(166,073	)			(166,073	)
BALANCE, JUNE 30, 2010			25,905,017			$	259,050,172			$	55,566,995			$	86,239,494			$	1,313,047			$	90,567,054			$	178,119,595			$	(1,034,256	)		$	981,878			$	492,684,384			$	4,188,353			$	496,872,737

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

 

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Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND 2010

(In Thousands of New Taiwan Dollars)

 

 

		2011				2010
CASH FLOWS FROM OPERATING ACTIVITIES
Net income attributable to shareholders of the parent		$	72,228,107			$	73,945,033
Net income attributable to minority interests			227,184				346,517
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			51,974,504				42,133,803
Amortization of premium/discount of financial assets			15,015				15,974
Impairment of financial assets			58,096				112,313
Gain on disposal of available-for-sale financial assets, net			(126,488	)			(117,487	)
Gain on disposal of financial assets carried at cost, net			(19,420	)			(84,627	)
Equity in earnings of equity method investees, net			(765,485	)			(706,236	)
Cash dividends received from equity method investees			1,914,392				-
Gain on disposal of property, plant and equipment and other assets, net			(32,259	)			(91,345	)
Impairment loss on idle assets			58,478				319
Deferred income tax			427,314				(855,556	)
Changes in operating assets and liabilities:
Decrease (increase) in:
Financial assets and liabilities at fair value through profit or loss			(16,845	)			362,386
Receivables from related parties			355				(18,276	)
Notes and accounts receivable			(1,461,719	)			(10,154,108	)
Allowance for doubtful receivables			(10,029	)			54,616
Allowance for sales returns and others			(1,734,312	)			(2,561,919	)
Other receivables from related parties			(79,870	)			(55,607	)
Other financial assets			57,357				332,211
Inventories			(3,117,222	)			(3,886,145	)
Prepaid expenses and other current assets			(443,426	)			(564,147	)
Increase (decrease) in:
Accounts payable			(2,075,757	)			1,058,991
Payables to related parties			674,926				531,538
Income tax payable			(1,079,857	)			(5,279,149	)
Accrued profit sharing to employees and bonus to directors and supervisors			4,903,524				5,079,128
Accrued expenses and other current liabilities			(1,974,219	)			(4,588,051	)
Accrued pension cost			35,099				(3,316	)
Deferred credits			(96,009	)			(46,922	)
Net cash provided by operating activities			119,541,434				94,959,938

(Continued)

 

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Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND 2010

(In Thousands of New Taiwan Dollars)

 

 

		2011				2010
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of:
Property, plant and equipment		$	(146,142,855	)		$	(98,857,482	)
Available-for-sale financial assets			(34,726,013	)			(32,605,392	)
Held-to-maturity financial assets			-				(3,829,368	)
Investments accounted for using equity method			-				(6,242,350	)
Financial assets carried at cost			(123,159	)			(1,722,949	)
Proceeds from disposal or redemption of:
Available-for-sale financial assets			58,501,445				21,375,053
Held-to-maturity financial assets			2,675,000				11,595,000
Financial assets carried at cost			207,333				180,494
Property, plant and equipment and other assets			551,208				112,142
Increase in deferred charges			(823,351	)			(801,055	)
Decrease in refundable deposits			3,843,589				313,323
Decrease (increase) in other assets			13,094				(14,996	)
Net cash used in investing activities			(116,023,709	)			(110,497,580	)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in short-term loans			1,926,937				18,082,602
Proceeds from long-term bank loans			2,100,000				-
Repayment of long-term bank loans			(1,142,968	)			(221,035	)
Decrease in other long-term payables			(890,000	)			(1,113,193	)
Decrease in guarantee deposits			(267,500	)			(128,394	)
Proceeds from donation			-				49,021
Proceeds from exercise of employee stock options			131,354				85,614
Increase in minority interests			18,601				18,039
Net cash provided by financing activities			1,876,424				16,772,654
NET INCREASE IN CASH AND CASH EQUIVALENTS			5,394,149				1,235,012
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS			(2,302,326	)			(25,135	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			147,886,955				171,276,341
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	150,978,778			$	172,486,218
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest paid		$	307,448			$	241,794
Income tax paid		$	7,605,291			$	9,556,350

(Continued)

 

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Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND 2010

(In Thousands of New Taiwan Dollars)

 

 

		2011				2010
INVESTING ACTIVITIES AFFECTING BOTH CASH AND NON-CASH ITEMS
Acquisition of property, plant and equipment		$	141,371,625			$	95,565,097
Decrease in payables to contractors and equipment suppliers			4,772,583				3,415,305
Nonmonetary exchange trade-out price			(1,353	)			(122,920	)
Cash paid		$	146,142,855			$	98,857,482
Disposal of property, plant and equipment and other assets		$	552,561			$	235,062
Nonmonetary exchange trade-out price			(1,353	)			(122,920	)
Cash received		$	551,208			$	112,142
Acquisition of available-for-sale financial assets		$	34,662,414			$	32,630,717
Increase in accrued expenses and other current liabilities			63,599				(25,325	)
Cash paid		$	34,726,013			$	32,605,392
Disposal of available-for-sale financial assets		$	58,591,994			$	21,375,053
Increase in other financial assets			(90,549	)			-
Cash received		$	58,501,445			$	21,375,053
NON-CASH FINANCING ACTIVITIES
Current portion of bonds payable		$	4,500,000			$	-
Current portion of long-term bank loans		$	-			$	889,275
Current portion of other long-term payables (under accrued expenses and other current liabilities)		$	3,916,796			$	1,301,510

 

The accompanying notes are an integral part of the consolidated financial statements.			(Concluded)

 

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Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND 2010

(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)

 

 

1.

GENERAL

Taiwan Semiconductor Manufacturing Company Limited (TSMC), a Republic of China (R.O.C.) corporation, was incorporated on February 21, 1987. TSMC is a dedicated foundry in the semiconductor industry which engages mainly in the manufacturing, selling, packaging, testing and computer-aided design of integrated circuits and other semiconductor devices and the manufacturing of masks. Beginning in 2010, TSMC also engages in the researching, developing, designing, manufacturing and selling of solid state lighting devices and related applications products and systems, and renewable energy and efficiency related technologies and products. On September 5, 1994, its shares were listed on the Taiwan Stock Exchange (TSE). On October 8, 1997, TSMC listed some of its shares of stock on the New York Stock Exchange (NYSE) in the form of American Depositary Shares (ADSs).

As of June 30, 2011 and 2010, TSMC and its subsidiaries had 35,979 and 29,585 employees, respectively.

 

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements are presented in conformity with the Guidelines Governing the Preparation of Financial Reports by Securities Issuers and accounting principles generally accepted in the R.O.C.

For the convenience of readers, the accompanying consolidated financial statements have been translated into English from the original Chinese version prepared and used in the R.O.C. If there is any conflict between the English version and the original Chinese version or any difference in the interpretation of the two versions, the Chinese-language consolidated financial statements shall prevail.

Significant accounting policies are summarized as follows:

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of all directly and indirectly majority owned subsidiaries of TSMC, and the accounts of investees in which TSMC’s ownership percentage is less than 50% but over which TSMC has a controlling interest. All significant intercompany balances and transactions are eliminated upon consolidation.

 

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The consolidated entities were as follows:

 

 

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The following diagram presents information regarding the relationship and ownership percentages between TSMC and its consolidated investees as of June 30, 2011:

TSMC North America is engaged in selling and marketing of integrated circuits and semiconductor devices. TSMC Japan, TSMC Korea and TSMC Europe are engaged mainly in marketing or customer service, engineering and technical supporting activities. TSMC Partners is engaged in investment in companies involved in the design, manufacture, and other related business in the semiconductor industry. TSMC Global and TSMC Development are engaged in investing activities. TSMC China is engaged in the manufacturing and selling of integrated circuits pursuant to the orders from and product design specifications provided by customers. Emerging Alliance, VTAF II, VTAF III, VTA Holdings, ISDF, ISDF II, and Growth Fund are engaged in investing in new start-up technology companies. TSMC Canada and TSMC Technology are engaged mainly in engineering support activities. WaferTech is engaged in the manufacturing, selling, testing and computer-aided designing of integrated circuits and other semiconductor devices. GUC is engaged in researching, developing, manufacturing, testing and marketing of integrated circuits. GUC-NA, GUC-Japan, GUC-Europe, and GUC-Shanghai are engaged in providing products consulting in North America, Japan, Europe, and China, respectively. GUC-BVI is engaged in investing activities. Xintec is engaged in the provision of wafer packaging service. TSMC Solar NA is engaged in selling and marketing of solar related products. TSMC Lighting NA is engaged in selling and marketing of solid state lighting related products. TSMC Solar Europe is engaged in investing activities of solar related business. TSMC Solar Europe GmbH is engaged in the selling and customer service of solar cell modules and related products. Mutual-Pak is engaged in the manufacturing and selling of electronic parts and researching, developing and testing of RFID.

The Company will transfer solar and solid state lighting businesses to its wholly-owned, newly incorporated subsidiaries as part of the strategic planning in the third quarter of 2011.

TSMC together with its subsidiaries are hereinafter referred to collectively as the “Company.”

Minority interests in the aforementioned subsidiaries are presented as a separate component of shareholders’ equity.

Foreign-currency Transactions and Translation of Foreign-currency Financial Statements

Foreign-currency transactions other than derivative contracts are recorded in New Taiwan dollars at the rates of exchange in effect when the transactions occur. Exchange gains or losses derived from foreign-currency transactions or monetary assets and liabilities denominated in foreign currencies are recognized in earnings.

At the balance sheet date, monetary assets and liabilities denominated in foreign currencies are revalued at prevailing exchange rates with the resulting gains or losses recognized in earnings.

 

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The financial statements of foreign subsidiaries are translated into New Taiwan dollars at the following exchange rates: Assets and liabilities - spot rates at period-end; shareholders’ equity - historical rates; income and expenses - average rates during the period. The resulting translation adjustments are recorded as a separate component of shareholders’ equity.

Use of Estimates

The preparation of consolidated financial statements in conformity with the aforementioned guidelines and principles requires management to make reasonable assumptions and estimates of matters that are inherently uncertain. The actual results may differ from management’s estimates.

Classification of Current and Noncurrent Assets and Liabilities

Current assets are assets held for trading purposes and assets expected to be converted to cash, sold or consumed within one year from the balance sheet date. Current liabilities are obligations incurred for trading purposes and obligations expected to be settled within one year from the balance sheet date. Assets and liabilities that are not classified as current are noncurrent assets and liabilities, respectively.

Cash Equivalents

Repurchase agreements collateralized by government bonds and corporate bonds acquired with maturities of less than three months from the date of purchase are classified as cash equivalents. The carrying amount approximates fair value due to their short term nature.

Financial Assets/Liabilities at Fair Value Through Profit or Loss

Derivatives that do not meet the criteria for hedge accounting are initially recognized at fair value, with transaction costs expensed as incurred. The derivatives are remeasured at fair value subsequently with changes in fair value recognized in earnings. A regular way purchase or sale of financial assets is accounted for using settlement date accounting.

Fair value is estimated using valuation techniques incorporating estimates and assumptions that are consistent with prevailing market conditions. When the fair value is positive, the derivative is recognized as a financial asset; when the fair value is negative, the derivative is recognized as a financial liability.

Available-for-sale Financial Assets

Investments designated as available-for-sale financial assets include debt securities and equity securities. Available-for-sale financial assets are initially recognized at fair value plus transaction costs that are directly attributable to the acquisition. Changes in fair value from subsequent remeasurement are reported as a separate component of shareholders’ equity. The corresponding accumulated gains or losses are recognized in earnings when the financial asset is derecognized from the balance sheet. A regular way purchase or sale of financial assets is accounted for using settlement date accounting.

Fair value is determined as follows: Open-end mutual funds and money market funds - net asset values at the end of the period; publicly traded stocks - closing prices at the end of the period; and other debt securities - average of bid and asked prices at the end of the period.

Cash dividends are recognized as investment income upon resolution of shareholders of an investee but are accounted for as a reduction to the original cost of investment if such dividends are declared on the earnings of the investee attributable to the period prior to the purchase of the investment. Stock dividends are recorded as an increase in the number of shares held and do not affect investment income. The cost per share is recalculated based on the new total number of shares.

Any difference between the initial carrying amount of a debt security and the amount due at maturity is amortized using the effective interest method, with the amortization recognized in earnings.

 

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If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. If, in a subsequent period, the amount of the impairment loss decreases, for equity securities, the previously recognized impairment loss is reversed to the extent of the decrease and recorded as an adjustment to shareholders’ equity; for debt securities, the amount of the decrease is recognized in earnings, provided that the decrease is clearly attributable to an event which occurred after the impairment loss was recognized.

Held-to-maturity Financial Assets

Debt securities for which the Company has a positive intention and ability to hold to maturity are categorized as held-to-maturity financial assets and are carried at amortized cost. Those financial assets are initially recognized at fair value plus transaction costs that are directly attributable to the acquisition. Gains or losses are recognized at the time of derecognition, impairment or amortization. A regular way purchase or sale of financial assets is accounted for using settlement date accounting.

If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. If, in a subsequent period, the amount of the impairment loss decreases and the decrease is clearly attributable to an event which occurred after the impairment loss was recognized, the previously recognized impairment loss is reversed to the extent of the decrease. The reversal may not result in a carrying amount that exceeds the amortized cost that would have been determined as if no impairment loss had been recognized.

Hedging Derivative Financial Instruments

Hedge derivatives are mainly derivatives instruments that are for cash flow hedge purposes and determined to be an effective hedge. The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognized in shareholders’ equity. The amount recognized in shareholders’ equity is recognized in profit or loss in the same period or period during which the hedged forecast transaction or an asset or liability arising from the hedged forecast transaction affects profit or loss. However, if all or a portion of a loss recognized in shareholders’ equity is not expected to be recovered in the future, the amount that is not expected to be recovered is reclassified into profit or loss.

Financial Assets Carried at Cost

Investments for which the Company does not exercise significant influence and that do not have a quoted market price in an active market and whose fair value cannot be reliably measured, such as non-publicly traded stocks and mutual funds, are carried at their original cost. The costs of non-publicly traded stocks and mutual funds are determined using the weighted-average method. If there is objective evidence which indicates that a financial asset is impaired, a loss is recognized. A subsequent reversal of such impairment loss is not allowed.

The accounting treatment for cash dividends and stock dividends arising from financial assets carried at cost is the same as that for cash and stock dividends arising from available-for-sale financial assets.

