Edgar Filing: TAIWAN SEMICONDUCTOR MANUFACTURING CO LTD

Taiwan Semiconductor Manufacturing Company Ltd.

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 2005

Taiwan Semiconductor Manufacturing Company Ltd.

(Translation of Registrant’s Name Into English)

No. 8, Li-Hsin Rd. 6,
Hsinchu Science Park,
Taiwan
(Address of Principal Executive Offices)

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


Form 20-F þ		Form 40-F o

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


Yes o		No þ

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

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 29, 2005	By	/s/ Lora Ho

		Lora Ho Vice President & Chief Financial Officer

Taiwan Semiconductor Manufacturing
Company, Ltd.

Financial Statements for the
Six Months Ended June 30, 2005 and 2004 and
Independent Auditors’ Report

INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Shareholders
Taiwan Semiconductor Manufacturing Company, Ltd.

We have audited the accompanying balance sheets of Taiwan Semiconductor Manufacturing Company, Ltd. as of June 30, 2005 and 2004, 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, Ltd. as of June 30, 2005 and 2004, 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 and accounting principles generally accepted in the Republic of China.

We have also audited the consolidated financial statements of Taiwan Semiconductor Manufacturing Company, Ltd. and subsidiaries as of and for the six months ended June 30, 2005, and have expressed an unqualified opinion with an explanatory paragraph stating that single period presentation of consolidated financial statements is permitted at the initial filing of semi-annual consolidated financial statements..

July 13, 2005

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.

- 1 -

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY, LTD.

BALANCE SHEETS
JUNE 30, 2005 AND 2004
(In Thousands of New Taiwan Dollars, Except Par Value)


	2005						2004
ASSETS	Amount			%			Amount			%

CURRENT ASSETS
Cash and cash equivalents (Notes 2, 3 and 4)	$	78,597,384			16		$	78,778,150			18
Short-term investments, net (Notes 2 and 4)		49,408,608			10			41,199,013			9
Receivables from related parties (Note 18)		14,999,678			3			17,983,732			4
Notes and accounts receivable		20,040,283			4			16,712,863			4
Allowance for doubtful receivables (Note 2)		(978,577	)		—			(983,077	)		—
Allowance for sales returns and others (Note 2)		(3,945,057	)		—			(3,019,657	)		—
Other receivables from related parties (Note 18)		1,565,784			—			147,010			—
Other financial assets (Notes 2 and 21)		1,682,240			—			664,058			—
Inventories, net (Notes 2 and 5)		14,113,615			3			11,725,188			3
Deferred income tax assets (Notes 2 and 12)		5,330,000			1			6,144,000			1
Prepaid expenses and other current assets		1,012,915			—			1,099,819			—


Total current assets		181,826,873			37			170,451,099			39


LONG-TERM INVESTMENTS (Notes 2, 6, 16 and 20)
Equity method		48,351,666			10			39,606,640			9
Cost method		784,939			—			716,377			—
Long-term bonds		16,342,005			3			8,893,477			2
Other investments		10,955,960			2			3,364,250			1


Total long-term investments		76,434,570			15			52,580,744			12


PROPERTY, PLANT, AND EQUIPMENT (Notes 2, 7 and 18)
Cost
Buildings		88,695,499			18			72,030,258			16
Machinery and equipment		441,034,330			88			353,594,669			81
Office equipment		7,586,253			1			6,486,523			2

		537,316,082			107			432,111,450			99
Accumulated depreciation		(330,854,258	)		(66	)		(275,065,953	)		(63	)
Advance payments and construction in progress		18,601,286			4			43,236,290			10


Net property, plant, and equipment		225,063,110			45			200,281,787			46


GOODWILL (Note 2)		1,741,951			—			2,090,341			—

OTHER ASSETS
Deferred charges, net (Notes 2, 8 and 20)		7,874,553			2			10,066,618			2
Deferred income tax assets (Notes 2 and 12)		6,313,825			1			4,169,929			1
Refundable deposits		87,542			—			26,241			—
Assets leased to others, net (Note 2)		75,746			—			81,480			—
Idle assets (Note 2)		13,995			—			78,609			—


Total other assets		14,365,661			3			14,422,877			3


TOTAL	$	499,432,165			100		$	439,826,848			100


	2005						2004
LIABILITIES AND SHAREHOLDERS’ EQUITY	Amount			%			Amount			%

CURRENT LIABILITIES
Accounts payable	$	5,680,946			1		$	7,308,388			2
Payables to related parties (Note 18)		2,146,317			—			4,662,001			1
Payables to contractors and equipment suppliers		10,004,328			2			8,658,321			2
Cash dividends and bonus payable (Note 14)		49,590,312			10			12,841,599			3
Accrued expenses and other current liabilities (Notes 2, 10, 20 and 21)		8,802,291			2			10,576,449			2
Current portion of bonds payable (Note 9)		10,500,000			2			5,000,000			1


Total current liabilities		86,724,194			17			49,046,758			11


LONG-TERM LIABILITIES
Bonds payable (Note 9)		19,500,000			4			30,000,000			7
Other long-term payables (Notes 10 and 20)		1,644,136			—			2,637,827			—
Other payables to related parties (Notes 18 and 20)		1,727,133			1			3,622,369			1


Total long-term liabilities		22,871,269			5			36,260,196			8


OTHER LIABILITIES
Accrued pension cost (Notes 2 and 11)		3,410,250			1			2,847,049			1
Guarantee deposits (Note 20)		1,517,584			—			599,091			—
Deferred gain on intercompany transactions (Notes 2 and 18)		708,941			—			—			—


Total other liabilities		5,636,775			1			3,446,140			1


Total liabilities		115,232,238			23			88,753,094			20


SHAREHOLDERS’ EQUITY (Notes 2, 14, 15 and 16)
Capital stock — $10 par value
Authorized: 27,050,000 thousand shares in 2005, 24,600,000 thousand shares in 2004
Issued: 24,726,129 thousand shares in 2005, 23,376,597 thousand shares in 2004		247,261,288			50			233,765,970			53
Capital surplus		56,720,875			11			56,885,914			13
Retained earnings
Appropriated as legal reserve		34,348,208			7			25,528,007			6
Appropriated as special reserve		2,226,427			—			—			—
Unappropriated earnings		47,808,698			10			43,517,207			10
Others
Unrealized loss on long-term investments		—			—			(9	)		—
Cumulative translation adjustments		(2,612,996	)		(1	)		53,132			—
Treasury stock (at cost) - 46,862 thousand shares in 2005 and 170,690 thousand shares in 2004		(1,552,573	)		—			(8,676,467	)		(2	)


Total shareholders’ equity		384,199,927			77			351,073,754			80


TOTAL	$	499,432,165			100		$	439,826,848			100

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

- 2 -

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY, LTD.

STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2005 AND 2004
(In Thousands of New Taiwan Dollars, Except Earnings Per Share)


	2005				2004
	Amount		%		Amount		%

GROSS SALES (Notes 2 and 18)	$	116,819,058			$	124,982,265

SALES RETURNS AND ALLOWANCES (Note 2)		2,649,624				2,599,819


NET SALES		114,169,434		100		122,382,446		100

COST OF SALES (Notes 13 and 18)		69,315,398		61		71,514,061		59


GROSS PROFIT		44,854,036		39		50,868,385		41


OPERATING EXPENSES (Notes 13 and 18)
Research and development		6,632,293		6		5,825,173		5
General and administrative		3,743,998		3		4,635,566		3
Marketing		617,811		—		733,496		1


Total operating expenses		10,994,102		9		11,194,235		9


INCOME FROM OPERATIONS		33,859,934		30		39,674,150		32


NON-OPERATING INCOME AND GAINS
Interest (Notes 2 and 21)		1,625,725		1		558,592		—
Settlement income (Note 20)		711,324		1		—		—
Technical service income (Notes 18 and 20)		186,962		—		111,096		—
Gain on disposal of property, plant, and equipment (Notes 2 and 18)		107,395		—		114,102		—
Investment income recognized by equity method, net (Notes 2 and 6)		—		—		2,053,966		2
Gain on sales of investments (Note 2)		—		—		98,644		—
Others (Note 18)		221,233		—		138,298		—

Total non-operating income and gains		2,852,639		2		3,074,698		2


NON-OPERATING EXPENSES AND LOSSES
Interest (Notes 2, 7, 9 and 21)		1,387,359		1		602,981		—
Investment loss recognized by equity method, net (Notes 2 and 6)		786,018		1		—		—
Foreign exchange loss, net (Notes 2 and 21)		197,684		—		542,591		—
Loss on sales of investments, net (Note 2)		111,808		—		—		—
Loss on idle assets (Note 2)		106,972		—		—		—

(Continued)

- 3 -


	2005				2004
	Amount		%		Amount		%

Loss on disposal of property, plant and equipment (Note 2)	$	53,599		—	$	32,913		—
Unrealized valuation loss on short-term investments (Notes 2 and 4)		41,467		—		—		—
Others		29,942		—		14,405		—


Total non-operating expenses and losses		2,714,849		2		1,192,890		—


INCOME BEFORE INCOME TAX		33,997,724		30		41,555,958		34

INCOME TAX BENEFIT (Notes 2 and 12)		1,189,610		1		642,844		—


NET INCOME	$	35,187,334		31	$	42,198,802		34


	2005				2004
	Before		After		Before		After
	Income		Income		Income		Income
	Tax		Tax		Tax		Tax
EARNINGS PER SHARE (NT$, Note 17)
Basic earnings per share	$	1.38	$	1.43	$	1.68	$	1.70

Diluted earnings per share	$	1.38	$	1.43	$	1.68	$	1.70

The pro forma net income and earnings per share (after income tax) are shown as follows, based on the assumption that the parent company stock held by subsidiaries is treated as an investment instead of treasury stock (Notes 2 and 16):


	2005		2004

NET INCOME	$	35,278,370	$	42,200,461


EARNINGS PER SHARE (NT$)
Basic earnings per share	$	1.43	$	1.70

Diluted earnings per share	$	1.43	$	1.70



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

- 4 -

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY, LTD.