Allowance for Doubtful Receivables

An allowance for doubtful receivables is provided based on a review of the collectability of receivables. The Company assesses the collectability of receivables by performing the account aging analysis and examining current trends in the credit quality of its customers.

 

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TSMC’s provision was originally set at 1% of the amount of outstanding receivables. On January 1, 2011, the Company adopted the third revision of Statement of Financial Accounting Standards (SFAS) No. 34, “Financial Instruments: Recognition and Measurement.” One of the main revisions is that the impairment of receivables originated by the Company is subject to the provisions of SFAS No. 34. Companies are required to evaluate for indication of impairment of accounts receivable based on an individual and collective basis at the end of each reporting period. When objective evidence indicates that the estimated future cash flow of accounts receivable decreases as a result of one or more events that occurred after the initial recognition of the accounts receivable, such accounts receivable are deemed to be impaired.

Because of the Company’s short average collection period, the amount of the impairment loss recognized is the difference between the carrying amount of accounts receivable and estimated future cash flows without considering the discounting effect. Changes in the carrying amount of the allowance account are recognized as bad debt in loss which is recorded in the operating expenses - general and administrative. When accounts receivable are considered uncollectable, the amount is written off against the allowance account.

Inventories

Inventories are recorded at standard cost and adjusted to approximate weighted-average cost on the balance sheet date.

Inventories are stated at the lower of cost or net realizable value. Inventory write-downs are made on an item-by-item basis, except where it may be appropriate to group similar or related items. Net realizable value is the estimated selling price of inventories less all estimated costs of completion and necessary selling costs.

Investments Accounted for Using Equity Method

Investments in companies wherein the Company exercises significant influence over the operating and financial policy decisions are accounted for using the equity method. The Company’s share of the net income or net loss of an investee is recognized in the “equity in earnings/losses of equity method investees, net” account. The cost of an investment shall be analyzed and the cost of investment in excess of the fair value of identifiable net assets acquired, representing goodwill, shall not be amortized. If the fair value of identifiable net assets acquired exceeds the cost of investment, the excess shall be proportionately allocated as reductions to fair values of non-current assets (except for financial assets other than investments accounted for using the equity method and deferred income tax assets). When an indication of impairment is identified, the carrying amount of the investment is reduced, with the related impairment loss recognized in earnings.

When the Company subscribes for additional investee’s shares at a percentage different from its existing ownership percentage, the resulting carrying amount of the investment in the investee differs from the amount of the Company’s share of the investee’s equity. The Company records such a difference as an adjustment to long-term investments with the corresponding amount charged or credited to capital surplus.

Gains or losses on sales from the Company to equity method investees or from equity method investees to the Company are deferred in proportion to the Company’s ownership percentages in the investees until such gains or losses are realized through transactions with third parties.

If an investee’s functional currency is a foreign currency, differences will result from the translation of the investee’s financial statements into the reporting currency of the Company. Such differences are charged or credited to cumulative translation adjustments, a separate component of shareholders’ equity.

 

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Property, Plant and Equipment and Assets Leased to Others

Property, plant and equipment and assets leased to others are stated at cost less accumulated depreciation. Properties covered by agreements qualifying as capital leases are carried at the lower of the leased equipment’s market value or the present value of the minimum lease payments at the inception date of the lease, with the corresponding amount recorded as obligations under capital leases. Borrowing costs directly attributable to the acquisition or construction of property, plant and equipment are capitalized as part of the cost of those assets. When an indication of impairment is identified, any excess of the carrying amount of an asset over its recoverable amount is recognized as a loss. If the recoverable amount increases in a subsequent period, the amount previously recognized as impairment would be reversed and recognized as a gain. However, the adjusted amount may not exceed the carrying amount that would have been determined, net of depreciation, as if no impairment loss had been recognized. Significant additions, renewals and betterments incurred during the construction period are capitalized. Maintenance and repairs are expensed as incurred.

Depreciation is computed using the straight-line method over the following estimated service lives: land improvements - 20 years; buildings - 10 to 20 years; machinery and equipment - 3 to 5 years; office equipment - 3 to 15 years; and leased assets - 20 years.

Upon sale or disposal of property, plant and equipment and assets leased to others, the related cost and accumulated depreciation are deducted from the corresponding accounts, with any gain or loss recorded as non-operating gains or losses in the period of sale or disposal.

When property, plant and equipment are determined to be idle or useless, they are transferred to idle assets at the lower of the net realizable value or carrying amount. Depreciation on the idle assets is provided continuously, and the idle assets are tested for impairment on a periodical basis.

Intangible Assets

Goodwill represents the excess of the consideration paid for acquisition over the fair value of identifiable net assets acquired. Goodwill is no longer amortized and instead is tested for impairment annually, or more frequently if events or changes in circumstances suggest that the carrying amount may not be recoverable. If an event occurs or circumstances change which indicate that the fair value of goodwill is more likely than not below its carrying amount, an impairment loss is recognized. A subsequent reversal of such impairment loss is not allowed.

Deferred charges consist of technology license fees, software and system design costs and patent and others. The amounts are amortized over the following periods: Technology license fees - the estimated life of the technology or the term of the technology transfer contract; software and system design costs - 2 to 5 years; patent and others - the economic life or contract period. When an indication of impairment is identified, any excess of the carrying amount of an asset over its recoverable amount is recognized as a loss. If the recoverable amount increases in a subsequent period, the previously recognized impairment loss would be reversed and recognized as a gain. However, the adjusted amount may not exceed the carrying amount that would have been determined, net of amortization, as if no impairment loss had been recognized.

Expenditures related to research activities and those related to development activities that do not meet the criteria for capitalization are charged to expense when incurred.

Pension Costs

For employees who participate in defined contribution pension plans, pension costs are recorded based on the actual contributions made to employees’ individual pension accounts during their service periods. For employees who participate in defined benefit pension plans, pension costs are recorded based on actuarial calculations.

 

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Income Tax

The Company applies an inter-period allocation for its income tax whereby deferred income tax assets and liabilities are recognized for the tax effects of temporary differences, net operating loss carryforwards and unused tax credits. Valuation allowances are provided to the extent, if any, that it is more likely than not that deferred income tax assets will not be realized. A deferred tax asset or liability is classified as current or noncurrent in accordance with the classification of its related asset or liability. However, if a deferred tax asset or liability does not relate to an asset or liability in the financial statements, then it is classified as either current or noncurrent based on the expected length of time before it is realized or settled.

Any tax credits arising from purchases of machinery and equipment, research and development expenditures and personnel training expenditures are recognized using the flow-through method.

Adjustments of prior years’ tax liabilities are added to or deducted from the current period’s tax provision.

Income tax on unappropriated earnings (excluding earnings from foreign consolidated subsidiaries) at a rate of 10% is expensed in the year of shareholder approval which is the year subsequent to the year the earnings are generated.

Stock-based Compensation

Employee stock options that were granted or modified in the period from January 1, 2004 to December 31, 2007 are accounted for by the interpretations issued by the Accounting Research and Development Foundation of the Republic of China. The Company adopted the intrinsic value method and any compensation cost determined using this method is recognized in earnings over the employee vesting period. Employee stock option plans that were granted or modified after December 31, 2007 are accounted for using fair value method in accordance with Statement of Financial Accounting Standards No. 39, “Accounting for Share-based Payment.” The Company did not grant or modify any employee stock options since January 1, 2008.

Revenue Recognition and Allowance for Sales Returns and Others

The Company recognizes revenue when evidence of an arrangement exists, the rewards of ownership and significant risk of the goods has been transferred to the buyer; price is fixed or determinable, and collectability is reasonably assured. Provisions for estimated sales returns and other allowances are recorded in the period the related revenue is recognized, based on historical experience, management’s judgment, and any known factors that would significantly affect the allowance.

Sales prices are determined using fair value taking into account related sales discounts agreed to by the Company and its customers. Sales agreements typically provide that payment is due 30 days from invoice date for a majority of the customers and 30 to 45 days after the end of the month in which sales occur for some customers. Since the receivables from sales are collectible within one year and such transactions are frequent, fair value of the receivables is equivalent to the nominal amount of the cash to be received.

 

3.

ACCOUNTING CHANGES

On January 1, 2011, the Company prospectively adopted the newly revised Statement of Financial Accounting Standards (SFAS) No. 34, “Financial Instruments: Recognition and Measurement.” The main revisions include (1) finance lease receivables are now covered by SFAS No. 34; (2) the scope of the applicability of SFAS No. 34 to insurance contracts is amended; (3) loans and receivables originated by the Company are now covered by SFAS No. 34; (4) additional guidelines on impairment testing of financial assets carried at amortized cost when the debtor has financial difficulties and the terms of obligations have been modified; and (5) accounting treatment by a debtor for modifications in the terms of obligations. This accounting change did not have a significant effect on the Company’s consolidated financial statements as of and for the period ended June 30, 2011.

 

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On January 1, 2011, the Company adopted the newly issued SFAS No. 41, “Operating Segments.” The statement requires identification and disclosure of operating segments on the basis of how the Company’s chief operating decision maker regularly reviews information in order to allocate resources and assess performance. This statement supersedes SFAS No. 20, “Segment Reporting.” The Company conformed to the disclosure requirements as of and for the six months ended June 30, 2011. The information for the six months ended June 30, 2010 has been recast to reflect the new segment reporting requirement.

 

4.

CASH AND CASH EQUIVALENTS

 

 

5.

FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

 

The Company entered into derivative contracts during the six months ended June 30, 2011 and 2010 to manage exposures due to fluctuations of foreign exchange rates. The derivative contracts entered into by the Company did not meet the criteria for hedge accounting. Therefore, the Company did not apply hedge accounting treatment for derivative contracts.

 

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Outstanding forward exchange contracts consisted of the following:

 

Outstanding cross currency swap contracts consisted of the following:

 

For the six months ended June 30, 2011 and 2010, changes in fair value related to derivative financial instruments recognized in earnings was a net loss of NT$280,630 thousand and a net gain of NT$20,468 thousand, respectively.

 

6.

AVAILABLE-FOR-SALE FINANCIAL ASSETS

 

 

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7.

HELD-TO-MATURITY FINANCIAL ASSETS

 

Structured time deposits categorized as held-to-maturity financial assets consisted of the following:

 

 

8.

ALLOWANCES FOR DOUBTFUL RECEIVABLES, SALES RETURNS AND OTHERS

Movements of the allowance for doubtful receivables were as follows:

 

Movements of the allowance for sales returns and others were as follows:

 

 

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9.

INVENTORIES

 

Write-downs of inventories to net realizable value in the amount of NT$315,552 thousand and NT$41,804 thousand, respectively, were included in the cost of sales for the six months ended June 30, 2011 and 2010. Inventory losses related to earthquake damage in the amount of NT$194,137 thousand were classified under non-operating expenses and losses for the six months ended June 30, 2010.

 

10.

INVESTMENTS ACCOUNTED FOR USING EQUITY METHOD

 

The Company originally owned 43% of Aiconn, which was merged with Accton Wireless Broadband Corp. (Accton) in March 2011. As a result of the merger, the Company’s equity investment in Aiconn was exchanged for equity of Accton and the Company did not exercise significant influence over Accton. Therefore, the aforementioned investment was reclassified to financial assets carried at cost.

In February 2010, the Company subscribed to 75,316 thousand shares of Motech through a private placement for NT$6,228,661 thousand; after the subscription, the Company’s percentage of ownership in Motech was 20%. Transfer of the aforementioned common shares within three years is prohibited according to the related regulations.

For the six months ended June 30, 2011 and 2010, equity in earnings/losses of equity method investees was a net gain of NT$765,485 thousand and NT$706,236 thousand, respectively. Related equity in earnings/losses of equity method investees were determined based on the audited financial statements, except for Aiconn and Mcube. The Company believes that, had the aforementioned equity method investees’ financial statements been audited, any adjustments arising would have no material effect on the Company’s consolidated financial statements.

 

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As of June 30, 2011 and 2010, the quoted market price of publicly traded stocks in unrestricted investments accounted for using the equity method (VIS) was NT$9,391,941 thousand and NT$8,229,728 thousand, respectively.

Movements of the difference between the cost of investments and the Company’s share in investees’ net assets allocated to depreciable assets were as follows:

 

Movements of the difference allocated to goodwill were as follows:

 

 

11.

HEDGING DERIVATIVE FINANCIAL INSTRUMENTS

 

The Company’s long-term bank loans bear floating interest rates; therefore, changes in the market interest rate may cause future cash flows to be volatile. Accordingly, the Company entered into an interest rate swap contract in order to hedge cash flow risk caused by floating interest rates. The outstanding interest rate swap contract consisted of the following:

 

 

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For the six months ended June 30, 2011 and 2010, the adjustment for current period to shareholders’ equity amounted to losses of NT$51 thousand and NT$761 thousand, respectively; and the amount removed from shareholders’ equity and recognized as a loss amount from the above interest rate swap contract amounted to NT$417 thousand and nil, respectively.

 

12.

FINANCIAL ASSETS CARRIED AT COST

 

In June, 2010, the Company invested in Stion Corporation (Stion, a United States corporation) for US$50,000 thousand and obtained Stion’s preferred stock of 7,347 thousand shares with 23.4% of ownership. Stion is engaged in the manufacturing of high-efficiency thin-film solar photovoltaic modules. Due to certain restrictions contained in the investment agreements, the Company does not have the ability to exert significant influence over Stion’s operating and financial policies. Therefore, the investment was classified under financial assets carried at cost.

The common stock of Capella Microsystems (Taiwan), Inc. and Integrated Memory Logic Limited was listed on the Taiwan GreTai Securities Market and Taiwan Stock Exchange in June 2010 and May 2010, respectively. Thus, the Company reclassified the aforementioned investments from financial assets carried at cost to available-for-sale financial assets.

For the six months ended June 30, 2011 and 2010, the Company recognized impairment on financial assets carried at cost of NT$58,096 thousand and NT$112,313 thousand, respectively.

 

13.

PROPERTY, PLANT AND EQUIPMENT

 

 

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The Company entered into agreements to lease buildings that qualify as capital leases. The term of the leases is from December 2003 to December 2013. The future minimum lease payments as of June 30, 2011 were NT$746,338 thousand.

During the six months ended June 30, 2011, Xintec capitalized the borrowing costs directly attributable to the acquisition or construction of property, plant and equipment. Information about capitalized interest was as follows:

 

 

14.

DEFERRED CHARGES, NET

 

 

 

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15.

SHORT-TERM LOANS

 

 

16.

BONDS PAYABLE

 

 

17.

LONG-TERM BANK LOANS

 

Pursuant to the loan agreements, financial ratios calculated based on semi-annual and annual financial statements of Xintec must comply with predetermined financial covenants. As of June 30, 2011, Xintec was in compliance with all such financial covenants.

 

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As of June 30, 2011, future principal repayments for the long-term bank loans were as follows:

 

 

18.

OTHER LONG-TERM PAYABLES

 

The payables for royalties were primarily attributable to several license arrangements that the Company entered into for certain semiconductor-related patents.

As of June 30, 2011, future payments for other long-term payables were as follows:

 

 

19.

PENSION PLANS

The pension mechanism under the Labor Pension Act (the “Act”) is deemed a defined contribution plan. Pursuant to the Act, TSMC, GUC, Xintec and Mutual-Pak have made monthly contributions equal to 6% of each employee’s monthly salary to employees’ pension accounts. Furthermore, TSMC North America, TSMC China, TSMC Europe, TSMC Canada, TSMC Solar NA and TSMC Solar Europe GmbH are required by local regulations to make monthly contributions at certain percentages of the basic salary of their employees. Pursuant to the aforementioned Act and local regulations, the Company recognized pension costs of NT$643,427 thousand and NT$475,476 thousand for the six months ended June 30, 2011 and 2010, respectively.

 

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TSMC, GUC and Xintec have defined benefit plans under the Labor Standards Law that provide benefits based on an employee’s service years and average monthly salary for the six-month period prior to retirement. The aforementioned companies contribute an amount equal to 2% of salaries paid each month to their respective pension funds (the Funds), which are administered by the Labor Pension Fund Supervisory Committee (the Committee) and deposited in the name of the committees in the Bank of Taiwan. The Company recognized pension costs of NT$152,007 thousand and NT$127,163 thousand for the six months ended June 30, 2011 and 2010, respectively.

Movements in the Funds and accrued pension cost under the defined benefit plans were summarized as follows:

 

 

20.

INCOME TAX

 

a.

A reconciliation of income tax expense based on “income before income tax” at the statutory rates and income tax currently payable was as follows:

 

 

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b.

Income tax expense consisted of the following:

 

 

c.

Net deferred income tax assets consisted of the following:

 

Effective in June 2010, the Article 5 of the Income Tax Law of the Republic of China was amended, in which the income tax rate of profit-seeking enterprises would be reduced from 20% to 17%. The last amended income tax rate of 17% is retroactively applied on January 1, 2010. TSMC and its domestic subsidiaries which are subject to the Income Tax Law of the Republic of China recalculated their deferred tax assets in accordance with the new amended Article and adjusted the resulting difference as an income tax expense in 2010. Furthermore, due to the reduced corporate income tax rate, the Company anticipated a decrease in future tax credits allowed for deduction, therefore resulting in higher adjustment to the valuation allowance balance.

Under Article 10 of the Statute for Industrial Innovation (SII) legislated and effective in May 2010, a profit-seeking enterprise may deduct up to 15% of its research and development expenditures from its income tax payable for the period in which these expenditures are incurred, but this deduction should not exceed 30% of the income tax payable for that period. This incentive is retroactive to January 1, 2010 and effective until December 31, 2019.

 

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As of June 30, 2011, the net operating loss carryforwards generated by WaferTech, TSMC Development and Mutual-Pak would expire on various dates through 2026.

 

d.

Integrated income tax information:

The balance of the imputation credit account of TSMC as of June 30, 2011 and 2010 was NT$8,826,775 thousand and NT$10,284,010 thousand, respectively.

The estimated and actual creditable ratios for distribution of TSMC’s earnings of 2010 and 2009 were 4.95% and 9.85%, respectively.

The imputation credit allocated to the shareholders is based on its balance as of the date of dividend distribution. The estimated creditable ratio may change when the actual distribution of imputation credit is made.

 

e.

All of TSMC’s earnings generated prior to December 31, 1997 have been appropriated.

 

f.

As of June 30, 2011, investment tax credits of TSMC, GUC, Xintec and Mutual-Pak consisted of the following:

 

 

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g.

The profits generated from the following projects of TSMC, GUC and Xintec are exempt from income tax for a five-year period:

 

 

h.

The tax authorities have examined income tax returns of TSMC through 2008. All investment tax credit adjustments assessed by the tax authorities have been recognized accordingly.

 

21.

LABOR COST, DEPRECIATION AND AMORTIZATION

 

 

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22.

SHAREHOLDERS’ EQUITY

As of June 30, 2011, 1,093,731 thousand ADSs of TSMC were traded on the NYSE. The number of common shares represented by the ADSs was 5,468,654 thousand (one ADS represents five common shares).

Capital surplus can only be used to offset a deficit under the Company Law. However, the capital surplus generated from donations and the excess of the issuance price over the par value of capital stock (including the stock issued for new capital, mergers, convertible bonds and the surplus from treasury stock transactions) may be appropriated as stock dividends, which are limited to a certain percentage of TSMC’s paid-in capital. In addition, the capital surplus from long-term investment may not be used for any purpose.

Capital surplus consisted of the following:

 

TSMC’s Articles of Incorporation provide that, when allocating the net profits for each fiscal year, TSMC shall first offset its losses in previous years and then set aside the following items accordingly:

 

a.

Legal capital reserve at 10% of the profits left over, until the accumulated legal capital reserve equals TSMC’s paid-in capital;

 

b.

Special capital reserve in accordance with relevant laws or regulations or as requested by the authorities in charge;

 

c.

Bonus to directors and profit sharing to employees of TSMC of not more than 0.3% and not less than 1% of the remainder, respectively. Directors who also serve as executive officers of TSMC are not entitled to receive the bonus to directors. TSMC may issue profit sharing to employees in stock of an affiliated company meeting the conditions set by the Board of Directors or, by the person duly authorized by the Board of Directors;

 

d.

Any balance left over shall be allocated according to the resolution of the shareholders’ meeting.

TSMC’s Articles of Incorporation also provide that profits of TSMC may be distributed by way of cash dividend and/or stock dividend. However, distribution of profits shall be made preferably by way of cash dividend. Distribution of profits may also be made by way of stock dividend; provided that the ratio for stock dividend shall not exceed 50% of the total distribution.

Any appropriations of the profits are subject to shareholders’ approval in the following year.

 

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TSMC accrued profit sharing to employees based on certain percentage of net income during the period, which amounted to NT$4,873,630 thousand and NT$4,988,630 thousand for the six months ended June 30, 2011 and 2010, respectively. Bonuses to directors were accrued based on estimated amount of payment. If the actual amounts subsequently resolved by the shareholders differ from the estimated amounts, the differences are recorded in the year of shareholders’ resolution as a change in accounting estimate. If profit sharing is resolved to be distributed to employees in stock, the number of shares is determined by dividing the amount of profit sharing by the closing price (after considering the effect of dividends) of the shares on the day preceding the shareholders’ meeting.

TSMC no longer has supervisors since January 1, 2007. The required duties of supervisors are being fulfilled by the Audit Committee.

The appropriation for legal capital reserve shall be made until the reserve equals TSMC’s paid-in capital. The reserve may be used to offset a deficit, or be distributed as dividends and bonuses for the portion in excess of 50% of the paid-in capital if TSMC has no unappropriated earnings and the reserve balance has exceeded 50% of TSMC’s paid-in capital. The Company Law also prescribes that, when the reserve has reached 50% of TSMC’s paid-in capital, up to 50% of the reserve may be transferred to capital.

A special capital reserve equivalent to the net debit balance of the other components of shareholders’ equity (for example, cumulative translation adjustments and unrealized loss on financial instruments, but excluding treasury stock) shall be made from unappropriated earnings pursuant to existing regulations promulgated by the Securities and Futures Bureau (SFB). Any special reserve appropriated may be reversed to the extent that the net debit balance reverses.

The appropriations of earnings for 2010 and 2009 had been approved in the TSMC’s shareholders meetings held on June 9, 2011 and June 15, 2010, respectively. The appropriations and dividends per share were as follows:

 

TSMC’s profit sharing to employees to be paid in cash and bonus to directors in the amounts of NT$10,908,338 thousand and NT$51,131 thousand for 2010, respectively, and profit sharing to employees to be paid in cash and bonus to directors in the amounts of NT$6,691,338 thousand and NT$67,692 thousand for 2009, respectively, had been approved in the shareholders’ meeting held on June 9, 2011 and June 15, 2010, respectively. The resolved amounts of the profit sharing to employees and bonus to directors were consistent with the resolutions of meeting of the Board of Directors held on February 15, 2011 and February 9, 2010 and same amount had been charged against earnings of 2010 and 2009, respectively.

The information about the appropriations of TSMC’s profit sharing to employees and bonus to directors is available at the Market Observation Post System website.

Under the Integrated Income Tax System that became effective on January 1, 1998, the R.O.C. resident shareholders are allowed a tax credit for their proportionate share of the income tax paid by TSMC on earnings generated since January 1, 1998.

 

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23.

STOCK-BASED COMPENSATION PLANS

TSMC’s Employee Stock Option Plans, consisting of the TSMC 2004 Plan, TSMC 2003 Plan and TSMC 2002 Plan were approved by the SFB on January 6, 2005, October 29, 2003 and June 25, 2002, respectively. The maximum number of options authorized to be granted under the TSMC 2004 Plan, TSMC 2003 Plan and TSMC 2002 Plan was 11,000 thousand, 120,000 thousand and 100,000 thousand, respectively, with each option eligible to subscribe for one common share of TSMC when exercised. The options may be granted to qualified employees of TSMC or any of its domestic or foreign subsidiaries, in which TSMC’s shareholding with voting rights, directly or indirectly, is more than fifty percent (50%). The options of all the plans are valid for ten years and exercisable at certain percentages subsequent to the second anniversary of the grant date. Under the terms of the plans, the options are granted at an exercise price equal to the closing price of TSMC’s common shares listed on the TSE on the grant date.

Options of the plans that had never been granted or had been granted but subsequently canceled had expired as of June 30, 2011.

Information about TSMC’s outstanding options for the six months ended June 30, 2011 and 2010 was as follows:

 

The number of outstanding options and exercise prices have been adjusted to reflect the distribution of earnings by TSMC in accordance with the plans.

As of June 30, 2011, information about TSMC’s outstanding options was as follows:

 

As of June 30, 2011, all of the above outstanding options were exercisable.

 

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GUC’s Employee Stock Option Plans, consisting of the GUC 2003 Plan and GUC 2002 Plan, were approved by its Board of Directors on January 23, 2003 and July 1, 2002, respectively. The maximum number of options authorized to be granted under the GUC 2003 Plan and GUC 2002 Plan was 7,535 and 5,000, respectively, with each option eligible to subscribe for one thousand common shares of GUC when exercised. The options may be granted to qualified employees of GUC. The options of all the plans are valid for six years and exercisable at certain percentages subsequent to the second anniversary of the grant date.

Moreover, the GUC 2007 Plan, GUC 2006 Plan and GUC 2004 Plan were approved by the SFB on November 28, 2007, July 3, 2006 and August 16, 2004 to grant a maximum of 1,999 options, 3,665 options and 2,500 options, respectively, with each option eligible to subscribe for one thousand common shares of GUC when exercised. The options may be granted to qualified employees of GUC or any of its subsidiaries. Except for the options of the GUC 2006 Plan which are valid until August 15, 2011, the options of the other two GUC option plans are valid for six years. Options of all three plans are exercisable at certain percentages subsequent to the second anniversary of the grant date.

Information about GUC’s outstanding options for the six months ended June 30, 2011 and 2010 was as follows:

 

The number of outstanding options and exercise prices have been adjusted to reflect the distribution of earnings by GUC in accordance with the plans.

As of June 30, 2011, information about GUC’s outstanding and exercisable options was as follows:

 

 

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Xintec’s Employee Stock Option Plans, consisting of the Xintec 2007 Plan and Xintec 2006 Plan, were approved by the SFB on June 26, 2007 and July 3, 2006, respectively. The maximum number of options authorized to be granted under the Xintec 2007 Plan and Xintec 2006 Plan was 6,000 thousand each, with each option eligible to subscribe for one common share of Xintec when exercised. The options may be granted to qualified employees of Xintec or any of its subsidiaries. The options of all the plans are valid for ten years and exercisable at certain percentages subsequent to the second anniversary of the grant date.

Information about Xintec’s outstanding options for the six months ended June 30, 2011 and 2010 was as follows:

 

The exercise prices have been adjusted to reflect the distribution of earnings by Xintec in accordance with the plans.

As of June 30, 2011, information about Xintec’s outstanding and exercisable options was as follows:

 

 

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No compensation cost was recognized under the intrinsic value method for the six months ended June 30, 2011 and 2010. Had the Company used the fair value based method to evaluate the options using the Black-Scholes model, the assumptions at the various grant dates and pro forma results of the Company for the six months ended June 30, 2011 and 2010 would have been as follows:

 

Assumptions:
TSMC		Expected dividend yield		1.00%-3.44%
		Expected volatility		43.77%-46.15%
		Risk free interest rate		3.07%-3.85%
		Expected life		5 years
GUC		Expected dividend yield		0.00%-0.60%
		Expected volatility		22.65%-45.47%
		Risk free interest rate		2.12%-2.56%
		Expected life		3-6 years
Xintec		Expected dividend yield		0.80%
		Expected volatility		31.79%-47.42%
		Risk free interest rate		1.88%-2.45%
		Expected life		3 years

 

 

24.

EARNINGS PER SHARE

EPS is computed as follows:

 

(Continued)

 

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(Concluded)

If the Company may settle the obligation by cash, by issuing shares, or in combination of both cash and shares, profit sharing to employees which will be settled in shares should be included in the weighted average number of shares outstanding in calculation of diluted EPS, if the shares have a dilutive effect. The number of shares is estimated by dividing the amount of profit sharing to employees in stock by the closing price (after considering the dilutive effect of dividends) of the common shares on the balance sheet date. Such dilutive effect of the potential shares needs to be included in the calculation of diluted EPS until the shares of profit sharing to employees are resolved in the shareholders’ meeting in the following year.

The average number of shares outstanding for EPS calculation has been considered for the effect of retrospective adjustments. This adjustment caused each the basic and diluted after income tax EPS for the six months ended June 30, 2010 to remain at NT$2.85.

 

25.

DISCLOSURES FOR FINANCIAL INSTRUMENTS

 

a.

Fair values of financial instruments were as follows:

 

 

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b.

Methods and assumptions used in estimating fair values of financial instruments

 

1)

The aforementioned financial instruments do not include cash and cash equivalents, receivables, other financial assets, refundable deposits, short-term loans, payables and guarantee deposits. The carrying amounts of these financial instruments approximate their fair values due to their short maturities.