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 2005 AND 2004
(In Thousands of New Taiwan Dollars)


																		Others
							Retained Earnings											Unrealized
	Capital Stocks						Legal		Special												Loss on			Cumulative			Total
	Shares (in				Capital		Capital		Capital			Unappropriated						Long-term			Translation			Treasury			Shareholders’
	Thousands)		Amount		Surplus		Reserve		Reserve			Earnings			Total			Investments			Adjustments			Stock			Equity

BALANCE, JANUARY 1, 2005		23,251,964	$	232,519,637	$	56,537,259	$	25,528,007	$	—		$	88,202,009		$	113,730,016		$	—		$	(2,226,427	)	$	(1,595,186	)	$	398,965,299

Appropriations of prior year’s earnings
Legal capital reserve		—		—		—		8,820,201		—			(8,820,201	)		—			—			—			—			—
Special capital reserve		—		—		—		—		2,226,427			(2,226,427	)		—			—			—			—			—
Employees’ profit sharing — in cash		—		—		—		—		—			(3,086,215	)		(3,086,215	)		—			—			—			(3,086,215	)
Employees’ profit sharing — in stock		308,622		3,086,215		—		—		—			(3,086,215	)		(3,086,215	)		—			—			—			—
Cash dividends to common shareholders - 20%		—		—		—		—		—			(46,504,097	)		(46,504,097	)		—			—			—			(46,504,097	)
Stock dividends to common shareholders - 5%		1,162,602		11,626,024		—		—		—			(11,626,024	)		(11,626,024	)		—			—			—			—
Bonus to directors and supervisors		—		—		—		—		—			(231,466	)		(231,466	)		—			—			—			(231,466	)

Net income for the six months ended June 30, 2005		—		—		—		—		—			35,187,334			35,187,334			—			—			—			35,187,334

Adjustment arising from changes in ownership percentage in investees		—		—		4,774		—		—			—			—			—			—			—			4,774

Translation adjustments		—		—		—		—		—			—			—			—			(386,569	)		—			(386,569	)

Employee stock options exercised		2,941		29,412		87,806		—		—			—			—			—			—			—			117,218

Cash dividends received by subsidiaries from parent company		—		—		84,285		—		—			—			—			—			—			—			84,285

Treasury stock transactions — sales of parent company stock held by subsidiaries		—		—		6,751		—		—			—			—			—			—			42,613			49,364


BALANCE, JUNE 30, 2005		24,726,129	$	247,261,288	$	56,720,875	$	34,348,208	$	2,226,427		$	47,808,698		$	84,383,333		$	—		$	(2,612,996	)	$	(1,552,573	)	$	384,199,927


BALANCE, JANUARY 1, 2004		20,266,619	$	202,666,189	$	56,855,885	$	20,802,137	$	68,945		$	50,229,008		$	71,100,090		$	(35	)	$	225,408		$	(1,633,228	)	$	329,214,309

Appropriations of prior year’s earnings
Legal reserve		—		—		—		4,725,870		—			(4,725,870	)		—			—			—			—			—
Reversal of special reserve		—		—		—		—		(68,945	)		68,945			—			—			—			—			—
Employees’ profit sharing — in cash		—		—		—		—		—			(681,628	)		(681,628	)		—			—			—			(681,628	)
Employees’ profit sharing — in stock		272,651		2,726,514		—		—		—			(2,726,514	)		(2,726,514	)		—			—			—			—
Cash dividends to preferred shareholders		—		—		—		—		—			(184,493	)		(184,493	)		—			—			—			(184,493	)
Cash dividends to common shareholders - 6%		—		—		—		—		—			(12,159,971	)		(12,159,971	)		—			—			—			(12,159,971	)
Stock dividends to common shareholders - 14%		2,837,327		28,373,267		—		—		—			(28,373,267	)		(28,373,267	)		—			—			—			—
Bonus to directors and supervisors		—		—		—		—		—			(127,805	)		(127,805	)		—			—			—			(127,805	)

Net income for the six months ended June 30, 2004		—		—		—		—		—			42,198,802			42,198,802			—			—			—			42,198,802

(Continued)

- 5 -


															Others
																		Unrealized
	Capital Stocks						Retained Earnings											Loss on			Cumulative			Total
	Shares (in				Capital		Legal		Special		Unappropriated				Long-term			Translation			Treasury			Shareholders’
	Thousands)		Amount		Surplus		Reserve		Reserve		Earnings		Total		Investments			Adjustments			Stock			Equity

Adjustment arising from changes in ownership percentage in investees		—	$	—	$	28,370	$	—	$	—	$	—	$	—	$	—		$	—		$	—		$	28,370

Reversal of unrealized loss on long term investment of investees		—		—		—		—		—		—		—		26			—			—			26

Translation adjustments		—		—		—		—		—		—		—		—			(172,276	)		—			(172,276	)

Treasury stock transactions — sales of parent company stock held by subsidiaries		—		—		1,659		—		—		—		—		—			—			16,559			18,218

Treasury stock repurchased by the Company		—		—		—		—		—		—		—		—			—			(7,059,798	)		(7,059,798	)


BALANCE, JUNE 30, 2004		23,376,597	$	233,765,970	$	56,885,914	$	25,528,007	$	—	$	43,517,207	$	69,045,214	$	(9	)	$	53,132		$	(8,676,467	)	$	351,073,754

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

- 6 -

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY, LTD.

STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2005 AND 2004
(In Thousands of New Taiwan Dollars)


	2005			2004

CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	35,187,334		$	42,198,802
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		34,330,028			31,086,443
Loss on idle assets		106,972			—
Deferred income tax		(1,149,822	)		(921,333	)
Investment loss (income) recognized by equity method, net		786,018			(2,053,966	)
Gain on sales of long-term investments		(94	)		(2,150	)
Amortization of premium from long-term bond investments		58,771			327
Gain on disposal of property, plant and equipment, net		(53,796	)		(81,189	)
Accrued pension cost		309,054			246,798
Changes in operating assets and liabilities:
Decrease (increase) in:
Receivables from related parties		1,186,405			(3,116,070	)
Notes and accounts receivable		(4,713,402	)		(2,795,056	)
Allowance for doubtful receivables		(1,884	)		(32,945	)
Allowance for sales returns and others		617,143			893,632
Other receivables from related parties		(1,145,538	)		(14,047	)
Other financial assets		287,847			(120,308	)
Inventories, net		58,330			(818,030	)
Prepaid expenses and other current assets		888,434			1,030,139
Increase (decrease) in:
Accounts payable		(807,671	)		1,224,512
Payables to related parties		(1,619,155	)		161,861
Accrued expenses and other current liabilities		(648,995	)		1,900,027


Net cash provided by operating activities		63,675,979			68,787,447


CASH FLOWS FROM INVESTING ACTIVITIES
Decrease (increase) in short-term investments		3,570,487			(32,042,407	)
Acquisitions of:
Long-term investments		(6,418,368	)		(9,307,272	)
Property, plant and equipment		(51,194,392	)		(39,179,243	)
Proceeds from disposal of:
Long-term investments		1,515,356			7,552
Property, plant and equipment		1,430,769			250,080
Increase in deferred charges		(503,079	)		(640,653	)
(Increase) decrease in refundable deposits		(2,129	)		151,138


Net cash used in investing activities		(51,601,356	)		(80,760,805	)

(Continued)

- 7 -


	2005			2004

CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in guarantee deposits	$	1,105,191		$	(164,398	)
Proceeds from exercise of stock options		117,218			—
Bonus to directors and supervisors		(231,466	)		(127,805	)
Repurchase of treasury stock		—			(7,059,798	)
Cash dividend paid for preferred stocks		—			(184,493	)


Net cash provided by (used in) financing activities		990,943			(7,536,494	)


NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		13,065,566			(19,509,852	)

CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD		65,531,818			98,288,002


CASH AND CASH EQUIVALENTS, END OF THE PERIOD	$	78,597,384		$	78,778,150


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid (excluding the amount capitalized of NT$157,109 thousand for the six months ended June 30, 2004; please see Note 7)	$	1,029,064		$	268,006

Income tax paid	$	87,315		$	11,689


NON-CASH INVESTING AND FINANCING ACTIVITIES
Current portion of long-term bonds payable	$	10,500,000		$	5,000,000

Current portion of other payables to related parties (under payables to related parties)	$	—		$	177,161

Current portion of other long-term payables (under accrued expenses and other current liabilities)	$	1,417,437		$	1,757,476

Reclassification of short-term investments to long-term investments	$	—		$	3,402,413



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

- 8 -

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY, LTD.

NOTES TO FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2005 AND 2004
(Amounts in Thousands of New Taiwan Dollars, Unless Specified Otherwise)

1. GENERAL

Taiwan Semiconductor Manufacturing Company, Ltd. (the Company or TSMC), a Republic of China (R.O.C.) corporation, was incorporated as a venture among the Government of the R.O.C., acting through the Development Fund of the Executive Yuan; Philips Electronics N.V. and certain of its affiliates (Philips); and certain other private investors. On September 5, 1994, its shares were listed on the Taiwan Stock Exchange (TSE). On October 8, 1997, TSMC listed some of its shares of stock on the New York Stock Exchange (NYSE) in the form of American Depositary Shares (ADSs).