 

2)

Except for derivatives and structured time deposits, available-for-sale and held-to-maturity financial assets were based on their quoted market prices.

 

3)

The fair values of those derivatives and structured time deposits are determined using valuation techniques incorporating estimates and assumptions that were consistent with prevailing market conditions.

 

4)

Financial assets carried at cost have no quoted prices in an active market and entail an unreasonably high cost to obtain verifiable fair values. Therefore, no fair value is presented.

 

5)

Fair value of bonds payable was based on their quoted market price.

 

6)

Fair values of long-term bank loans, other long-term payables and obligations under capital leases were based on the present value of expected cash flows, which approximate their carrying amounts.

 

c.

The changes in fair value of derivatives contracts for the six months ended June 30, 2011 and 2010 estimated using valuation techniques were recognized as net gain of NT$4,729 thousand and net loss of NT$176,330 thousand, respectively.

 

d.

As of June 30, 2011 and 2010, financial assets exposed to fair value interest rate risk were NT$10,716,092 thousand and NT$44,622,911 thousand, respectively; financial liabilities exposed to fair value interest rate risk were NT$44,302,126 thousand and NT$31,418,522 thousand, respectively; and financial liabilities exposed to cash flow interest rate risk were NT$1,500,448 thousand and NT$1,637,954 thousand, respectively.

 

e.

Movements of the unrealized gains or losses on financial instruments for the six months ended June 30, 2011 and 2010 were as follows:

 

 

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f.

Information about financial risk

 

1)

Market risk. The derivative financial instruments categorized as financial assets/liabilities at fair value through profit or loss are mainly used to hedge market the exchange rate fluctuations of foreign-currency assets and liabilities; therefore, the market exchange rate risk of derivatives will be offset by the foreign exchange risk of these hedged items. Available-for-sale financial assets and held-to-maturity financial assets held by the Company are mainly fixed-interest-rate debt securities and publicly traded stock; therefore, the fluctuations in market interest rates and market prices will result in changes in fair values of these debt securities.

 

2)

Credit risk. Credit risk represents the potential loss that would be incurred by the Company if the counter-parties or third-parties breached contracts. Financial instruments with positive fair values at the balance sheet date are evaluated for credit risk. The Company evaluated whether the financial instruments for any possible counter-parties or third-parties are reputable financial institutions, business enterprises and government agencies and accordingly, the Company believed that the Company’s exposure to credit risk was not significant.

 

3)

Liquidity risk. The Company has sufficient operating capital and bank facilities to meet cash needs upon settlement of derivative financial instruments, bonds payable and bank loans. Therefore, the liquidity risk is low.

 

4)

Cash flow interest rate risk. The Company mainly invests in fixed-interest-rate debt securities. Therefore, cash flows are not expected to fluctuate significantly due to changes in market interest rates. The long-term bank loans were floating-rate loans. Therefore, changes in the market interest rates will result in changes in the interest rate of the long-term bank loans, which will affect future cash flows.

 

g.

The Company seeks to reduce the effects of future cash flow related interest rate changes by primarily using derivative financial instruments.

 

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The Company’s long-term bank loans bear floating interest rates; therefore, changes in the market interest rate may cause future cash flows to be volatile. Accordingly, the Company entered into an interest rate swap contract in order to hedge cash flow risk caused by floating interest rates. Information about outstanding interest rate swap contract consisted of the following:

 

 

26.

RELATED PARTY TRANSACTIONS

Except as disclosed in the consolidated financial statements and other notes, the following is a summary of significant related party transactions:

 

a.

Investees of TSMC

VIS (accounted for using equity method)

SSMC (accounted for using equity method)

Motech (accounted for using equity method)

 

b.

VisEra Technology Company, Ltd. (VisEra), an indirect investee accounted for using equity method by TSMC.

 

c.

Others

Related parties over which the Company has significant influence but which the Company had no material transactions.

 

 

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The sales prices and payment terms to related parties were not significantly different from those of sales to third parties. For other related party transactions, prices and terms were determined in accordance with mutual agreements.

 

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The Company leased certain office space and facilities from VIS. The lease terms and prices were determined in accordance with mutual agreements. The rental expense was paid monthly and the related expenses were classified under research and development expenses and manufacturing expenses.

The Company leased certain factory building from VisEra. The lease terms and prices were determined in accordance with mutual agreements. The rental expense was paid monthly and classified under manufacturing expenses.

The Company leased certain machinery and equipment to VisEra. The lease terms and prices were determined in accordance with mutual agreements. The rental income was received monthly and the related income was classified under non-operating income and gains.

 

27.

PLEDGED OR MORTGAGED ASSETS

The Company provided certain assets as collateral mainly for long-term bank loans, land lease agreements and customs duty guarantee, which were as follows:

 

 

28.

SIGNIFICANT LONG-TERM LEASES

The Company leases several parcels of land, factory and office premises from the Science Park Administration and Jhongli Industrial Park Service Center. These operating leases expire on various dates from April 2011 to July 2030 and can be renewed upon expiration.

The Company entered into lease agreements for its office premises and certain equipment located in the United States, Europe, Japan, Shanghai and Taiwan. These operating leases expire between 2011 and 2020 and can be renewed upon expiration.

As of June 30, 2011, future lease payments were as follows:

 

 

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29.

SIGNIFICANT COMMITMENTS AND CONTINGENCIES

Significant commitments and contingencies of the Company as of June 30, 2011, excluding those disclosed in other notes, were as follows:

 

a.

Under a technical cooperation agreement with ITRI, the R.O.C. Government or its designee approved by TSMC can use up to 35% of TSMC’s capacity if TSMC’s outstanding commitments to its customers are not prejudiced. The term of this agreement is for five years beginning from January 1, 1987 and is automatically renewed for successive periods of five years unless otherwise terminated by either party with one year prior notice.

 

b.

Under several foundry agreements, TSMC shall reserve a portion of its production capacity for certain major customers that have guarantee deposits with TSMC. As of June 30, 2011, TSMC had a total of US$15,317 thousand of guarantee deposits.

 

c.

Under a Shareholders Agreement entered into with Philips and EDB Investments Pte Ltd. on March 30, 1999, the parties formed a joint venture company, SSMC, which is an integrated circuit foundry in Singapore. TSMC’s equity interest in SSMC was 32%. Nevertheless, Philips parted with its semiconductor company which was renamed as NXP B.V. in September 2006. TSMC and NXP B.V. purchased all the SSMC shares owned by EDB Investments Pte Ltd. pro rata according to the Shareholders Agreement on November 15, 2006. After the purchase, TSMC and NXP B.V. currently own approximately 39% and 61% of the SSMC shares respectively. TSMC and Philips (now NXP B.V.) are required, in the aggregate, to purchase at least 70% of SSMC’s capacity, but TSMC alone is not required to purchase more than 28% of the capacity. If any party defaults on the commitment and the capacity utilization of SSMC fall below a specific percentage of its capacity, the defaulting party is required to compensate SSMC for all related unavoidable costs.

 

d.

In August 2006, TSMC filed a lawsuit against Semiconductor Manufacturing International Corporation, SMIC (Shanghai) and SMIC Americas (aggregately referred to as “SMIC”) in the Superior Court of California for Alameda County for breach of a 2005 agreement that settled an earlier trade secret misappropriation and patent infringement litigation between the parties, as well as for trade secret misappropriation, seeking injunctive relief and monetary damages. In September 2006, SMIC filed a cross-complaint against TSMC in the same court alleging breach of settlement agreement, implied covenant of good faith and fair dealing. SMIC also filed a civil action against TSMC in November 2006 with the Beijing People’s High Court alleging defamation and breach of good faith. On June 10, 2009, the Beijing People’s High Court ruled in favor of TSMC and dismissed SMIC’s lawsuit. On November 4, 2009, after a two-month trial, a jury in the California action found SMIC to have both breached the 2005 settlement agreement and misappropriated TSMC’s trade secrets. TSMC has subsequently settled both lawsuits with SMIC. Pursuant to the new settlement agreement, the parties have agreed to the entry of a stipulated judgment in favor of TSMC in the California action, and to the dismissal of SMIC’s appeal against the Beijing High Court’s finding in favor of TSMC. Under the new settlement agreement and the related stipulated judgment, SMIC has agreed to make cash payments by installments to TSMC totaling US$200 million, which are in addition to the US$135 million previously paid to TSMC under the 2005 settlement agreement, and, conditional upon relevant government regulatory approvals, to issue to TSMC a total of 1,789,493,218 common shares of Semiconductor Manufacturing International Corporation and a three-year warrant to purchase 695,914,030 common shares (subject to adjustment) of Semiconductor Manufacturing International Corporation at HK$1.30 per share (subject to adjustment). TSMC has received the approval from the Investment Commission of Ministry of Economic Affairs and acquired the above mentioned common shares in July 2010 and obtained the subsequent cash settlement income in accordance with the agreement.

 

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e.

In June 2010, Keranos, LLC. filed a lawsuit in the U.S. District Court for the Eastern District of Texas alleging that TSMC, TSMC North America, and several other leading technology companies infringe three expired U.S. patents. In response, TSMC, TSMC North America, and several co-defendants in the Texas case filed a lawsuit against Keranos in the U.S. District Court for the Northern District of California in November 2010, seeking a judgment declaring that they did not infringe the asserted patents, and that those patents are invalid. The outcome of these two litigations cannot be determined at this time.

 

f.

In December 2010, Ziptronix, Inc. filed a complaint in the U.S. District Court for the Northern District of California accusing TSMC, TSMC North America and one other company of allegedly infringing six U.S. patents. This litigation is in its very early stages and therefore the outcome of the case cannot be determined at this time.

 

g.

TSMC entered into an agreement with a counterparty in 2003 whereby TSMC China is obligated to purchase certain property, plant and equipment at the agreed-upon price within the contract period. If the purchase is not completed, TSMC China is obligated to compensate the counterparty for the loss incurred. The property, plant and equipment have been in use by TSMC China since 2004 and are being depreciated over their estimated service lives. The related obligation totaled NT$5,975,328 thousand and NT$7,343,587 thousand as of June 30, 2011 and 2010, respectively, which is included in other long-term payables.

 

h.

Amounts available under unused letters of credit as of June 30, 2011 were NT$87,698 thousand.

 

30.

OTHERS

The significant financial assets and liabilities denominated in foreign currencies were as follows:

 

 

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Note:    Exchange rate represents the number of N.T. dollars for which one foreign currency could be exchanged.

 

31.

ADDITIONAL DISCLOSURES

Following are the additional disclosures required by the SFB for TSMC and its investees in which all significant intercompany balances and transactions are eliminated upon consolidation:

 

a.

Financing provided:    Please see Table 1 attached;

 

b.

Endorsement/guarantee provided:    None;

 

c.

Marketable securities held:    Please see Table 2 attached;

 

d.

Marketable securities acquired and disposed of at costs or prices of at least NT$100 million or 20% of the paid-in capital:    Please see Table 3 attached;

 

e.

Acquisition of individual real estate properties at costs of at least NT$100 million or 20% of the paid-in capital:    Please see Table 4 attached;

 

f.

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

 

g.

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

 

h.

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

 

i.

Names, locations, and related information of investees over which TSMC exercises significant influence:    Please see Table 7 attached;

 

j.

Information on investment in Mainland China

 

1)

The name of the investee in Mainland China, the main businesses and products, its issued capital, method of investment, information on inflow or outflow of capital, percentage of ownership, equity in the net gain or net loss, ending balance, amount received as dividends from the investee, and the limitation on investee:    Please see Table 8 attached.

 

2)

Significant direct or indirect transactions with the investee, its prices and terms of payment, unrealized gain or loss, and other related information which is helpful to understand the impact of investment in Mainland China on financial reports:    Please see Table 9 attached.

 

k.

Intercompany relationships and significant intercompany transactions:    Please see Table 9 attached.

 

32.

OPERATING SEGMENTS INFORMATION

The Company’s only reportable segment is the foundry segment. The foundry segment engages mainly in the manufacturing, selling, packaging, testing and computer-aided design of integrated circuits and other semiconductor devices and the manufacturing of masks. The Company also had other operating segments that did not exceed the quantitative threshold. These segments mainly engage in the researching, developing, and providing SoC (System on chip) design and also engage in the researching, developing, designing, manufacturing and selling of solid state lighting devices and renewable energy and efficiency related technologies and products.

 

- 44 -

---

The Company uses the operating profit as the measurement for segment profit and the basis of performance assessment. There was no material inconsistency between the accounting policies of the operating segment and the accounting policies described in Note 2.

The Company’s operating segments information was as follows:

 

 

- 45 -

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TABLE 1

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

FINANCINGS PROVIDED

FOR THE SIX MONTHS ENDED JUNE 30, 2011

(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)

 

 

No.		Financing Name		Financial statement Account		Counter-party		Financing Limit for Each Borrowing Company		Maximum Balance for the Period (US$ in Thousands)				Ending Balance (US$ in Thousands)				Interest Rate		Reason  for Financing		Allowance for Bad Debt				Collateral								Transaction Amounts				Financing Company’s Financing Amount Limits (Note 2)
																										Item				Value
1		TSMC Partners		Long-term receivables   from related parties		TSMC China		(Note 1)		$ (US$	7,175,000 250,000	)		$ (US$	7,175,000 250,000	)		0.25%-0.26%		Purchase equipment		$	-				-			$	-			$	-			$	32,657,501

 

Note 1:

The total amount for lending to a company for funding for a short-term period shall not exceed ten percent (10%) of the net worth of TSMC Partners. In addition, the total amount lendable to any one borrower shall be no more than thirty percent (30%) of the borrower’s net worth. While offshore subsidiaries whose voting shares are 100% owned, directly or indirectly, by TSMC will not subjected to this restriction.

 

Note 2:

The total amount available for lending purpose shall not exceed the net worth of TSMC Partners.