The Company is engaged mainly in the manufacturing, selling, packaging, testing and computer-aided designing of integrated circuits and other semiconductor devices and the manufacturing of masks.

As of June 30, 2005 and 2004, the Company had 18,734 and 17,559 employees, respectively.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

Significant accounting policies are summarized as follows:

Use of Estimates

The preparation of financial statements in conformity with the aforementioned guidelines 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 Non-current Assets and Liabilities

Current assets are those expected to be converted to cash, sold or consumed within one year from the balance sheet date. Current liabilities are obligations due on demand within one year from the balance sheet date. Assets and liabilities that are not classified as current are non-current assets and liabilities, respectively.

Cash Equivalents

Government bonds under repurchase agreements, treasury bills, notes, and commercial papers acquired with maturities less than three months from the date of purchase are classified as cash equivalents.

Short-term Investments

Short-term investments primarily consist of corporate bonds, agency bonds, asset-backed securities, bond funds, government bonds and others.

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Short-term investments are recorded at historical cost and are carried at the lower of cost or market value as of the balance sheet date. An allowance for decline in value is provided and is charged to current income when the aggregate carrying amount of the investments exceeds the aggregate market value. A reversal of the allowance is recorded for a subsequent recovery of the market value.

The costs of funds and listed stocks sold are accounted for using the weighted-average method; whereas other securities sold are accounted for using the specific identification method.

The market value of funds is determined using the net asset value of the funds at the end of the period, and the market value of listed stocks is determined using the average-closing price of the listed stocks for the last month of the period. The market value of other short-term investments is determined using the average of bid and ask prices as of the balance sheet date.

Cash dividends are recorded as investment income in the current period.

Allowance for Doubtful Receivables

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

Revenue Recognition and Allowance for Sales Returns and Others

The Company recognizes revenue when evidence of an arrangement exists, the shipment is made, price is fixed or determinable, and the collectibility is reasonably assured. Revenues from the design and manufacturing of photo masks, which are used as manufacturing tools in the fabrication process, are recognized when the photo masks are qualified by our customers. The Company records a provision for estimated future returns and other allowances in the same period the related revenue is recorded. Provisions for estimated sales returns and other allowances are generally made at a specific percentage based on historical experience, our management’s judgment, and any known factors that would significantly affect the allowance.

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

Inventories

Inventories are stated at the lower of cost or market value. Inventories are recorded at standard cost and adjusted to the approximate weighted-average cost at the end of the period. Market value represents replacement cost for raw materials, supplies and spare parts and net realizable value for finished goods and work in process. The Company assesses the impact of changing technology on its inventories on hand and writes off inventories that are considered obsolete. Ending inventories are evaluated for estimated excess quantities and obsolescence based on a demand forecast within a specific time horizon, which is generally 180 days or less. Estimated losses on scrap and slow-moving items are recognized and included in the allowance for losses.

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Long-term Investments

Investments in companies wherein the Company exercises significant influence on the operating and financial policy decisions are accounted for using the equity method of accounting. The Company’s proportionate share in the net income or net loss of investee companies is recognized in the “investment income/loss recognized by equity method, net” account. When equity investments are made, the difference, if any, between the cost of investment and the Company’s proportionate share of the investee’s net equity is amortized using the straight-line method over five years and is also recorded in the “investment income/loss recognized by equity method, net” account.

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

Investments in companies wherein the Company does not exercise significant influence are recorded at historical cost. Cash dividends are recognized as investment income in the year received but are accounted for as reductions in the carrying amount of the long-term investments if the dividends are received in the same year that the related investments are acquired. Stock dividends are recorded as an increase in the number of shares held and do not affect investment income or the carrying amount of the investment.

Investments in mutual funds are stated at the lower of aggregate cost or net asset value. An allowance is recognized when the net asset value of the funds is lower than their cost, with the corresponding amount recorded as a reduction to shareholders’ equity. A reversal of the allowance will result from a subsequent recovery of the net asset value.

When an indication of significant impairment is identified in an investee company, the carrying amount of this investment is reduced to reflect an other-than-temporary decline, with the related impairment loss charged to current income.

The costs of stocks and mutual funds sold are determined using the weighted-average method.

Investments in long-term bonds are stated at amortized cost. The discount or premium is amortized over the duration period using the interest method, and recorded as an adjustment to interest income.

When investments in publicly-traded stocks are reclassified from short-term investments to long-term investments or from long-term investments to short-term investments, the Company recognizes a loss to the extent, if any, that the market value of such investments is lower than the carrying amount, and the market value becomes the new basis.

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

Gains or losses on sales from the Company to investee companies accounted for using the equity method are deferred in proportion to the Company’s ownership percentages in the investee companies until realized through transactions with third parties. The entire amount of the gains or losses on sales to majority-owned subsidiaries is deferred until such gains or losses are realized through the subsequent sales of the related products to third parties. Gains or losses on sales from investee companies to the Company are deferred in proportion to the Company’s ownership percentages in the investee companies until realized through transactions with third parties. Gains or losses on sales between investee companies accounted for using the equity method are deferred in proportion to the Company’s weighted-average ownership percentages in the investee companies which record such gains or losses until realized through transactions with third parties.

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If an investee’s functional currency is a foreign currency, translation adjustments will result from the process of translating the investee’s financial statements into the reporting currency of the Company. Such adjustments are accumulated and reported as a separate component of shareholders’ equity.

Property, Plant and Equipment, Assets Leased to Others and Idle Assets

Property, plant and equipment and assets leased to others are stated at cost less accumulated depreciation. When an indication of significant 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 the future period, the subsequent reversal of the impairment loss would be recognized as a gain. However, the increased carrying amount of an asset due to a reversal of an impairment loss should not exceed the carrying amount that would have been determined (net of depreciation), had no impairment loss been recognized for the asset in prior years. Idle assets are stated at the lower of net realizable value or book value. Significant additions, renewals and betterments incurred during the construction period are capitalized. Maintenance and repairs are expensed in the period incurred. Interest expense incurred during the purchase and construction period is also capitalized.

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

Upon sale or disposal of property, plant and equipment, the related cost and accumulated depreciation are removed from the corresponding accounts, with any gain or loss credited or charged to non-operating gains or losses in the period of sale or disposal.

Goodwill

Goodwill represents the excess of the consideration paid for acquisition over the fair market value of identifiable net assets acquired and acquisition costs. Goodwill is amortized using the straight-line method over the estimated life of 10 years. If an event occurs or circumstances change that more likely than not reduce the fair value of goodwill below its carrying amount, an impairment loss is charged to current income. Subsequent recovery in the fair value of the goodwill may not be recorded such as to reverse the impairment loss previously recorded.

Deferred Charges

Deferred charges consist of technology license fees, software and system design costs and other charges. The amounts are amortized as follows: Technology license fees — the shorter of the estimated life of the technology or the term of the technology transfer contract; software and system design costs and other charges — 3 years. When an indication of significant 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 future 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 amortization, as if no impairment loss had been recognized.

Pension Costs

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

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Income Tax

The Company uses an inter-period tax allocation method for income tax. Deferred income tax assets and liabilities are recognized for the tax effects of temporary differences 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 the purchases of machinery, equipment and technology, research and development expenditures, personnel training, and investments in important technology-based enterprises are recognized using the flow-through method.

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

Income tax on unappropriated earnings 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 option plans that are amended or have options granted on or after January 1, 2004 must be accounted for by the interpretations issued by the Accounting Research and Development Foundation. The Company adopted the intrinsic value method and any compensation cost determined using this method is charged to expense over the employee vesting period.

Treasury Stock

When the Company repurchases its outstanding common stock, the cost of the reacquired stock is recorded as treasury stock as a reduction to shareholders’ equity. When the Company retires treasury stock, the treasury stock account is reduced and the common stock as well as the capital surplus — additional paid-in capital are reversed in proportionate to the equity percentage of the retirement. When the book value of the treasury stock exceeds the sum of the par value and additional paid-in capital, the difference is charged to capital surplus - treasury stock transactions and to retained earnings for any remaining amount. The Company’s stock held by its subsidiaries is also treated as treasury stock and reclassified from long-term investments to treasury stock. The cash dividends received by the subsidiaries from the Company are recorded under capital surplus — treasury stock transactions.

Foreign-currency Transactions

Foreign currency transactions 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 current income. At the end of each period, assets and liabilities denominated in foreign currencies are revalued at the prevailing exchange rates with the resulting gains or losses recognized in current income.

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Derivative Financial Instruments

The Company enters into foreign currency forward contracts to manage foreign exchange exposures on foreign-currency-denominated assets and liabilities. The contracts are recorded in New Taiwan dollars at the current rate of exchange of the contract date. The differences in the New Taiwan dollar amounts translated using the current rates and the amounts translated using the contracted forward rates on the contract date are amortized over the terms of the forward contracts using the straight-line method. At the end of each period, the receivables or payables arising from forward contracts are restated using the prevailing exchange rates at the balance sheet date with the resulting differences credited or charged to income. In addition, the receivables and payables related to the forward contracts of the same counter party are netted with the resulting amount presented as either an asset or a liability. Any resulting gain or loss upon settlement is credited or charged to income in the period of settlement.