 

- 46 -

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TABLE 2

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

MARKETABLE SECURITIES HELD

JUNE 30, 2011

(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)

 

 

Held Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		June 30, 2011
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)				Market Value or Net Asset Value (Foreign Currencies in Thousands)				Note
TSMC		Corporate bond
		Nan Ya Plastics Corporation		-		Held-to-maturity financial assets			-			$	1,303,484				N/A			$	1,334,550
		Taiwan Power Company		-		”			-				860,303				N/A				861,061
		Formosa Plastics Corporation		-		”			-				575,212				N/A				577,236
		Formosa Petrochemical Corporation		-		”			-				475,445				N/A				476,512
		China Steel Corporation		-		”			-				305,086				N/A				305,179
		Stock
		Semiconductor Manufacturing International Corporation		-		Available-for-sale financial assets			1,789,493				4,171,309				7				4,171,309
		TSMC Global		Subsidiary		Investments accounted for using equity method			1				41,617,880				100				41,617,880
		TSMC Partners		Subsidiary		”			988,268				32,657,501				100				32,657,501
		VIS		Investee accounted for using equity method		”			628,223				9,110,898				38				9,391,941
		Motech		Investee accounted for using equity method		”			76,069				6,132,395				20				4,245,447
		SSMC		Investee accounted for using equity method		”			314				5,519,534				39				5,239,884
		TSMC North America		Subsidiary		”			11,000				2,830,777				100				2,830,777
		Xintec		Investee with a controlling financial interest		”			93,081				1,596,809				41				1,596,809
		GUC		Investee with a controlling financial interest		”			46,688				1,064,925				35				5,299,072
		TSMC Solar Europe		Subsidiary		”			-				391,148				100				391,148
		TSMC Europe		Subsidiary		”			-				201,892				100				201,892
		TSMC Japan		Subsidiary		”			6				146,863				100				146,863
		TSMC Solar NA		Subsidiary		”			1				83,704				100				83,704
		TSMC Korea		Subsidiary		”			80				22,622				100				22,622
		TSMC Lighting NA		Subsidiary		”			1				2,872				100				2,872
		United Industrial Gases Co., Ltd.		-		Financial assets carried at cost			16,783				193,584				10				310,107
		Shin-Etsu Handotai Taiwan Co., Ltd.		-		”			10,500				105,000				7				340,983
		W.K. Technology Fund IV		-		”			4,000				40,000				2				42,704
		Fund
		Horizon Ventures Fund		-		Financial assets carried at cost			-				103,992				12				103,992
		Crimson Asia Capital		-		”			-				55,259				1				55,259
		Capital
		TSMC China		Subsidiary		Investments accounted for using equity method			-				5,198,868				100				5,230,389
		VTAF III		Subsidiary		”			-				2,587,484				99				2,567,506
		VTAF II		Subsidiary		”			-				1,015,748				98				1,009,979
		Emerging Alliance		Subsidiary		”			-				277,059				99				277,059
TSMC Partners		Corporate bond
		General Elec Cap Corp. Mtn		-		Held-to-maturity financial assets			-			US$	20,150				N/A			US$	20,650
		General Elec Cap Corp. Mtn		-		”			-			US$	20,101				N/A			US$	21,176

(Continued)

 

- 47 -

---

Held Company  Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		June 30, 2011														Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)		Market Value or Net Asset Value (Foreign Currencies in Thousands)
TSMC Partners		Common stock
		TSMC Development, Inc. (TSMC Development)		Subsidiary		Investments accounted for using equity method			1			US$	436,801			100		US$	436,801
		VisEra Holding Company		Investee accounted for using equity method		”			43,000			US$	90,180			49		US$	90,180
		InveStar Semiconductor Development Fund, Inc. (ISDF)		Subsidiary		”			787			US$	14,191			97		US$	14,191
		InveStar Semiconductor Development Fund, Inc. (II) LDC. (ISDF II)		Subsidiary		”			14,153			US$	10,781			97		US$	10,781
		TSMC Technology		Subsidiary		”			1			US$	10,271			100		US$	10,271
		TSMC Canada		Subsidiary		”			2,300			US$	4,010			100		US$	4,010
		Mcube Inc.		Investee accounted for using equity method		”			5,333				-			83			-
		Preferred stock
		Mcube Inc.		Investee accounted for using equity method		Investments accounted for using equity method			1,000				-			6			-
		Fund
		Walden Venture Capital Enterprise		-		Financial assets carried at cost			-			US$	5,000			8		US$	5,000
TSMC Development		Corporate bond
		GE Capital Corp.		-		Held-to-maturity financial assets			-			US$	20,154			N/A		US$	21,176
		JP Morgan Chase & Co.		-		”			-			US$	15,000			N/A		US$	15,070
		Stock
		WaferTech		Subsidiary		Investments accounted for using equity method			293,640			US$	197,757			100		US$	197,757
Emerging Alliance		Common stock
		RichWave Technology Corp.		-		Financial assets carried at cost			4,074			US$	1,545			10		US$	1,545
		Global Investment Holding Inc.		-		”			11,124			US$	3,065			6		US$	3,065
		Preferred stock
		Audience, Inc.		-		Financial assets carried at cost			1,654			US$	250			-		US$	250
		Next IO, Inc.		-		”			8			US$	500			-		US$	500
		Pixim, Inc.		-		”			4,641			US$	1,137			2		US$	1,137
		QST Holdings, LLC		-		”			-			US$	142			4		US$	142
		Capital
		VentureTech Alliance Holdings, LLC (VTA Holdings)		Subsidiary		Investments accounted for using equity method			-				-			7			-
VTAF II		Common stock
		Aether Systems, Inc.		-		Financial assets carried at cost			1,600			US$	1,503			25		US$	1,503
		RichWave Technology Corp.		-		”			1,267			US$	1,036			3		US$	1,036
		Sentelic		-		”			1,806			US$	2,607			9		US$	2,607
		Preferred stock
		5V Technologies, Inc.		-		Financial assets carried at cost			2,890			US$	2,168			4		US$	2,168
		Aquantia		-		”			4,556			US$	4,316			3		US$	4,316
		Audience, Inc.		-		”			12,378			US$	2,378			3		US$	2,378
		Impinj, Inc.		-		”			475			US$	1,000			-		US$	1,000
		Next IO, Inc.		-		”			132			US$	1,110			2		US$	1,110
		Pixim, Inc.		-		”			33,347			US$	1,878			2		US$	1,878
		Power Analog Microelectronics		-		”			7,027			US$	3,383			19		US$	3,383
		QST Holdings, LLC		-		”			-			US$	593			13		US$	593
		Xceive		-		”			4,615			US$	1,611			3		US$	1,611

(Continued)

 

- 48 -

---

Held  Company Name		Marketable Securities Type and Name		Relationship with the Company		Financial Statement Account		June 30, 2011																Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)				Market Value or Net Asset Value (Foreign Currencies in Thousands)
VTAF II		Capital
		VTA Holdings		Subsidiary		Investments accounted for using equity method			-			$	-				31			$	-
VTAF III		Common stock
		Mutual-Pak Technology Co., Ltd.		Subsidiary		Investments accounted for using equity method			11,868			US$	1,687				57			US$	1,687
		Accton Wireless Broadband Corp.		-		Financial assets carried at cost			2,249			US$	315				6			US$	315
		Preferred stock
		BridgeLux, Inc.		-		Financial assets carried at cost			6,771			US$	8,745				4			US$	8,745
		Exclara, Inc.		-		”			59,695			US$	5,897				15			US$	5,897
		GTBF, Inc.		-		”			1,154			US$	1,500				N/A			US$	1,500
		InvenSense, Inc.		-		”			816			US$	1,000				1			US$	1,000
		LiquidLeds Lighting Corp.		-		”			1,600			US$	800				11			US$	800
		Neoconix, Inc.		-		”			3,801			US$	4,748				4			US$	4,748
		Powervation, Ltd.		-		”			380			US$	5,797				16			US$	5,797
		Silicon Technical Services, LLC		-		”			1,055			US$	1,208				-			US$	1,208
		Stion Corp.		-		”			7,347			US$	50,000				23			US$	50,000
		Tilera, Inc.		-		”			3,890			US$	3,025				2			US$	3,025
		Validity Sensors, Inc.		-		”			9,340			US$	3,456				4			US$	3,456
		Capital
		Growth Fund Limited (Growth Fund)		Subsidiary		Investments accounted for using equity method			-			US$	825				100			US$	825
		VTA Holdings		Subsidiary		”			-				-				62				-
Growth Fund		Common stock
		SiliconBlue Technologies, Inc.		-		Financial assets carried at cost			5,107			US$	762				1			US$	762
		Veebeam		-		”			10			US$	25				-			US$	25
ISDF		Common stock
		Integrated Memory Logic, Inc.		-		Available-for-sale financial assets			2,977			US$	11,971				4			US$	11,971
		Memsic, Inc.		-		”			1,286			US$	4,397				5			US$	4,397
		Preferred stock
		Sonics, Inc.		-		Financial assets carried at cost			230			US$	497				2			US$	497
ISDF II		Common stock
		Memsic, Inc.		-		Available-for-sale financial assets			1,072			US$	3,666				5			US$	3,666
		Alchip Technologies Limited		-		Financial assets carried at cost			7,520			US$	3,664				14			US$	3,664
		Sonics, Inc.		-		”			278			US$	10				3			US$	10
		Goyatek Technology, Corp.		-		”			932			US$	361				6			US$	361
		Auden Technology MFG. Co., Ltd.		-		”			1,049			US$	223				3			US$	223
		Preferred stock
		FangTek, Inc.		-		Financial assets carried at cost			1,032			US$	148				6			US$	148
		Sonics, Inc.		-		”			264			US$	455				3			US$	455
GUC		Open-end mutual fund
		Jhi Sun Money Market Fund		-		Available-for-sale financial assets			9,875			$	140,307				-			$	140,307
		Mega Diamond Money Market Fund		-		”			10,009				120,305				-				120,305
		PCA Well Pool Money Market Fund		-		”			6,141				80,205				-				80,205
		Capital Money Market Fund		-		”			3,873				60,043				-				60,043
		Hua Nan Phoenix Money Market Fund		-		”			3,194				50,036				-				50,036

(Continued)

 

- 49 -

---

Held Company Name		Marketable Securities Type  and Name		Relationship with the  Company		Financial Statement  Account		June 30, 2011																Note
								Shares/Units (In Thousands)				Carrying Value (Foreign Currencies in Thousands)				Percentage of Ownership (%)				Market Value or Net Asset Value (Foreign Currencies in Thousands)
GUC		Common stock
		GUC-NA		Subsidiary		Investments accounted for using equity method			800			$	61,706				100			$	61,706
		GUC-Japan		Subsidiary		”			1				15,129				100				15,129
		GUC-BVI		Subsidiary		”			550				8,684				100				8,684
		GUC-Europe		Subsidiary		”			-				3,746				100				3,746
GUC-BVI		Capital
		Global Unichip (Shanghai) Company, Limited (GUC-Shanghai)		Subsidiary		Investments accounted for using equity method			-				7,430				100				7,430
Xintec		Capital
		Compositech Ltd.		-		Financial assets carried at cost			587				-				3				-
TSMC Solar Europe		Stock
		TSMC Solar Europe GmbH		Subsidiary		Investments accounted for using equity method			1			EUR	9,263				100			EUR	9,263
TSMC Global		Corporate bond
		Aust + Nz Banking Group		-		Held-to-maturity financial assets			20,000			US$	20,000				N/A			US$	20,003
		Commonwealth Bank of Australia		-		”			25,000			US$	25,000				N/A			US$	24,835
		Commonwealth Bank of Australia		-		”			25,000			US$	25,000				N/A			US$	25,021
		JP Morgan Chase + Co.		-		”			35,000			US$	35,052				N/A			US$	35,016
		Nationwide Building Society-UK Government Guarantee		-		”			8,000			US$	8,000				N/A			US$	8,006
		Westpac Banking Corp.		-		”			25,000			US$	25,000				N/A			US$	24,709
		Westpac Banking Corp. 12/12 Frn		-		”			5,000			US$	5,000				N/A			US$	5,012
		Government bond
		Societe De Financement De Lec		-		Held-to-maturity financial assets			15,000			US$	15,000				N/A			US$	15,022
		Money market fund
		Ssga Cash Mgmt Global Offshore		-		Available-for-sale financial assets			333			US$	333				N/A			US$	333

(Concluded)

 

- 50 -

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TABLE 3

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

MARKETABLE SECURITIES ACQUIRED AND DISPOSED OF AT COSTS OR PRICES OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL

FOR THE SIX MONTHS ENDED JUNE 30, 2011

(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)

 

 

Company Name		Marketable Securities Type  and Name		Financial  Statement Account		Counter-party		Nature of Relationship		Beginning Balance								Acquisition								Disposal (Note 2)																Ending Balance (Note 3)
										Shares/Units (In Thousands)				Amount (Foreign Currencies in Thousands)				Shares/Units (In Thousands) (Note 1)				Amount (Foreign Currencies in Thousands)				Shares/Units (In Thousands)				Amount (Foreign Currencies in Thousands)				Carrying Value (Foreign Currencies  in Thousands)				Gain (Loss) or Disposal (Foreign Currencies in Thousands)				Shares/Units (In Thousands)				Amount (Foreign Currencies in Thousands)
TSMC		Stock
		TSMC Soalr Europe		Investments accounted for using equity method		-		Subsidiary			-			$	23,971				-			$	385,682				-			$	-			$	-			$	-				-			$	391,148
TSMC Solar		Stock
Europe		TSMC Solar Europe GmbH		Investments accounted for using equity method		-		Subsidiary			1			EUR	90				-			EUR	9,800				-				-				-				-				1			EUR	9,263
GUC		Open-end mutual fund
		Jhi Sun Money Market Fund		Available-for-sale financial assets		Jih Sun Investment Trust Co., Ltd.		-			-				-				9,875				140,000				-				-				-				-				9,875				140,307
		Mega Diamond Money Market Fund		”		Mega Investment International Trust Co., Ltd.		-			-				-				10,009				120,000				-				-				-				-				10,009				120,305
		Hua Nan Phoenix Money Market Fund		”		Hua Nan Investment Trust Corp.		-			-				-				6,393				100,000				3,199				50,053				50,000				53				3,194				50,036
TSMC Global		Corporate bond
		Allstate Life Gbl Fdg Secd		Available-for-sale financial assets		-		-			4,430			US$	4,824				-				-				4,430			US$	4,787			US$	4,834			US$	(47	)			-				-
		American Honda Fin Corp. Mtn		”		-		-			4,000			US$	3,995				-				-				4,000			US$	4,005			US$	3,985			US$	20				-				-
		Anz National Intl Ltd.		”		-		-			3,500			US$	3,554				-				-				3,500			US$	3,555			US$	3,515			US$	40				-				-
		Archer Daniels Midland Co.		”		-		-			-				-				7,000			US$	7,000				7,000			US$	7,010			US$	7,000			US$	10				-				-
		Astrazeneca Plc		”		-		-			3,150			US$	3,397				-				-				3,150			US$	3,356			US$	3,456			US$	(100	)			-				-
		AT+T Wireless		”		-		-			3,500			US$	3,823				-				-				3,500			US$	3,762			US$	3,979			US$	(217	)			-				-
		Banco Bilbao Vizcaya P R		”		-		-			3,250			US$	3,249				-				-				3,250			US$	3,251			US$	3,250			US$	1				-				-
		Bank of Nova Scotia		”		-		-			5,000			US$	5,000				-				-				5,000			US$	5,012			US$	5,000			US$	12				-				-
		Barclays Bank Plc		”		-		-			12,000			US$	11,997				-				-				12,000			US$	12,022			US$	12,035			US$	(13	)			-				-
		Barclays Bk Plc UK Govt Cr		”		-		-			-				-				5,000			US$	5,108				5,000			US$	5,099			US$	5,108			US$	(9	)			-				-
		Bb+T Corporation		”		-		-			-				-				3,840			US$	3,990				3,840			US$	3,977			US$	3,990			US$	(13	)			-				-
		Bear Stearns Cos Inc.		”		-		-			3,500			US$	3,494				-				-				3,500			US$	3,465			US$	3,360			US$	105				-				-
		Berkshire Hathaway Inc. Del		”		-		-			3,500			US$	3,517				-				-				3,500			US$	3,521			US$	3,500			US$	21				-				-
		Bhp Billiton Fin USA Ltd.		”		-		-			-				-				4,000			US$	4,443				4,000			US$	4,447			US$	4,443			US$	4				-				-
		Bnp Paribas SA		”		-		-			3,810			US$	3,844				-				-				3,810			US$	3,838			US$	3,844			US$	(6	)			-				-
		Boeing Cap Corp.		”		-		-			2,925			US$	3,192				-				-				2,925			US$	3,180			US$	3,235			US$	(55	)			-				-
		Bp Capital Markets Plc		”		-		-			3,900			US$	3,988				-				-				3,900			US$	3,992			US$	3,969			US$	23				-				-
		Bp Capital Markets Plc		”		-		-			-				-				7,160			US$	7,160				7,160			US$	7,201			US$	7,160			US$	41				-				-
		Chevron Corp.		”		-		-			-				-				4,000			US$	4,305				4,000			US$	4,286			US$	4,305			US$	(19	)			-				-
		Cie Financement Foncier		”		-		-			4,000			US$	4,019				-				-				4,000			US$	4,034			US$	4,029			US$	5				-				-
		Cisco Systems Inc.		”		-		-			-				-				7,050			US$	7,050				7,050			US$	7,073			US$	7,050			US$	23				-				-
		Citigroup Funding Inc.		”		-		-			16,000			US$	16,323				-				-				16,000			US$	16,337			US$	16,262			US$	75				-				-
		Citigroup Funding Inc.		”		-		-			7,300			US$	7,446				-				-				7,300			US$	7,440			US$	7,448			US$	(8	)			-				-
		Citigroup Inc.		”		-		-			5,000			US$	5,490				-				-				5,000			US$	5,478			US$	5,360			US$	118				-				-
		Coca Cola Co.		”		-		-			4,000			US$	4,002				-				-				4,000			US$	4,003			US$	4,000			US$	3				-				-

(Continued)

 

- 51 -

---

Company Name		Marketable Securities Type and Name		Financial Statement Account		Counter-party		Nature of Relationship		Beginning Balance								Acquisition								Disposal (Note 2)																Ending Balance (Note 3)
										Shares/Units (In Thousands)				Amount (Foreign Currencies in Thousands)				Shares/Units (In Thousands) (Note 1)				Amount (Foreign Currencies in Thousands)				Shares/Units (In Thousands)				Amount (Foreign Currencies in Thousands)				Carrying Value (Foreign Currencies in Thousands)				Gain (Loss) or Disposal (Foreign Currencies in Thousands)				Shares/Units (In Thousands)				Amount (Foreign Currencies in Thousands)
TSMC Global		Countrywide Finl Corp.		Available-for-sale financial assets		-		-			4,000			US$	4,208				-			US$	-				4,000			US$	4,221			US$	4,291			US$	(70	)			-			US$	-
		Credit Suisse New York		”		-		-			3,945			US$	4,090				-				-				3,945			US$	4,069			US$	4,073			US$	(4	)			-				-
		Credit Suisse New York		”		-		-			-				-				3,200			US$	3,200				3,200			US$	3,238			US$	3,200			US$	38				-				-
		Dexia Credit Local		”		-		-			6,000			US$	5,976				-				-				6,000			US$	5,983			US$	6,000			US$	(17	)			-				-
		Dexia Credit Local		”		-		-			4,000			US$	3,984				-				-				4,000			US$	3,927			US$	4,000			US$	(73	)			-				-
		Dexia Credit Local S.A		”		-		-			4,000			US$	3,992				-				-				4,000			US$	3,976			US$	4,000			US$	(24	)			-				-
		Dexia Credit Local SA NY		”		-		-			5,000			US$	4,983				-				-				5,000			US$	4,952			US$	5,000			US$	(48	)			-				-
		Finance for Danish Ind		”		-		-			3,800			US$	3,799				-				-				3,800			US$	3,808			US$	3,801			US$	7				-				-
		General Elec Cap Corp.		”		-		-			7,000			US$	7,002				-				-				7,000			US$	7,005			US$	7,002			US$	3				-				-
		General Elec Cap Corp.		”		-		-			4,000			US$	4,110				-				-				4,000			US$	4,095			US$	4,117			US$	(22	)			-				-
		General Elec Cap Corp.		”		-		-			-				-				5,000			US$	5,000				5,000			US$	5,037			US$	5,000			US$	37				-				-
		Georgia Pwr Co.		”		-		-			4,000			US$	4,006				-				-				4,000			US$	4,002			US$	4,024			US$	(22	)			-				-
		Gmac LLC		”		-		-			4,600			US$	4,731				-				-				4,600			US$	4,715			US$	4,726			US$	(11	)			-				-
		Goldman Sachs Group Inc.		”		-		-			-				-				3,400			US$	3,400				3,400			US$	3,425			US$	3,400			US$	25				-				-
		Hewlett Packard Co.		”		-		-			3,000			US$	3,003				-				-				3,000			US$	3,004			US$	2,995			US$	9				-				-
		Household Fin Corp.		”		-		-			4,330			US$	4,694				-				-				4,330			US$	4,662			US$	4,781			US$	(119	)			-				-
		HSBC Bank Plc		”		-		-			3,400			US$	3,405				-				-				3,400			US$	3,407			US$	3,407				-				-				-
		HSBC Fin Corp.		”		-		-			2,900			US$	3,074				-				-				2,900			US$	3,074			US$	3,142			US$	(68	)			-				-
		IBM Corp.		”		-		-			6,800			US$	6,775				-				-				6,800			US$	6,781			US$	6,772			US$	9				-				-
		Inc Bk Nv Neth St Cr Gtee		”		-		-			-				-				8,500			US$	8,668				8,500			US$	8,655			US$	8,668			US$	(13	)			-				-
		John Deer Capital Corp. Fdic GT		”		-		-			3,500			US$	3,616				-				-				3,500			US$	3,601			US$	3,634			US$	(33	)			-				-
		JP Morgan Chase + Co.		”		-		-			5,000			US$	5,021				-				-				5,000			US$	5,032			US$	5,000			US$	32				-				-
		Lloyds Tsb Bank Plc Ser 144A		”		-		-			5,950			US$	6,009				-				-				5,950			US$	6,007			US$	6,077			US$	(70	)			-				-
		Macquarie Bk Ltd. Sr		”		-		-			3,900			US$	3,975				9,300			US$	9,472				13,200			US$	13,423			US$	13,455			US$	(32	)			-				-
		Massmutual Global Fdg II Mediu		”		-		-			4,000			US$	3,955				-				-				4,000			US$	3,991			US$	3,926			US$	65				-				-
		Mellon Fdg Corp.		”		-		-			3,500			US$	3,475				-				-				3,500			US$	3,479			US$	3,404			US$	75				-				-
		Merck + Co. Inc.		”		-		-			4,000			US$	4,032				-				-				4,000			US$	4,013			US$	4,066			US$	(53	)			-				-
		Merrill Lynch + Co. Inc.		”		-		-			4,691			US$	4,647				-				-				4,691			US$	4,669			US$	4,603			US$	66				-				-
		Merrill Lynch + Co. Inc.		”		-		-			-				-				4,000			US$	4,335				4,000			US$	4,319			US$	4,335			US$	(16	)			-				-
		Met Life Glob Funding I		”		-		-			-				-				3,000			US$	3,000				3,000			US$	3,004			US$	3,000			US$	4				-				-
		Metlife Inc.		”		-		-			6,500			US$	6,600				-				-				6,500			US$	6,584			US$	6,527			US$	57				-				-
		Microsoft Corp.		”		-		-			3,250			US$	3,232				-				-				3,250			US$	3,224			US$	3,249			US$	(25	)			-				-
		Morgan Stanley		”		-		-			-				-				9,000			US$	9,000				9,000			US$	9,140			US$	9,000			US$	140				-				-
		Morgan Stanley Dean Witter		”		-		-			8,000			US$	8,524				-				-				8,000			US$	8,513			US$	8,797			US$	(284	)			-				-
		National Australia Bank		”		-		-			-				-				3,000			US$	3,035				3,000			US$	3,040			US$	3,034			US$	6				-				-
		Pepsiamericas Inc.		”		-		-			-				-				4,000			US$	4,329				4,000			US$	4,308			US$	4,329			US$	(21	)			-				-
		Philip Morris Intl Inc.		”		-		-			-				-				4,000			US$	4,640				4,000			US$	4,591			US$	4,640			US$	(49	)			-				-
		Princoa Global Fdg I Medium		”		-		-			5,050			US$	5,011				-				-				5,050			US$	5,042			US$	4,921			US$	121				-				-
		Rabobank Nederland		”		-		-			5,000			US$	5,000				-				-				5,000			US$	5,000			US$	4,997			US$	3				-				-
		Royal Bk of Scotland Plc		”		-		-			5,000			US$	5,052				-				-				5,000			US$	5,045			US$	5,106			US$	(61	)			-				-
		Royal Bk Scotlnd Grp Plc 144A		”		-		-			9,450			US$	9,516				-				-				9,450			US$	9,517			US$	9,596			US$	(79	)			-				-
		Sanofi Aventis		”		-		-			-				-				4,000			US$	4,000				4,000			US$	4,003			US$	4,000			US$	3				-				-
		Sanofi Aventis		”		-		-			-				-				3,870			US$	3,870				3,870			US$	3,884			US$	3,870			US$	14				-				-
		Shell International Fin		”		-		-			4,515			US$	4,536				-				-				4,515			US$	4,533			US$	4,527			US$	6				-				-
		Shell International Fin		”		-		-			3,200			US$	3,248				-				-				3,200			US$	3,256			US$	3,227			US$	29				-				-
		Standard Chartered BK NY		”		-		-			-				-				3,000			US$	3,000				3,000			US$	3,001			US$	3,000			US$	1				-				-
		State Str Corp.		”		-		-			6,420			US$	6,417				-				-				6,420			US$	6,423			US$	6,382			US$	41				-				-
		Sun Life Finl Global		”		-		-			4,400			US$	4,332				-				-				4,400			US$	4,351			US$	4,304			US$	47				-				-
		Suncorp Metway Ltd.		”		-		-			8,800			US$	8,982				-				-				8,800			US$	8,937			US$	9,125			US$	(188	)			-				-
		Swedbank Hypotek AB		”		-		-			4,000			US$	3,993				-				-				4,000			US$	3,998			US$	4,002			US$	(4	)			-				-
		Swedbank Hypotek AB		”		-		-			-				-				4,100			US$	4,100				4,100			US$	4,086			US$	4,100			US$	(14	)			-				-

(Continued)

 