The Company enters into cross-currency swap contracts to manage currency exposures on foreign-currency-denominated assets and liabilities. The principal amount is recorded using the current rate at the contract date. The differences in the New Taiwan dollar amounts translated using the current rates and the amounts translated using the contracted rates on the contract dates are amortized over the terms of the contracts using the straight-line method. At the end of each period, the receivables or payables arising from cross-currency swap contracts are restated using the prevailing exchange rate with the resulting differences credited or charged to income. In addition, the receivables and payables related to the contracts of the same counter party are netted with the resulting amount presented as either an asset or a liability. The difference in interest computed pursuant to the contracts on each settlement date or the balance sheet date is recorded as an adjustment to the interest income or expense associated with the hedged items. Any resulting gain or loss upon settlement is credited or charged to income in the period of settlement.

The Company enters into interest rate swap contracts to manage exposures to changes in interest rates on existing assets or liabilities. The cash settlement receivable or payable computed pursuant to the contracts on each settlement date or the balance sheet date is recorded as an adjustment to interest income or expense associated with the hedged items.

Reclassifications

Certain accounts in the financial statements as of and for the six months ended June 30, 2004 have been reclassified to conform to the financial statements as of and for the six months ended June 30, 2005.

3. CASH AND CASH EQUIVALENTS


	June 30
	2005		2004

Cash and bank deposits	$	48,158,582	$	66,348,727
Government bonds acquired under repurchase agreements		29,804,199		10,165,256
Treasury bills		349,892		842,873
Corporate issued notes		172,291		884,533
Agency notes		112,420		435,526
Commercial papers		—		101,235


	$	78,597,384	$	78,778,150

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4. SHORT-TERM INVESTMENTS


	June 30
	2005			2004

Corporate bonds	$	12,846,798		$	7,190,519
Agency bonds		11,554,410			6,974,162
Corporate issued asset-backed securities		11,482,685			6,720,188
Bond funds		10,140,224			9,900,000
Government bonds		2,750,355			7,052,471
Money market funds		491,465			—
Corporate issued notes		158,052			—
Commercial papers		94,770			—
Listed stocks		6,528			6,528
Government bonds acquired under repurchase agreements		—			3,355,145

		49,525,287			41,199,013
Allowance for valuation losses		(116,679	)		—


	$	49,408,608		$	41,199,013

Market value	$	49,408,608		$	41,491,242

The Company entered into investment management agreements with three well-known financial institutions (fund managers) to manage investment portfolios for the Company. In accordance with the investment guidelines and terms in these agreements, the securities invested by the fund managers cannot be below a pre-defined credit rating. As of June 30, 2005, the Company had investment portfolios with these fund managers that aggregated to an original amount of US$1,200,000 thousand. The investment portfolios included securities such as corporate bonds, agency bonds, asset-backed securities, government bonds and others. Securities acquired with maturities less than three months from the date of purchase were reclassified as cash equivalents.

5. INVENTORIES, NET


	June 30
	2005			2004

Finished goods	$	2,600,225		$	2,372,138
Work in process		11,380,115			9,213,016
Raw materials		937,820			785,848
Supplies and spare parts		658,803			755,052

		15,576,963			13,126,054
Allowance for losses		(1,463,348	)		(1,400,866	)


	$	14,113,615		$	11,725,188

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6. LONG-TERM INVESTMENTS


	June 30
	2005				2004
			% of				% of
	Carrying		Owner-		Carrying		Owner-
	Amount		ship		Amount		ship

Equity method
TSMC International Investment Ltd. (TSMC International)	$	23,057,382		100	$	23,708,232		100
TSMC (Shanghai) Company Limited (TSMC-Shanghai)		9,967,851		100		1,758,405		100
Vanguard International Semiconductor Corporation (VIS)		5,115,164		27		4,667,952		28
TSMC Partners, Ltd. (TSMC Partners)		3,873,176		100		4,113,671		100
Systems on Silicon Manufacturing Company Pte Ltd. (SSMC)		3,514,280		32		3,181,111		32
Emerging Alliance Fund, L.P. (Emerging Alliance)		820,765		99		912,982		99
TSMC North America (TSMC-North America)		794,692		100		474,695		100
VentureTech Alliance Fund II, L.P. (VTAF II)		469,749		98		165,190		98
Global Unichip Corporation (GUC)		403,208		46		362,629		47
TSMC Japan K. K. (TSMC-Japan)		95,013		100		100,521		100
Chi Cherng Investment Co., Ltd. (Chi Cherng)		77,971		36		42,990		36
Hsin Ruey Investment Co., Ltd. (Hsin Ruey)		77,256		36		42,673		36
VisEra Technologies Company, Ltd. (VisEra)		62,668		25		51,825		25
Taiwan Semiconductor Manufacturing Company Europe B.V. (TSMC-Europe)		22,491		100		23,764		100

		48,351,666				39,606,640


Cost method
Non-publicly traded stocks		482,500		—		432,500		—
Funds		302,439		—		283,877		—

		784,939				716,377


Long-term bonds
Government bonds		11,817,146				8,893,477
Corporate bonds
China Steel Corporation		2,936,934				—
Taiwan Power Company		908,645				—
Nan Ya Plastics Corporation		272,612				—
Formosa Plastics Corporation		271,181				—
Formosa Chemical & Fiber Corporation		135,487				—

		16,342,005				8,893,477

Other investments		10,955,960				3,364,250


	$	76,434,570			$	52,580,744

For the six months ended June 30, 2005 and 2004, net investment loss and income recognized from the equity method investees was NT$786,018 thousand and NT$2,053,966 thousand, respectively. The carrying amounts of investments accounted for under the equity method and the related investment loss or income were determined based on the audited financial statements of the investees as of and for the same periods as the Company.

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Other investments consisted of the following structured time-deposits:


	Principal		Interests		Range of
	Amount		Receivable		Interest Rates			Maturity Date

June 30, 2005

Step-up callable deposits
Domestic bank	$	2,000,000	$	7,624		2.05-2.20	%	Jul. 2007 to Aug. 2007
Foreign bank		2,000,000		10,403		1.40-2.44	%	Jul. 2006 to Jul. 2007
Callable range accrual deposits
Foreign bank		6,955,960		20,237	(See below)			Sep. 2009 to Jan. 2010

	$	10,955,960	$	38,264


June 30, 2004

Step-up callable deposits
Foreign bank	$	3,364,250	$	2,474		1.44%-3.25	%	Jun. 2007 to Jun. 2009

The interest rate of the step-up callable deposits is determined by the Company and the related banks. The amount of interest earned by the Company for the callable range accrual deposits is based on a pre-defined range as determined by the 3-month or 6-month LIBOR plus an agreed upon rate ranging between 2.1% and 3.45%. Based on the terms of the deposits, if the 3-month or 6-month LIBOR moves outside of the pre-defined range, the interest paid to the Company is at a fixed rate between zero and 1.5%. Under the term of the contracts, the bank has the right to cancel the contracts prior to the maturity date.

As of June 30, 2005 and 2004, deposits that resided in banks located in Hong Kong amounted to NT$2,529,440 thousand and NT$1,688,750 thousand, respectively; those that resided in banks located in Singapore amounted to NT$632,360 thousand and NT$675,500 thousand, respectively.

7. PROPERTY, PLANT AND EQUIPMENT

Accumulated depreciation consisted of the following:


	June 30
	2005		2004

Buildings	$	39,229,473	$	32,452,205
Machinery and equipment		286,453,058		238,344,951
Office equipment		5,171,727		4,268,797


	$	330,854,258	$	275,065,953

There was no capitalized interest for the six months ended June 30, 2005. Interest expense for the six months ended June 30, 2004 was NT$760,090 thousand (before deducting the amount capitalized of NT$157,109 thousand for the six months ended June 30, 2004). The interest rate used for purposes of calculating the capitalized amount was 2.80% for the six months ended June 30, 2004.

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8. DEFERRED CHARGES, NET


	June 30
	2005		2004

Technology license fees	$	5,836,060	$	7,518,432
Software and system design costs		1,942,091		2,444,985
Other		96,402		103,201


	$	7,874,553	$	10,066,618

9. BONDS PAYABLE


	June 30
	2005		2004

Domestic unsecured bonds:
Issued in October 1999 and repayable in October 2004, 5.95% interest payable annually	$	—	$	5,000,000
Issued in December 2000 and repayable in December 2005 and 2007 in two payments, 5.25% and 5.36% interest payable annually, respectively		15,000,000		15,000,000
Issued in January 2002 and repayable in January 2007, 2009 and 2012 in three payments, 2.60%, 2.75% and 3% interest payable annually, respectively		15,000,000		15,000,000

	$	30,000,000	$	35,000,000

As of June 30, 2005, future principal repayments for the Company’s bonds were as follows:


Year of Repayment	Amount

2005 (3^rd to 4^th quarter)	$	10,500,000
2007		7,000,000
2009		8,000,000
2010 and thereafter		4,500,000

		30,000,000
Current portion		(10,500,000	)


	$	19,500,000

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10. OTHER LONG-TERM PAYABLES

The Company entered into several license arrangements for certain semiconductor-related patents. Future payments under the agreements as of June 30, 2005 were as follows:


Year of Repayment	Amount

2005 (3^rd to 4^th quarter)	$	1,144,732
2006		462,413
2007		442,652
2008		252,944
2009		252,944
2010 and thereafter		505,888

		3,061,573
Current portion (under accrued expenses and other current liabilities)		(1,417,437	)


	$	1,644,136

11. PENSION PLAN

The Company has a defined benefit plan for all regular employees that provides benefits based on the employee’s length of service and average monthly salary or wage for the six-month period prior to retirement.

The Company contributes an amount equal to 2% of salaries and wages paid each month to a pension fund (the Fund). The Fund is administered by a pension fund monitoring committee (the Committee) and deposited in the Committee’s name in the Central Trust of China.

For the six months ended June 30, 2005 and 2004, the changes in the Fund and accrued pension cost are summarized as follows:


	Six Months Ended June 30
	2005			2004
The Fund
Balance, beginning of period	$	1,428,001		$	1,191,702
Contribution		122,103			116,844
Interest		15,629			15,562
Payment		(8,419	)		—


Balance, end of period	$	1,557,314		$	1,324,108


Accrued pension cost
Balance, beginning of period	$	3,101,196		$	2,600,251
Accruals		309,054			246,798


Balance, end of period	$	3,410,250		$	2,847,049

The Labor Pension Act became effective on July 1, 2005 and this pension mechanism is deemed a defined contribution plan. The employees who were subject to the Labor Standards Law prior to the enforcement of this Act may choose to be subject to the pension mechanism under this Act or may continue to be subject to the pension mechanism under the Labor Standards Law. For those employees who were subject to the Labor Standards Law prior to July 1, 2005 and still work for the same company after July 1, 2005 and choose to be subject to the pension mechanism under this Act, their seniority as of July 1, 2005 shall be maintained. The rate of contribution by an employer to the Labor Pension Fund per month shall not be less than 6% of each employee’s monthly salary or wage.

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12. INCOME TAX

A reconciliation of income tax expense based on income before income tax at statutory rate and current income tax expense before income tax credits was as follows:


	Six Months Ended June 30
	2005			2004

Income tax expense based on “income before income tax” at statutory rate (25%)	$	(8,499,431	)	$	(10,388,989	)
Tax-exempt income		4,734,183			6,233,394
Temporary and permanent differences		(635,273	)		(294,984	)


Current income tax expense before income tax credits	$	(4,400,521	)	$	(4,450,579	)

Income tax benefit consisted of the following:


Current income tax expense before income tax credits	$	(4,400,521	)	$	(4,450,579	)
Additional tax at 10% on unappropriated earnings		(1,489,709	)		(821,767	)
Income tax credits		5,890,230			5,272,346
Other income tax adjustments		39,788			(278,489	)
Net change in deferred income tax assets
Investment tax credits		2,512,133			(883,812	)
Temporary differences		1,708,642			528,349
Net change in valuation allowance of deferred income tax assets		(3,070,953	)		1,276,796


Income tax benefit	$	1,189,610		$	642,844

Deferred income tax assets (liabilities) consisted of the following:


	June 30
	2005			2004

Current deferred income tax assets
Investment tax credits	$	5,330,000		$	6,144,000


Noncurrent deferred income tax assets, net
Investment tax credits	$	23,066,717		$	18,622,082
Temporary differences		(741,893	)		(2,957,102	)
Valuation allowance		(16,010,999	)		(11,495,051	)


	$	6,313,825		$	4,169,929

d.		Integrated income tax information:

		The balance of the imputation credit account (ICA) as of June 30, 2005 and 2004 was NT$15,569 thousand and NT$347 thousand, respectively.

		The expected and actual creditable ratios for distribution of earnings of 2004 and 2003 were 0.11% and 0.03%, respectively.

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

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

f.		As of June 30, 2005, investment tax credits consisted of the following:


		Total		Remaining
		Creditable		Creditable		Expiry
Regulation	Item	Amount		Amount		Year

Statute for Upgrading	Purchase of machinery and	$	134,467	$	—		2005
Industries	equipment		4,886,421		2,325,728		2006
			4,139,371		4,139,371		2007
			11,007,440		11,007,440		2008
			2,189,404		2,189,404		2009


		$	22,357,103	$	19,661,943


Statute for Upgrading	Research and development	$	3,127,586	$	—		2005
Industries	expenditures		3,346,930		3,346,930		2006
			1,976,913		1,976,913		2007
			2,332,557		2,332,557		2008
			987,076		987,076		2009


		$	11,771,062	$	8,643,476


Statute for Upgrading	Personnel training	$	29,448	$	—		2005
Industries			27,311		27,311		2006
			26,780		26,780		2007
			37,207		37,207		2008


		$	120,746	$	91,298


Statute for Upgrading	Investments in important	$	38,036	$	—		2005

Industries	technology-based enterprises

The sales generated from the following expansion and construction of the Company’s manufacturing plants are exempt from income tax:


		Tax-Exemption Period

Construction of Fab 8 — module B		2002 to 2005
Expansion of Fab 2 — modules A and B, Fab 3, Fab 4, Fab 5 and Fab 6		2003 to 2006
Construction of Fab 12		2004 to 2007

The tax authorities have examined income tax returns of the Company through 2001.

-21-

13. LABOR COST, DEPRECIATION AND AMORTIZATION


	Six Months Ended June 30, 2005
			Classified as
	Classified as		Operating
	Cost of Sales		Expenses		Total
Labor cost
Salary	$	4,091,113	$	1,678,438	$	5,769,551
Labor and health insurance		303,436		144,065		447,501
Pension		295,506		140,296		435,802
Meal		208,186		67,904		276,090
Welfare benefit		72,159		40,344		112,503
Other		51,139		45,032		96,171


	$	5,021,539	$	2,116,079	$	7,137,618


Depreciation	$	31,158,607	$	1,489,769	$	32,648,376

Amortization	$	814,069	$	859,118	$	1,673,187


	Six Months Ended June 30, 2004
			Classified as
	Classified as		Operating
	Cost of Sales		Expenses		Total
Labor cost
Salary	$	4,166,565	$	2,020,169	$	6,186,734
Labor and health insurance		269,132		148,662		417,794
Pension		235,293		129,935		365,228
Meal		177,762		67,846		245,608
Welfare benefit		72,239		43,496		115,735
Other		60,436		243,058		303,494


	$	4,981,427	$	2,653,166	$	7,634,593


Depreciation	$	27,377,787	$	1,193,473	$	28,571,260

Amortization	$	1,381,976	$	1,123,581	$	2,505,557

14. SHAREHOLDERS’ EQUITY

The Company has issued a total of 668,351 thousand ADSs which are traded on the NYSE as of June 30, 2005. The number of common shares represented by the ADSs is 3,341,754 thousand (one ADS represents five common shares).

On May 10,2005, the Board of Directors approved the offering of up to 1,050,000 thousand common shares in the form of ADSs by certain existing shareholders. As of July 13, 2005, the proposed offering is still waiting for the approval by the R.O.C. Securities and Futures Bureau (SFB).

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 issue 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 is restricted to a certain percentage of the paid in common stock of the Company.

-22-

As of June 30, 2005 and 2004, capital surplus consisted of the following:


	June 30
	2005		2004

From merger	$	24,003,546	$	24,132,297
Additional paid-in capital		23,139,481		23,172,550
From convertible bonds		9,360,424		9,410,632
From long-term investments		126,128		115,665
From treasury stock transactions		91,241		54,715
Donations		55		55

	$	56,720,875	$	56,885,914

The Company’s Articles of Incorporation as revised on May 10, 2005 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:

Legal capital reserve at 10% of the profits left over, until the accumulated legal capital reserve has equaled the Company’s total capital;

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

Bonus to directors and supervisors and bonus to employees of the Company equal to 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 and supervisors. The Company may issue stock bonuses to employees of an affiliated company meeting the conditions set by the Board of Directors or, by the person duly authorized by the Board of Directors;

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

The Company’s Articles of Incorporation also stipulate 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, however, the ratio for stock dividend shall not exceed 50% of total distribution.

Any appropriations of net income are recorded in the financial statement in the year of shareholder approval.

The appropriation for legal capital reserve is made until the reserve equals the aggregate par value of the Company’s outstanding capital stock. The reserve can only be used to offset an accumulated deficit or the portion in excess of 50% of the outstanding capital stock can be distributed as dividends and bonuses when the reserve balance has reached 50% of the aggregate par value of the outstanding capital stock of the Company.

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

-23-

The appropriations of earnings for 2004 and 2003 were approved in the shareholders’ meetings on May 10, 2005 and May 11, 2004, respectively. The appropriations and dividends per share are as follows:


						Dividends Per Share
	Appropriation of Earnings					(NT$)
	For Fiscal		For Fiscal			For Fiscal		For Fiscal
	Year 2004		Year 2003			Year 2004		Year 2003

Legal capital reserve	$	8,820,201	$	4,725,870
Special capital reserve		2,226,427		(68,945	)
Employees’ profit sharing — in cash		3,086,215		681,628
Employees’ profit sharing — in stock		3,086,215		2,726,514
Cash dividends to preferred shareholders		—		184,493		$	—	$	0.35
Cash dividends to common shareholders		46,504,097		12,159,971			2.00		0.60
Stock dividends to common shareholders		11,626,024		28,373,267			0.50		1.41
Bonus to directors and supervisors		231,466		127,805


	$	75,580,645	$	48,910,603

The amounts of the above appropriations of earnings for 2004 and 2003 are consistent with the resolutions of the meetings of the Board of Directors on February 22, 2005 and February 17, 2004. However, the Company Law prescribes that TSMC, as a holder of treasury stock, shall not participate in the appropriation of earnings. Therefore, the actual cash dividend per share and stock dividend per share are slightly more than those in the aforementioned resolution. If the above bonus to employee, directors and supervisors had been paid entirely in cash and charged against income for 2004 and 2003, the after income tax basic earnings per share for the years ended December 31, 2004 and 2003 would have decreased from NT$3.97 to NT$3.70 and NT$2.33 to NT$2.15, respectively. The shares distributed as a bonus to employees represented 1.33% and 1.35% of the Company’s total outstanding common shares as of December 31, 2004 and 2003, respectively.