- 52 -

---

Company Name		Marketable Securities Type and Name		Financial Statement Account		Counter-party		Nature of Relationship		Beginning Balance								Acquisition								Disposal (Note 2)																Ending Balance (Note 3)
										Shares/Units (In Thousands)				Amount (Foreign Currencies in Thousands)				Shares/Units (In Thousands) (Note 1)				Amount (Foreign Currencies in Thousands)				Shares/Units (In Thousands)				Amount (Foreign Currencies in Thousands)				Carrying Value (Foreign Currencies in Thousands)				Gain (Loss) or Disposal (Foreign Currencies in Thousands)				Shares/Units (In Thousands)				Amount (Foreign Currencies in Thousands)
TSMC Global		Teva Pharm Fin III		Available-for-sale financial assets		-		-			-			US$	-				4,000			US$	4,000				4,000			US$	4,019			US$	4,000			US$	19				-			US$	-
		Teva Pharma Fin III LLC		”		-		-			4,000			US$	4,016				-				-				4,000			US$	4,011			US$	4,000			US$	11				-				-
		Total Capital Canada Ltd.		”		-		-			-				-				4,000			US$	4,000				4,000			US$	4,013			US$	4,000			US$	13				-				-
		United Technologies Corp.		”		-		-			-				-				4,000			US$	4,265				4,000			US$	4,244			US$	4,266			US$	(22	)			-				-
		US Central Federal Cred		”		-		-			4,000			US$	4,084				4,500			US$	4,599				8,500			US$	8,664			US$	8,692			US$	(28	)			-				-
		Verizon Communications		”		-		-			-				-				7,725			US$	7,725				7,725			US$	7,785			US$	7,725			US$	60				-				-
		Virginia Elec + Pwr Co.		”		-		-			-				-				3,250			US$	3,489				3,250			US$	3,461			US$	3,489			US$	(28	)			-				-
		Volkswagen Intl Fin NV		”		-		-			-				-				4,000			US$	4,000				4,000			US$	4,010			US$	4,000			US$	10				-				-
		Wachovia Corp. Global Medium		”		-		-			5,000			US$	5,141				-				-				5,000			US$	5,142			US$	5,138			US$	4				-				-
		Wal Mart Stores Inc.		”		-		-			4,000			US$	3,964				-				-				4,000			US$	3,968			US$	3,986			US$	(18	)			-				-
		Wal Mart Stores Inc.		”		-		-			3,770			US$	4,325				-				-				3,770			US$	4,261			US$	4,383			US$	(122	)			-				-
		Westpac Banking Corp.		”		-		-			3,500			US$	3,514				-				-				3,500			US$	3,511			US$	3,500			US$	11				-				-
		Westpac Banking Corp.		”		-		-			4,000			US$	4,005				-				-				4,000			US$	4,022			US$	4,044			US$	(22	)			-				-
		Wyeth		”		-		-			3,345			US$	3,657				638			US$	697				3,983			US$	4,325			US$	4,397			US$	(72	)			-				-
		Government bond
		US Treasury N/B		Available-for-sale financial assets		-		-			41,700			US$	42,042				-				-				41,700			US$	42,042			US$	41,729			US$	313				-				-
		US Treasury N/B		”		-		-			11,100			US$	10,976				-				-				11,100			US$	10,941			US$	11,084			US$	(143	)			-				-
		US Treasury N/B		”		-		-			7,000			US$	7,079				-				-				7,000			US$	7,077			US$	7,078			US$	(1	)			-				-
		US Treasury N/B		”		-		-			5,250			US$	5,212				30,175			US$	29,906				35,425			US$	35,154			US$	35,101			US$	53				-				-
		US Treasury N/B		”		-		-			-				-				19,900			US$	19,872				19,900			US$	19,888			US$	19,872			US$	16				-				-
		US Treasury N/B		”		-		-			-				-				10,000			US$	10,084				10,000			US$	10,073			US$	10,084			US$	(11	)			-				-
		US Treasury N/B		”		-		-			-				-				10,000			US$	10,042				10,000			US$	10,046			US$	10,042			US$	4				-				-
		US Treasury N/B		”		-		-			-				-				10,000			US$	10,024				10,000			US$	10,035			US$	10,024			US$	11				-				-
		US Treasury N/B		”		-		-			-				-				10,000			US$	9,988				10,000			US$	9,990			US$	9,988			US$	2				-				-
		US Treasury N/B		”		-		-			-				-				3,300			US$	3,301				3,300			US$	3,298			US$	3,301			US$	(3	)			-				-
		Agency bond
		Fannie Mae		Available-for-sale financial assets		-		-			16,104			US$	16,102				-				-				16,104			US$	16,116			US$	16,098			US$	18				-				-
		Fannie Mae		”		-		-			11,100			US$	11,096				-				-				11,100			US$	11,109			US$	11,096			US$	13				-				-
		Fannie Mae		”		-		-			8,765			US$	8,763				11,500			US$	11,503				20,265			US$	20,280			US$	20,262			US$	18				-				-
		Fannie Mae		”		-		-			4,600			US$	4,589				-				-				4,600			US$	4,606			US$	4,598			US$	8				-				-
		Fannie Mae		”		-		-			3,900			US$	3,861				-				-				3,900			US$	3,851			US$	3,899			US$	(48	)			-				-
		Fannie Mae		”		-		-			3,000			US$	2,994				-				-				3,000			US$	3,000			US$	3,009			US$	(9	)			-				-
		Fannie Mae		”		-		-			-				-				20,300			US$	20,269				20,300			US$	20,301			US$	20,269			US$	32				-				-
		Fannie Mae		”		-		-			-				-				11,045			US$	12,104				11,045			US$	12,044			US$	12,104			US$	(60	)			-				-
		Fannie Mae		”		-		-			-				-				7,500			US$	7,500				7,500			US$	7,508			US$	7,500			US$	8				-				-
		Fannie Mae		”		-		-			-				-				3,000			US$	3,000				3,000			US$	3,008			US$	3,000			US$	8				-				-
		Federal Farm Credit Bank		”		-		-			4,000			US$	3,994				-				-				4,000			US$	4,002			US$	3,995			US$	7				-				-
		Federal Farm Credit Bank		”		-		-			4,000			US$	3,984				-				-				4,000			US$	3,986			US$	3,998			US$	(12	)			-				-
		Federal Farm Credit Bank		”		-		-			-				-				4,000			US$	4,002				4,000			US$	4,003			US$	4,002			US$	1				-				-
		Federal Home Loan Bank		”		-		-			5,000			US$	5,007				-				-				5,000			US$	5,007			US$	5,009			US$	(2	)			-				-
		Federal Home Loan Bank		”		-		-			6,800			US$	6,817				-				-				6,800			US$	6,817			US$	6,811			US$	6				-				-
		Federal Home Loan Bank		”		-		-			8,000			US$	8,040				-				-				8,000			US$	8,033			US$	7,990			US$	43				-				-
		Federal Home Loan Bank		”		-		-			10,000			US$	9,998				-				-				10,000			US$	10,001			US$	9,985			US$	16				-				-
		Federal Home Loan Bank		”		-		-			8,400			US$	8,397				-				-				8,400			US$	8,400			US$	8,399			US$	1				-				-
		Federal Home Ln Bks		”		-		-			5,000			US$	5,046				-				-				5,000			US$	5,043			US$	5,098			US$	(55	)			-				-
		Federal Home Ln Mtg Corp.		”		-		-			3,732			US$	3,727				-				-				3,340			US$	3,340			US$	3,341			US$	(1	)			-				-
		Federal Home Ln Mtg Corp.		”		-		-			3,324			US$	3,453				-				-				3,161			US$	3,288			US$	3,360			US$	(72	)			-				-

(Continued)

 

- 53 -

---

Company Name		Marketable Securities Type and Name		Financial Statement Account		Counter-party		Nature of Relationship		Beginning Balance								Acquisition								Disposal (Note 2)																Ending Balance (Note 3)
										Shares/Units (In Thousands)				Amount (Foreign Currencies in Thousands)				Shares/Units (In Thousands) (Note 1)				Amount (Foreign Currencies in Thousands)				Shares/Units (In Thousands)				Amount (Foreign Currencies in Thousands)				Carrying Value (Foreign Currencies in Thousands)				Gain (Loss) or Disposal (Foreign Currencies in Thousands)				Shares/Units (In Thousands)				Amount (Foreign Currencies in Thousands)
TSMC Global		Federal Home Loan Mtg Corp.		Available-for-sale financial assets		-		-			5,183			US$	5,168				-			US$	-				4,634			US$	4,634			US$	4,632			US$	2				-			US$	-
		Fhr 2953 Da		”		-		-			3,284			US$	3,466				-				-				2,846			US$	3,028			US$	2,993			US$	35				-				-
		Fhr 3184 Fa		”		-		-			4,096			US$	4,084				-				-				3,810			US$	3,807			US$	3,806			US$	1				-				-
		Fnma Tba Jan 15 Single Fam		”		-		-			-				-				3,000			US$	3,147				3,000			US$	3,142			US$	3,147			US$	(5	)			-				-
		Fnma Tba Feb 15 Single Fam		”		-		-			-				-				3,000			US$	3,138				3,000			US$	3,117			US$	3,138			US$	(21	)			-				-
		Fnma Tba Mar 15 Single Fam		”		-		-			-				-				3,000			US$	3,110				3,000			US$	3,140			US$	3,110			US$	30				-				-
		Fnma Tba Apr 15 Single Fam		”		-		-			-				-				3,000			US$	3,131				3,000			US$	3,164			US$	3,131			US$	33				-				-
		Fnr 2006 60 CO		”		-		-			3,485			US$	3,483				-				-				3,274			US$	3,274			US$	3,272			US$	2				-				-
		Fnr 2009 116 A		”		-		-			4,271			US$	4,640				-				-				3,841			US$	4,137			US$	4,122			US$	15				-				-
		Freddie Mac		”		-		-			5,750			US$	5,764				-				-				5,750			US$	5,761			US$	5,771			US$	(10	)			-				-
		Freddie Mac		”		-		-			4,300			US$	4,316				-				-				4,300			US$	4,312			US$	4,308			US$	4				-				-
		Freddie Mac		”		-		-			10,420			US$	10,411				-				-				10,420			US$	10,414			US$	10,412			US$	2				-				-
		Freddie Mac		”		-		-			-				-				19,000			US$	18,981				19,000			US$	18,986			US$	18,981			US$	5				-				-
		Freddie Mac		”		-		-			-				-				3,550			US$	3,549				3,550			US$	3,553			US$	3,549			US$	4				-				-
		Freddie Mac		”		-		-			-				-				14,200			US$	14,196				14,200			US$	14,204			US$	14,196			US$	8				-				-
		Gnr 2009 45 AB		”		-		-			4,417			US$	4,496				-				-				3,082			US$	3,129			US$	3,215			US$	(86	)			-				-
		Government Natl Mtg Assn		”		-		-			3,050			US$	3,285				-				-				3,050			US$	3,202			US$	3,278			US$	(76	)			-				-
		Ngn 2010 R2 1A		”		-		-			3,732			US$	3,731				-				-				3,490			US$	3,492			US$	3,490			US$	2				-				-
		Ngn 2011 R4 1A		”		-		-			-				-				4,000			US$	4,000				3,914			US$	3,914			US$	3,914				-				-				-
		Money market fund
		Ssga Cash Mgmt Global Offshore		Available-for-sale financial assets		-		-			12,387			US$	12,387				764,056			US$	764,056				776,110			US$	776,110			US$	776,110				-				333			US$	333

 

Note 1:

The shares/units and amount of marketable securities acquired do not include stock dividends from investees.

 

Note 2:

The data for marketable securities disposed exclude bonds maturities and redemption by the issuer.

 

Note 3:

The ending balance includes the amortization of premium/discount on bonds investments, unrealized valuation gains/losses on financial assets, translation adjustments, equity in earnings/losses of equity method investees and other adjustments to long-term investment using equity method.

(Concluded)

 

- 54 -

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TABLE 4

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

ACQUISITION OF INDIVIDUAL REAL ESTATE PROPERTIES AT COSTS OF AT LEAST NT$100 MILLION OR 20% OF THE PAID-IN CAPITAL

FOR THE SIX MONTHS ENDED JUNE 30, 2011

(Amounts in Thousands of New Taiwan Dollars)

 

 

Company Name

Types of Property

Transaction Date

Transaction Amount

Payment Term

Counter-party

Nature of Relationships

Prior Transaction of Related Counter-party

Price Reference

Purpose of Acquisition

Other Terms

Owner

Relationships

Transfer Date

Amount

TSMC

Fab

January 5, 2011 to     February 24, 2011

$

260,171

By the construction     progress

China Steel Structure Co., Ltd.

-

N/A

N/A

N/A

N/A

Public bidding

Manufacturing     purpose

None

Fab

January 7, 2011 to     June 28, 2011

109,337

By the construction     progress

Lead Fu Industrials Corp.

-

N/A

N/A

N/A

N/A

Public bidding

Manufacturing     purpose

None

Fab

January 27, 2011 to     June 27, 2011

473,947

By the construction     progress

Tasa Construction Corporation

-

N/A

N/A

N/A

N/A

Public bidding

Manufacturing     purpose

None

Fab

January 27, 2011 to     June 28, 2011

1,665,100

By the construction     progress

Da Cin Construction Co., Ltd.

-

N/A

N/A

N/A

N/A

Public bidding

Manufacturing     purpose

None

Fab

January 27, 2011 to     June 28, 2011

928,324

By the construction     progress

Fu Tsu Construction Co., Ltd.

-

N/A

N/A

N/A

N/A

Public bidding

Manufacturing     purpose

None

Fab

January 27, 2011 to     June 28, 2011

134,924

By the construction     progress

Edg Corporation Ltd.

-

N/A

N/A

N/A

N/A

Public bidding

Manufacturing     purpose

None

Fab

February 24, 2011 to     June 28, 2011

176,655

By the construction     progress

Yankey Engineering Co., Ltd.

-

N/A

N/A

N/A

N/A

Public bidding

Manufacturing     purpose

None

Xintec

Fab

February 17, 2011

1,050,000

Based on the     agreement

Vertex Precision Electronics Inc.

-

N/A

N/A

N/A

N/A

Pricing report

Manufacturing     purpose

None

 

- 55 -

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TABLE 5

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

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

FOR THE SIX MONTHS ENDED JUNE 30, 2011

(Amounts in Thousands of New Taiwan Dollars)

 

 

 

Company  Name		Related Party		Nature of Relationships		Transaction Details												Abnormal Transaction				Notes/Accounts Payable or Receivable								Note
						Purchases/ Sales		Amount				% to         Total				Payment Terms		Unit Price     (Note)		Payment Terms     (Note)		Ending Balance				% to     Total
TSMC		TSMC North America		Subsidiary		Sales		$	115,627,277				54			Net 30 days after invoice date		-		-		$	27,063,064				53
		GUC		Investee with a controlling     financial interest		Sales			1,158,302				1			Net 30 days after monthly closing		-		-			289,461				1
		VIS		Investee accounted for using     equity method		Sales			157,325				-			Net 30 days after monthly closing		-		-			-				-
		TSMC Solar Europe GmbH		Indirect subsidiary		Sales			148,898				-			Net 60 days after invoice date		-		-			49,185				-
		TSMC China		Subsidiary		Purchases			4,935,280				19			Net 30 days after monthly closing		-		-			(955,093	)			7
		WaferTech		Indirect subsidiary		Purchases			3,763,210				15			Net 30 days after monthly closing		-		-			(620,389	)			5
		VIS		Investee accounted for using     equity method		Purchases			2,829,238				11			Net 30 days after monthly closing		-		-			(1,087,485	)			8
		SSMC		Investee accounted for using     equity method		Purchases			1,994,243				8			Net 30 days after monthly closing		-		-			(440,314	)			3
		Motech		Investee accounted for using     equity method		Purchases			124,673				-			Net 30 days after monthly closing		-		-			-				-
GUC		TSMC North America		Same parent company		Purchases			296,462				20			Net 30 days after invoice date/net     30 days after monthly closing		-		-			(55,372	)			7
Xintec		OmniVision		Parent company of director     (represented for Xintec)		Sales			822,450				42			Net 30 days after monthly closing		-		-			170,622				36

 

Note:

The sales prices and payment terms to related parties were not significantly different from those of sales to third parties. For other related party transactions, prices and terms were determined in accordance with mutual agreements.

 

- 56 -

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TABLE 6

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

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

JUNE 30, 2011

(Amounts in Thousands of New Taiwan Dollars)

 

 

Company Name		Related Party		Nature of Relationships		Ending Balance				Turnover Days     (Note 1)		Overdue						Amounts Received in Subsequent Period				Allowance for Bad Debts
												Amounts				Action Taken
TSMC		TSMC North America		Subsidiary		$	27,078,019			42		$	8,406,618			-		$	11,121,720			$	-
		TSMC China		Subsidiary			1,979,030			(Note 2)			-			-			-				-
		VIS		Investee accounted for using equity method			512,256			(Note 2)			21,935			Accelerate demand on account receivable			20,944				-
		Motech		Investee accounted for using equity method			436,600			(Note 2)			-			-			-				-
		GUC		Investee with a controlling financial interest			432,404			35			-			-			-				-
Xintec		OmniVision		Parent company of director (represented for Xintec)			170,622			32			-			-			-				-

Note 1:     The calculation of turnover days excludes other receivables from related parties.