The above information about the appropriations of bonus to employees, directors and supervisors is available at Market Observation 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 the Company on earnings generated since January 1, 1998.

15. STOCK-BASED COMPENSATION PLANS

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

Under the 2003 Plan and the 2002 Plan, units that had never been granted, or had been granted and subsequently cancelled were expired as of June 30, 2005.

-24-

Information about outstanding stock options for the six months ended June 30, 2005 and 2004 was as follows:


				Weighted-
				Average
	Number of			Exercise
	Options			Price
	(in Thousands)			(NT$)
Six months ended June 30, 2005

Beginning balance		64,367		$	40.5
Options granted		14,864			48.4
Options exercised		(2,941	)		39.9
Options cancelled		(2,931	)		42.7


Ending balance		73,359			42.1


Six months ended June 30, 2004

Beginning balance		49,357		$	43.0
Options granted		20,091			47.4
Options cancelled		(2,510	)		45.1


Ending balance		66,938			44.2

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

As of June 30, 2005, information about outstanding and exercisable options was as follows:

Options Outstanding

Options Exercisable

Weighted-

average

Range of

Number of

Remaining

Exercise

Number of

Exercise

Options (in

Contractual

Price

Options (in

Price

Price (NT$)

Thousands)

Life (Years)

(NT$)

Thousands)

(NT$)

29.9-42.1

50,195

7.60

38.8

25,032

38.8

47.0-54.5

23,164

9.33

49.2

—

73,359

25,032

-25-

No compensation cost was recognized under intrinsic value method for the six months ended June 30, 2005 and 2004. Had the Company used the fair value based method (based on the Black-Scholes model) to evaluate the options granted after January 1, 2004, the assumptions and pro forma results of the Company for the six months ended June 30, 2005 and 2004 would have been as follows:


	Six Months Ended June 30
	2005			2004

Assumptions:
Expected dividend yield		1.00%-3.44	%		1.00	%
Expected volatility		43.77%-46.15	%		43.19%-43.25	%
Risk free interest rate		3.07%-3.85	%		3.07%-3.85	%
Expected life	5 years			5 years

Net income:
Net income as reported	$	35,187,334		$	42,198,802
Pro forma net income		35,140,859			42,184,898

Earnings per share (EPS) — after income tax (NT$):
Basic EPS as reported	$	1.43		$	1.70
Pro forma basic EPS		1.42			1.70
Diluted EPS as reported		1.43			1.70
Pro forma diluted EPS		1.42			1.70

The estimated weighted average fair value per unit for the options granted during the six months ended June 30, 2005 and 2004 was NT$17.69 and NT$19.75, respectively.

16. TREASURY STOCK


					(Shares in Thousands)
	Beginning		Increase/				Ending
	Shares		Distribute		Decrease		Shares
Six months ended June 30, 2005

Reclassification of parent company stock held by subsidiaries from long-term investments		45,521		2,242		901		46,862


Six months ended June 30, 2004

Reclassification of parent company stock held by subsidiaries from long-term investments		40,597		5,676		303		45,970
Repurchase under share buyback plan		—		124,720		—		124,720


		40,597		130,396		303		170,690

Proceeds from the sales of treasury stock for the six months ended June 30, 2005 and 2004 were NT$49,364 thousand and NT$18,218 thousand, respectively. The Company’s capital stock held by a subsidiary as an investment is recorded as treasury stock, with the holder having the same rights as other common shareholders. As of June 30, 2005 and 2004, the book value of the treasury stock was NT$1,552,573 thousand and NT$1,616,669 thousand, respectively; the market value was NT$2,648,643 thousand and NT$2,247,024 thousand, respectively. The Company’s stocks held by its subsidiaries are treated as treasury stock and the holders are entitled to the rights of shareholders. However, starting from June 24, 2005, in accordance with the revised Company Law, the holders will be no longer entitled to the right to vote.

-26-

The Company held a special meeting of the board of directors and approved a share buyback plan to repurchase the Company’s common shares listed on the TSE during the period from March 24, 2004 to May 23, 2004. The Company repurchased 124,720 thousand common shares for a total cost of NT$7,059,798 thousand. All the treasury stock repurchased under the buyback plan was retired on August 16, 2004.

17. EARNINGS PER SHARE

EPS is computed as follows:


					Number of		EPS (NT$)
	Amounts (Numerator)				Shares		Before		After
	Before		After		(Denominator)		Income		Income
	Income Tax		Income Tax		(in Thousands)		Tax		Tax
Six months ended June 30, 2005

Basic EPS
Income available to common shareholders	$	33,997,724	$	35,187,334		24,676,592	$	1.38	$	1.43

Effect of dilutive potential common stock — stock options		—		—		10,537


Diluted EPS
Income available to common shareholders (including effect of dilutive potential common stock)	$	33,997,724	$	35,187,334		24,687,129	$	1.38	$	1.43


Six months ended June 30, 2004

Basic EPS
Income available to common shareholders	$	41,555,958	$	42,198,802		24,760,690	$	1.68	$	1.70

Effect of dilutive potential common stock — stock options		—		—		9,703


Diluted EPS
Income available to common shareholders (including effect of dilutive potential common stock)	$	41,555,958	$	42,198,802		24,770,393	$	1.68	$	1.70

18. RELATED PARTY TRANSACTIONS

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

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

b.		Philips, a major shareholder of the Company.

c.		Subsidiaries

TSMC-Shanghai
TSMC-North America
TSMC-Europe
TSMC-Japan

Investees

GUC (with controlling financial interest)
VisEra (with controlling financial interest)
VIS (accounted for using equity method)
SSMC (accounted for using equity method)

-27-

Indirect subsidiaries

WaferTech, LLC (WaferTech)
TSMC Technology, Inc. (TSMC Technology)

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


	2005				2004
	Amount		%		Amount		%
For the six months ended June 30

Sales
TSMC-North America	$	64,760,945		56	$	68,191,878		55
Philips and its affiliates		1,147,115		1		2,712,508		2
Others		186,880		—		205,544		—


	$	66,094,940		57	$	71,109,930		57


Purchases
WaferTech	$	5,117,622		31	$	7,505,754		35
VIS		2,168,998		13		4,247,055		19
SSMC		2,094,617		13		3,050,439		14
TSMC-Shanghai		234,333		1		—		—


	$	9,615,570		58	$	14,803,248		68


Manufacturing expenses — technical assistance fees Philips (Note 20a)	$	202,334		—	$	808,072		1


Marketing expenses — commission
TSMC-Japan	$	133,765		22	$	139,243		19
TSMC-Europe		116,034		19		105,175		14


	$	249,799		41	$	244,418		33


General and administrative expenses — rental expense
GUC	$	8,162		—	$	—		—


Proceeds from disposal of property, plant and equipment
TSMC-Shanghai	$	106,412		38	$	—		—
VIS		—		—		32,960		13


	$	106,412		38	$	32,960		13


Non-operating income and gains
SSMC (primarily technical service income, see Note 20f)	$	146,655		5	$	149,362		5
VIS (primarily technical service income, see Note 20k)		77,504		3		29,763		1
TSMC-Shanghai (primarily from deferred gain realized for disposal of property, plant and equipment)		75,743		3		—		—
Others		10,752		—		2,076		—


	$	310,654		11	$	181,201		6

(Continued)

-28-


	2005				2004
	Amount		%		Amount		%
At end of June 30

Receivables
TSMC-North America	$	14,513,699		97	$	16,954,566		94
Philips and its affiliates		467,843		3		922,713		5
Others		18,136		—		106,453		1


	$	14,999,678		100	$	17,983,732		100


Other receivables
TSMC-Technology	$	715,306		46	$	3,852		3
TSMC-North America		415,650		27		74,721		51
TSMC-Shanghai		271,905		17		—		—
SSMC		115,460		7		60,028		41
Others		47,463		3		8,409		5


	$	1,565,784		100	$	147,010		100


Payables
VIS	$	883,144		41	$	1,844,800		40
WaferTech		793,200		37		1,296,351		28
SSMC		284,080		13		685,240		15
TSMC-Shanghai		70,080		3		—		—
Philips and its affiliates		—		—		745,428		16
Others		115,813		6		90,182		1


	$	2,146,317		100	$	4,662,001		100


Other long-term payables
Philips and its affiliates	$	1,727,133		100	$	3,622,369		100


Deferred gain on intercompany transactions
TSMC-Shanghai (disposal of property, plant and equipment)	$	708,941		100	$	—		—

The terms of sales to related parties are not significantly different from those to third parties. For other related party transactions, prices are determined in accordance with the related contractual agreements.

19. SIGNIFICANT LONG-TERM LEASES

The Company leases land from the Science-Based Industrial Park Administration. These lease agreements expire on various dates from March 2008 to December 2020 and can be renewed upon their expiration.

-29-

As of June 30, 2005, future remaining lease payments were as follows:


Year	Amount

2005 (3^rd to 4^th quarter)	$	129,503
2006		251,415
2007		251,415
2008		233,250
2009		227,195
2010 and thereafter		1,292,511


	$	2,385,289

20. SIGNIFICANT COMMITMENTS AND CONTINGENCIES

The significant commitments and contingencies of the Company as of June 30, 2005 are as follows:

On June 20, 2004, the Company and Philips revised the Technical Cooperation Agreement, which was originally signed on May 12, 1997, with an effective date from January 1, 2004 for five years. Upon expiration, this amended Technical Cooperation Agreement will be terminated at the expiration date and will not be automatically renewed. Under this amended Technical Cooperation Agreement, the Company will pay Philips royalties based on a fixed amounts mutually agreed-on, rather than under certain percentage of the Company’s annual net sales. The Company and Philips agree to cross license the patents owned by each party. The Company also obtained through Philips a number of patent cross licenses.

Under a technical cooperation agreement with ITRI, the Company shall reserve and allocate up to 35% of certain of its production capacity for use by the Ministry of Economic Affairs (MOEA) or any other party designated by the MOEA. The term of this agreement is for five years beginning January 1, 1987 and is automatically renewed for successive periods of five years unless otherwise terminated by either party with one year prior notice. The agreement was automatically renewed in 1992 and 1997 and on January 1, 2002.

On October 28, 1992, the Company entered into a letter agreement with Philips under which Philips has an option on up to 30% of the Company’s capacity as agreed in the agreement on most favored terms and conditions for similar orders, as long as Philips’ and its affiliates’ shareholding in the Company remains at 24.8% or higher. As of June 30, 2005, Philips’ and its affiliates’ shareholding in the Company is 18.74%.

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, 2005, the Company had a total of US$47,868 thousand of guarantee deposits.

Under a Shareholders Agreement entered into with Philips and EDB Investments Pte Ltd. on March 30, 1999, the parties formed a joint venture company, SSMC, for the purpose of constructing an integrated circuit foundry in Singapore. As of June 30, 2005, the Company’s equity interest in SSMC was 32%. The Company and Philips committed to buy specific percentages of the production capacity of SSMC. The Company and Philips are required, in the aggregate, to purchase up to 70% of SSMC’s full capacity, but the Company along is not required to purchase more than 28% of the annual installed capacity. If any party defaults on the commitment and the capacity utilization of SSMC fall below a specific percentage of its total capacity, the defaulting party is required to compensate SSMC for all related unavoidable costs.

-30-

The Company provides technical services to SSMC under a Technical Cooperation Agreement (the Agreement) entered into on May 12, 1999. The Company receives compensation for such services computed at a specific percentage of net selling price of certain products sold by SSMC. The Agreement shall remain in force for ten years and may be automatically renewed for successive periods of five years each unless pre-terminated by either party under certain conditions.

Under a Technology Transfer Agreement (TTA) with National Semiconductor Corporation (National) entered into on June 27, 2000, the Company shall receive payments for the licensing of certain technology to National. The agreement was to remain in force for ten years and could be automatically renewed for successive periods of two years thereafter unless either party gives notice for early termination under certain conditions. In January 2003, the Company and National entered into a Termination Agreement whereby the TTA was terminated for convenience. Under the Termination Agreement, the Company will be relieved of any further obligation to transfer any additional technology. In addition, the Company granted National an option to request the transfer of certain technologies under the same terms and conditions as the terminated TTA. The option will expire in January 2008.

Beginning in 2001, the Company entered into several licensing arrangements for certain semiconductor patents. The terms of the contracts range from five to ten years with payments to be made in the form of royalties over the term of the related contracts. The Company has recorded the related amounts as a liability with the corresponding amounts recorded as deferred charges which are amortized and charged to cost of sales on a straight-line basis over the estimated life of the technology or the term of the contract, whichever is shorter.

In November 2002, the Company entered into an Amended and Restated Joint Technology Cooperation Agreement with Philips, Freescale Semiconductor, Inc. and STMicroelectronics to jointly develop 90-nm to 65-nm advanced CMOS Logic and e-DRAM technologies. The Company also agreed to align 0.12 micron CMOS Logic technology to enhance its foundry business opportunities. The Company will contribute process technologies and share a portion of the costs associated with this joint development project.

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

The Company provides a technology transfer to VIS under a Manufacturing License and Technology Transfer Agreement entered into in August 2004. The Company receives compensation for such technology transfer in the form of royalty payments from VIS computed at specific percentages of net selling price of certain products sold by VIS. VIS agreed to reserve its certain capacity to manufacture for the Company certain products at prices as agreed by the parties.

Amounts available under unused letters of credit as of June 30, 2005 were NT$6,480 thousand.

The Company provided guarantees on loans amounting to US$30,000 thousand and US$40,000 thousand for TSMC Development, Inc. (TSMC Development) and TSMC-North America, respectively.

TSMC, TSMC-North America and WaferTech filed a series of lawsuits in late 2003 and 2004 in both state and federal courts in California and with the U.S. International Trade Commission against Semiconductor Manufacturing International Corporation (“SMIC”), SMIC (Shanghai) and SMIC Americas. The lawsuits alleged that SMIC companies infringed multiple TSMC patents and misappropriated TSMC’s trade secrets. These suits have been settled out of court on January 30, 2005. As part of the settlement, SMIC will pay TSMC US$175 million over six years to resolve TSMC’s patent infringement and trade secret claims.

-31-

21. 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: Please see Table 2 attached;

c.		Marketable securities held: Please see Table 3 attached;

d.		Marketable securities acquired or disposed of at costs or prices of at least NT$100 million or 20% of the paid-in capital: Please see Table 4 attached;

e.		Acquisition of individual real estate properties at costs of at least NT$100 million or 20% of the paid-in capital: None;

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

g.		Total purchases from or sales to related parties of at least NT$100 million or 20% of the 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 on which the Company exercises significant influence: Please see Table 7 attached;

j.		Financial instrument transactions:

	1)		Derivative financial instruments

			The Company entered into derivative financial instrument transactions during the six months ended June 30, 2005 and 2004 to manage exposures related to foreign-exchange rate and interest rate fluctuations. Certain information on these contracts was as follows:

Outstanding forward exchange contracts as of June 30, 2005 and 2004


			Contract
Financial			Amount
Instruments	Currency	Maturity	(in Thousands)

June 30, 2005
Sell	US$/NT$	Jul. 2005 to Aug. 2005	US$103,000

June 30, 2004
Sell	US$/NT$	July. 2004 to Apr. 2005	US$2,158,000
Sell	EUR/US$	Aug. 2004	EUR 20,000

As of June 30, 2005 and 2004, payables from forward exchange contracts (included in the “other current liabilities” account) aggregated NT$38,173 thousand and NT$903,322 thousand, respectively.

-32-

	b)		Cross currency swap contracts

			Outstanding cross currency swap contracts as of June 30, 2005 were as follows:


			Range of
	Contract Amount	Range of	Interest Rate
Maturity Date	(in Thousands)	Interest Rate Paid	Received
Jul. 2005 to Aug. 2005	US$2,045,000	3.10%-3.40%	1.03%-1.22%
	(US$/NT$)

			The Company did not enter into any cross currency swap contracts during the six months ended June 30, 2004.

			As of June 30, 2005, payables resulted from cross currency swap contracts (included in the “other current liabilities” account) were NT$705,607 thousand.

			During the six months ended June 30, 2005 and 2004, the net exchange gain or loss arising from forward exchange contracts and cross currency swap contracts was recognized in the “foreign exchange loss, net” account and the difference in interest was recorded in interest income or expense.

	c)		Interest rate swap contracts

			The Company rescinded all outstanding interest rate swap contracts during the three months ended March 31, 2005 before their original maturities. The rescission loss of NT$28,295 thousand was recognized in the “interest expense” account. There were no outstanding contracts at June 30, 2005.

			Outstanding contracts as of June 30, 2004 were as follows:


		Contract
		Amount
Contract Date	Period	(in Thousands)
Sep. 2003	Sep. 2003 to Dec. 2005	NT$ 500,000
Oct. 2003	Oct. 2003 to Dec. 2005	NT$ 500,000
Oct. 2003	Oct. 2003 to Dec. 2005	NT$ 500,000
Oct. 2003	Oct. 2003 to Dec. 2005	NT$ 500,000
Oct. 2003	Oct. 2003 to Dec. 2005	NT$ 500,000
Nov. 2003	Nov. 2003 to Dec. 2005	NT$ 500,000

Transaction risk

	i)		Credit risk. Credit risk represents the positive net settlement amount of those contracts with positive fair values at the balance sheet date. The positive net settlement amount represents the loss to be incurred by the Company if the counter-parties breached the contracts. The banks, which are the counter-parties to the foregoing derivative financial instruments, are reputable financial institutions. Management believes its exposure related to the potential default by those counter-parties is low.

	ii)		Market price risk. All derivative financial instruments are intended as hedges for fluctuations in foreign exchange rates and interest rates. Gains or losses from these hedging instruments are likely to be offset by gains or losses from the hedged items. Thus, market price risk is believed to be low.

-33-

	iii)		Cash flow risk and the amount and period of future cash needs.

			As of June 30, 2005, the Company’s future cash needs for outstanding forward exchange contracts and cross currency swap contracts were as follows:


	Inflow	Outflow
Term	(in Thousands)	(in Thousands)
Within one year	NT$67,304,233	US$	2,148,000

The Company has sufficient operating capital to meet the above cash needs. In addition, there will be corresponding cash inflow for the cash outflow. Therefore, the cash flow risk is low.

Fair values of financial instruments were as follows:


	June 30, 2005						June 30, 2004
	Carrying						Carrying
	Amount			Fair Value			Amount			Fair Value
Non-derivative financial instruments

Assets
Short-term investments	$	49,408,608		$	49,408,608		$	41,199,013		$	41,491,242
Long-term investments (securities with market price)		32,451,393			39,638,685			16,928,153			23,154,967
Liabilities Bonds payable (including current portion)		30,000,000			30,429,929			35,000,000			35,729,923

Derivative financial instruments

Assets (liabilities)
Forward exchange contracts (sell)		(39,969	)		(36,560	)		(761,592	)		(538,407	)
Cross currency swap contracts		(674,894	)		(452,530	)		—			—
Interest rate swap contracts		—			—			—			(26,956	)

			The above financial instruments do not include cash and cash equivalents, receivables, other financial assets, payables, and payable to contractors and equipment suppliers. The carrying amounts of the aforementioned financial instruments reported in the balance sheet approximate their fair values.