Note 2:     The ending balance primarily consisted of other receivables, which is not applicable for the calculation of turnover days.

 

- 57 -

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TABLE 7

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

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

JUNE 30, 2011

(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)

 

 

								Original Investment Amount								Balance as of June 30, 2011
Investor Company		Investee Company		Location		Main Businesses and Products		June 30, 2011 (Foreign Currencies in Thousands)				December 31, 2010 (Foreign Currencies in Thousands)				Shares (In Thousands)				Percentage of Ownership				Carrying Value (Foreign Currencies in Thousands)				Net Income (Losses) of the Investee (Foreign Currencies in Thousands)				Equity in the Earnings (Losses) (Note 1) (Foreign Currencies in Thousands)				Note
TSMC		TSMC Global		Tortola, British Virgin Islands		Investment activities		$	42,327,245			$	42,327,245				1				100			$	41,617,880			$	180,565			$	180,565			Subsidiary
		TSMC Partners		Tortola, British Virgin Islands		Investing in companies involved in the design, manufacture, and other related business in the semiconductor industry			31,456,130				31,456,130				988,268				100				32,657,501				844,360				844,360			Subsidiary
		VIS		Hsin-Chu, Taiwan		Research, design, development, manufacture, packaging, testing and sale of memory integrated circuits, LSI, VLSI and related parts			13,232,288				13,232,288				628,223				38				9,110,898				759,616				88,401			Investee accounted for using equity method
		Motech		Taipei, Taiwan		Manufacturing and sales of solar cells, crystalline silicon solar cell, and test and measurement instruments and design and construction of solar power systems			6,228,661				6,228,661				76,069				20				6,132,395				33,669				(155,363	)		Investee accounted for using equity method
		SSMC		Singapore		Fabrication and supply of integrated circuits			5,120,028				5,120,028				314				39				5,519,534				1,952,120				658,729			Investee accounted for using equity method
		TSMC China		Shanghai, China		Manufacturing and selling of integrated circuits at the order of and pursuant to product design specifications provided by customers			12,180,367				12,180,367				-				100				5,198,868				1,100,853				1,095,078			Subsidiary
		TSMC North America		San Jose, California, U.S.A.		Selling and marketing of integrated circuits and semiconductor devices			333,718				333,718				11,000				100				2,830,777				109,373				109,373			Subsidiary
		VTAF III		Cayman Islands		Investing in new start-up technology companies			3,604,425				3,565,441				-				99				2,587,484				(80,858	)			(79,308	)		Subsidiary
		Xintec		Taoyuan, Taiwan		Wafer level chip size packaging service			1,357,890				1,357,890				93,081				41				1,596,809				108,942				31,644			Investee with a controlling financial interest
		GUC		Hsin-Chu, Taiwan		Researching, developing, manufacturing, testing and marketing of integrated circuits			386,568				386,568				46,688				35				1,064,925				267,626				93,624			Investee with a controlling financial interest
		VTAF II		Cayman Islands		Investing in new start-up technology companies			1,166,470				1,166,470				-				98				1,015,748				91,555				89,723			Subsidiary
		TSMC Solar Europe		Amsterdam, the Netherlands		Investing in solar related business			411,032				25,350				-				100				391,148				(25,675	)			(25,675	)		Subsidiary (Note 3)
		Emerging Alliance		Cayman Islands		Investing in new start-up technology companies			971,785				971,785				-				99				277,059				(11,423	)			(11,366	)		Subsidiary (Note 3)
		TSMC Europe		Amsterdam, the Netherlands		Marketing and engineering supporting activities			15,749				15,749				-				100				201,892				18,767				18,767			Subsidiary (Note 3)
		TSMC Japan		Yokohama, Japan		Marketing activities			83,760				83,760				6				100				146,863				2,607				2,607			Subsidiary (Note 3)
		TSMC Solar NA		Delaware, U.S.A.		Selling and marketing of solar related products			147,686				60,962				1				100				83,704				(28,031	)			(28,031	)		Subsidiary (Note 3)
		TSMC Korea		Seoul, Korea		Customer service and technical supporting activities			13,656				13,656				80				100				22,622				1,737				1,737			Subsidiary (Note 3)
		TSMC Lighting NA		Delaware, U.S.A.		Selling and marketing of solid state lighting related products			3,133				3,133				1				100				2,872				(5	)			(5	)		Subsidiary (Note 3)
TSMC Partners		TSMC Development		Delaware, U.S.A.		Investment activities		US$	0.001			US$	0.001				1				100			US$	436,801			US$	33,545				Note 2			Subsidiary
		VisEra Holding Company		Cayman Islands		Investing in companies involved in the design, manufacturing, and other related businesses in the semiconductor industry		US$	43,000			US$	43,000				43,000				49			US$	90,180			US$	12,660				Note 2			Investee accounted for using equity method
		ISDF		Cayman Islands		Investing in new start-up technology companies		US$	787			US$	4,088				787				97			US$	14,191			US$	1,318				Note 2			Subsidiary
		ISDF II		Cayman Islands		Investing in new start-up technology companies		US$	14,153			US$	16,532				14,153				97			US$	10,781			US$	(536	)			Note 2			Subsidiary (Note 3)
		TSMC Technology		Delaware, U.S.A.		Engineering support activities		US$	0.001			US$	0.001				1				100			US$	10,271			US$	393				Note 2			Subsidiary (Note 3)
		TSMC Canada		Ontario, Canada		Engineering support activities		US$	2,300			US$	2,300				2,300				100			US$	4,010			US$	170				Note 2			Subsidiary (Note 3)

(Continued)

 

- 58 -

---

Investor  Company		Investee Company		Location		Main Businesses and Products		Original Investment Amount								Balance as of June 30, 2011
								June 30, 2011 (Foreign Currencies in Thousands)				December 31, 2010 (Foreign Currencies in Thousands)				Shares (In Thousands)				Percentage of Ownership				Carrying Value (Foreign Currencies in Thousands)				Net Income (Losses) of the Investee (Foreign Currencies in Thousands)				Equity in the Earnings (Losses) (Note 1) (Foreign Currencies in Thousands)				Note
TSMC Partners		Mcube Inc. (Common Stock)		Delaware, U.S.A.		Research, development, and sale of micro-semiconductor device		US$	800			US$	800				5,333				83			US$	-			US$	(6,750	)			Note 2			Investee accounted for using equity method (Note 3)
		Mcube Inc. (Preferred Stock)		Delaware, U.S.A.		Research, development, and sale of micro-semiconductor device		US$	1,000			US$	1,000				1,000				6				-			US$	(6,750	)			Note 2			Investee accounted for using equity method (Note 3)
TSMC Development		WaferTech		Washington, U.S.A.		Manufacturing, selling, testing and computer-aided designing of integrated circuits and other semiconductor devices		US$	280,000			US$	280,000				293,640				100			US$	197,757			US$	32,546				Note 2			Subsidiary
VTAF III		Mutual-Pak Technology Co., Ltd.		Taipei, Taiwan		Manufacturing and selling of electronic parts and researching, developing, and testing of RFID		US$	3,937			US$	3,937				11,868				57			US$	1,687			US$	(707	)			Note 2			Subsidiary (Note 3)
		Growth Fund		Cayman Islands		Investing in new start-up technology companies		US$	1,740			US$	1,700				-				100			US$	825			US$	(61	)			Note 2			Subsidiary (Note 3)
		VTA Holdings		Delaware, U.S.A.		Investing in new start-up technology companies			-				-				-				62				-				-				Note 2			Subsidiary (Note 3)
VTAF II		VTA Holdings		Delaware, U.S.A.		Investing in new start-up technology companies			-				-				-				31				-				-				Note 2			Subsidiary (Note 3)
GUC		GUC-NA		U.S.A.		Consulting services in main products		US$	1,256			US$	1,249				800				100			$	61,706			$	4,312				Note 2			Subsidiary
		GUC-Japan		Japan		Consulting services in main products		JPY	30,000			JPY	30,000				1				100				15,129				457				Note 2			Subsidiary (Note 3)
		GUC-BVI		British Virgin Islands		Investment activities		US$	550			US$	550				550				100				8,684				(128	)			Note 2			Subsidiary (Note 3)
		GUC-Europe		The Netherlands		Consulting services in main products		EUR	100			EUR	100				-				100				3,746				(257	)			Note 2			Subsidiary (Note 3)
GUC-BVI		GUC-Shanghai		Shanghai, China		Consulting services in main products		US$	500			US$	500				-				100				7,430				(105	)			Note 2			Subsidiary (Note 3)
Emerging Alliance		VTA Holdings		Delaware, U.S.A.		Investing in new start-up technology companies			-				-				-				7				-				-				Note 2			Subsidiary (Note 3)
TSMC Solar Europe		TSMC Solar Europe GmbH		Hamburg, Germany		Selling of solar related products and providing customer service		EUR	9,900			EUR	100				1				100			EUR		9,263		EUR	(637)				Note 2			Subsidiary (Note 3)

Note 1:     Equity in earnings/losses of investees include the effect of unrealized gross profit from affiliates.

Note 2:     The equity in the earnings/losses of the investee company is not reflected herein as such amount is already included in the equity in the earnings/losses of the investor company.

Note 3:     Equity in earnings/losses was determined based on the unaudited financial statements.

(Concluded)

 

- 59 -

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TABLE 8

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

INFORMATION OF INVESTMENT IN MAINLAND CHINA

FOR THE SIX MONTHS ENDED JUNE 30, 2011

(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)

 

 

Investor Company		Investee Company				Main Businesses and Products		Total Amount of Paid-in Capital (Thousand)				Method of Investment				Accumulated Outflow of Investment from Taiwan as of January 1, 2011 (US$ in Thousand)				Investment Flows								Accumulated Outflow of Investment from Taiwan as of June 30, 2011 (US$ in Thousand)				Percentage of Ownership				Equity in the Earnings (Losses)				Carrying Value as of June 30, 2011				Accumulated Inward Remittance of Earnings as of June 30, 2011
																				Outflow				Inflow
TSMC			TSMC China			Manufacturing and selling of     integrated circuits at the     order of and pursuant to     product design     specifications provided by     customers		$	12,180,367 (RMB 3,070,623	)			(Note 1	)		$ (US$	12,180,367 371,000	)		$	-			$	-			$ (US$	12,180,367 371,000	)			100	%		$	1,095,078 (Note 3	)		$	5,198,868			$	-
GUC			GUC-Shanghai			Consulting services in main     products		(US$	16,160 500	)			(Note 2	)		(US$	16,160 500	)			-				-			(US$	16,160 500	)			100	%			(105 (Note 4	)  )			7,430				-

 

Investor Company		Accumulated Investment in Mainland China as of June 30, 2011 (US$ in Thousand)				Investment Amounts Authorized by Investment Commission, MOEA (US$ in Thousand)				Upper Limit on Investment (US$ in Thousand)
TSMC		$ (US$	12,180,367 371,000	)		$ (US$	12,180,367 371,000	)		$ (US$	12,180,367 371,000	)
GUC		(US$	16,160 500	)		(US$	16,160 500	)			1,834,379 (Note 5	)

Note 1:   TSMC directly invested US$371,000 thousand in TSMC China.

Note 2:   GUC, TSMC’s investee with a controlling financial interest, indirectly invested in GUC-Shanghai through GUC-BVI.

Note 3:   Amount was recognized based on the audited financial statements.

Note 4:   Amount was determined based on the unaudited financial statements.

Note 5:   Subject to 60% of net asset value of GUC according to the revised “Guidelines Governing the Approval of Investment or Technical Cooperation in Mainland China” issued by the Investment Commission.

 

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TABLE 9

Taiwan Semiconductor Manufacturing Company Limited and Subsidiaries

INTERCOMPANY RELATIONSHIPS AND SIGNIFICANT INTERCOMPANY TRANSACTIONS

(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

 

 

A.	For the six months ended June 30, 2011

 

(Continued)

 

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No.		Company Name		Counter Party		Nature of         Relationship         (Note 1)		Intercompany Transactions
								Financial Statements Item		Amount				Terms     (Note 2)		Percentage of Consolidated Total Gross Sales or Total Assets
								Purchases		$	296,462			-		-
				TSMC North America		3		Manufacturing overhead			120,408			-		-
								Payables to related parties			55,372			-		-
								Operating expenses			61,369			-		-
1		GUC		GUC-NA		3		Manufacturing overhead			30,583			-		-
								Accrued expense			12,972			-		-
				GUC-Japan		3		Operating expenses			21,826			-		-
								Accrued expense			6,232			-		-
				GUC-Shanghai		3		Operating expenses			8,568			-		-
								Accrued expense			2,084			-		-
2		TSMC Partners		TSMC China		3		Other long-term receivables			7,192,250			-		1%
3		TSMC China		TSMC Partners		3		Other long-term payables			7,199,655			-		1%

Note 1:     No. 1 represents the transactions from parent company to subsidiary.

      No. 3 represents the transactions between subsidiaries.

Note 2:     The sales prices and payment terms of intercompany sales are not significantly different from those to third parties. For other intercompany transactions, prices and terms are determined in accordance with mutual agreements.

(Continued)

 

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B.	For the six months ended June 30, 2010

 

(Continued)

 

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No.		Company Name		Counter Party		Nature of   Relationship   (Note 1)		Intercompany Transactions
								Financial Statements Item		Amount				Terms   (Note 2)		Percentage of Consolidated  Total Gross Sales or Total Assets
								Purchases		$	351,210			-		-
				TSMC North America		3		Manufacturing overhead			103,202			-		-
								Payables to related parties			55,635			-		-
								Manufacturing overhead			14,602			-		-
1		GUC		GUC-NA		3		Operating expenses			77,162			-		-
								Accrued expense			14,974			-		-
				GUC-Japan		3		Operating expenses			22,024			-		-
								Accrued expense			4,155			-		-
				GUC-Europe		3		Operating expenses			1,295			-		-
				GUC-Shanghai		3		Operating expenses			8,619			-		-

 

Note 1:

No. 1 represents the transactions from parent company to subsidiary.

 No. 3 represents the transactions between subsidiaries.

 

Note 2:

The sales prices and payment terms of intercompany sales are not significantly different from those to third parties. For other intercompany transactions, prices and terms are determined in accordance with mutual agreements.

(Concluded)

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

				Taiwan Semiconductor Manufacturing Company Ltd.
Date: August 22, 2011				By:		/s/    Lora Ho
						Lora Ho
						Senior Vice President & Chief Financial Officer