			The above financial instruments also exclude refundable deposits, guarantee deposits, long-term investments that do not have quoted market prices as well as other long-term payables. The future cash inflow and outflow of the deposits approximate their fair values. Some of long-term investments do not have quoted market prices; therefore, fair values for those long-term investments are not shown above. The fair value of other long-term payables is determined using the discounted value of expected cash flows, which approximates their carrying amount.

-34-

Fair values of financial instruments were determined as follows:

	a)		Fair value of short-term and publicly traded long-term investments is based on quoted market prices.

	b)		Fair value of bonds payable is based on their quoted market price.

	c)		Fair value of derivative financial instruments is the amount receivable from or payable to the counter-party if the contracts were terminated on the balance sheet date.

The fair values of some financial and non-financial instruments were not included in the fair values disclosed above. Accordingly, the sum of the fair values of the financial instruments listed above does not represent the fair value of the Company as a whole.

Information on investment in Mainland China

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

	2)		Significant direct or indirect transactions with the investee company, 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 18.

-35-

TABLE 1

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY, LTD. AND INVESTEES

FINANCING PROVIDED
FOR THE SIX MONTHS ENDED JUNE 30, 2005
(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

Financing

Maximum

Company’s

Balance

Financing

for the

Ending

Limit for

Amount

Account

Period

Balance

Type of

Reasons for

Allowance

Each

Limits

Financial

(US$ in

Interest

Financing

Transaction

Short-term

for

Collateral

Borrowing

(US$ in

No.

Financing Name

Counter-party

Statement

Thousand)

Rate

(Note 1)

Amounts

Financing

Bad Debt

Item

Value

Company

Thousand)

TSMC International

TSMC Development

Other receivables

1,897,080

1.5

—

Operating capital

—

N/A

31,237,580

(US$60,000

)

(US$60,000

)

(US$987,968

)

(Note 2

)

TSMC Partners

TSMC Development

Other receivables

2,529,440

948,540

1.5

—

Operating capital

—

N/A

(Note 3

)

(US$80,000

)

(US$30,000

)


Note 1:		The No. 2 represents necessary for short-term financing.

Note 2:		Not exceeding the issued capital of the Company.

Note 3:		Generally not exceeding the issued capital of the Company, unless approved by all members of the board.

-36-

TABLE 2

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY, LTD. AND INVESTEES

ENDORSEMENT/GUARANTEE PROVIDED
FOR THE SIX MONTHS ENDED JUNE 30, 2005
(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Specified)

Ratio of

Accumulated

Amount of

Counter-party

Maximum

Value of

Collateral to Net

Maximum

Endorsement/

Nature of

Limits on Each

Balance for the

Collateral

Equity of the

Collateral/Guarantee

Guarantee

Relationship

Counter-party's

Period

Ending Balance

Property, Plant

Latest Financial

Amounts Allowable

No.

Provider

Name

(Note 2)

Endorsement/Guarantee Amounts

(US$ in Thousand)

and Equipment

Statement

(Note 1)

The Company

TSMC Development

Not exceed 10% of the net worth of

1,897,080

948,540

—

0.25

96,049,982

the Company, and also limiting to

(US$60,000)

(US$30,000)

TSMC-North America

the total capital issued of the

1,264,720

—

0.33

endorsement/guarantee company,

(US$40,000)

unless otherwise approved by

Board of Directors.


Note 1:		25% of the net worth of the Company as of June 30, 2005.

Note 2:		The No. 2 represents a subsidiary in which the Company holds directly over 50% of the equity interest.
		The No. 3 represents an investee in which the Company holds directly and indirectly over 50% of the equity interest.

-37-

TABLE 3

TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY, LTD. AND INVESTEES

MARKETABLE SECURITIES HELD
JUNE 30, 2005
(Amounts in Thousands of New Taiwan Dollars, Unless Otherwise Specified)


				June 30, 2005
										Market Value or
										Net Asset
		Relationship with	Financial Statement	Shares/Units		Carrying Value		Percentage of		Value
Held Company Name	Marketable Securities Type and Name	the Company	Account	(In Thousand)		(US$ in Thousand)		Ownership		(US$ in Thousand)		Note

The Company	Government bonds
	United States Treas NTS	—	Short-term investment		—	US$	80,106		N/A	US$	79,826
	Kreditanstalt Fur Wiederaufbau	—	Short-term investment		—	US$	6,881		N/A	US$	6,869
	2002 Government Bond Series B	—	Long-term investment		—		358,683		N/A		358,136
	2003 Government Bond Series I	—	Long-term investment		—		3,392,485		N/A		3,391,450
	2004 Government Bond Series A	—	Long-term investment		—		2,349,767		N/A		2,350,449
	2004 Government Bond Series E	—	Long-term investment		—		3,896,211		N/A		3,895,418
	2004 Kaohsiung Municipal Bond Series A	—	Long-term investment		—		620,000		N/A		619,999
	2005 Government Bond Series A	—	Long-term investment		—		1,200,000		N/A		1,200,265

	Bond funds
	JF Taiwan First Bond Fund	—	Short-term investment		73,993		1,003,701		N/A		1,019,467
	ABN AMRO Bond Fund	—	Short-term investment		134,906		1,956,175		N/A		1,991,304
	JF Taiwan Bond Fund	—	Short-term investment		78,698		1,153,209		N/A		1,176,489
	INVESCO R.O.C. Bond A Fund	—	Short-term investment		69,846		1,003,373		N/A		1,018,827
	Dresdner Bond DAM Fund	—	Short-term investment		69,303		771,617		N/A		786,496
	Barits Bond Fund	—	Short-term investment		64,049		752,149		N/A		763,507
	Shinkong Chi Shin Bond Fund	—	Short-term investment		151,594		2,100,000		N/A		2,129,516
	NITC Bond Fund	—	Short-term investment		3,764		600,000		N/A		606,734
	ABN AMRO Select Bond Fund	—	Short-term investment		18,235		200,000		N/A		202,478
	HSBC NTD Money Management Fund	—	Short-term investment		41,568		600,000		N/A		605,820

	Stock
	Taiwan Mask Corp.	—	Short-term investment		1,787		6,528		—		26,623
	TSMC International	Subsidiary	Long-term investment		987,968		23,057,382		100		23,057,382
	VIS	Investee accounted for using equity method	Long-term investment		437,891		5,115,164		27		12,449,270
	TSMC Partners	Subsidiary	Long-term investment		300		3,873,176		100		3,873,176
	SSMC	Investee accounted for using equity method	Long-term investment		382		3,514,280		32		3,514,280
	TSMC-North America	Subsidiary	Long-term investment		11,000		794,692		100		1,429,190	Treasury stock of NT$634,498 thousand is deducted from the carrying value.
	GUC	Investee	Long-term investment		40,149		403,208		46		426,476
	TSMC-Japan	Subsidiary	Long-term investment		6		95,013		100		95,013
	VisEra	Investee	Long-term investment		5,100		62,668		25		63,595
	TSMC-Europe	Subsidiary	Long-term investment		—		22,491		100		22,491

(Continued)

-38-


				June 30, 2005
										Market Value or
										Net Asset
		Relationship with	Financial Statement	Shares/Units		Carrying Value		Percentage of		Value
Held Company Name	Marketable Securities Type and Name	the Company	Account	(In Thousand)		(US$ in Thousand)		Ownership		(US$ in Thousand)		Note


	United Industrial Gases Co., Ltd.	—	Long-term investment		16,783	$	193,584		10	$	265,434
	Shin-Etsu Handotai Taiwan Co., Ltd.	—	Long-term investment		10,500		105,000		7		173,007
	W.K. Technology Fund IV	—	Long-term investment		5,000		50,000		2		54,046
	Hontung Venture Capital Co., Ltd.	—	Long-term investment		8,392		83,916		10		54,509
	Globaltop Partner I Venture Capital Corp.	—	Long-term investment		5,000		50,000		1		49,574

	Corporate bonds
	Taiwan Power Company	—	Short-term investment		—		816,282		N/A		802,214
	Formosa Petrochemical Corporation	—	Short-term investment		—		311,568		N/A		307,632
	AIG Sunamerica Global Fing Ix	—	Short-term investment		—	US$	1,032		N/A	US$	1,012
	Anz Cap Tr I	—	Short-term investment		—	US$	1,012		N/A	US$	996
	Abbott Labs	—	Short-term investment		—	US$	2,732		N/A	US$	2,654
	Abbott Labs	—	Short-term investment		—	US$	1,581		N/A	US$	1,560
	Ace Ltd.	—	Short-term investment		—	US$	1,046		N/A	US$	1,027
	Alltel Corp.	—	Short-term investment		—	US$	609		N/A	US$	605
	Allstate Life Global Fdg Secd	—	Short-term investment		—	US$	2,998		N/A	US$	2,985
	American Express Co.	—	Short-term investment		—	US$	3,550		N/A	US$	3,474
	American Gen Fin Corp.	—	Short-term investment		—	US$	1,768		N/A	US$	1,728
	American Gen Fin Corp. Mtn	—	Short-term investment		—	US$	3,130		N/A	US$	3,039
	American Gen Fin Corp. Mtn	—	Short-term investment		—	US$	1,058		N/A	US$	1,025
	American Honda Fin Corp. Mtn	—	Short-term investment		—	US$	3,800		N/A	US$	3,789
	American Intl Group Inc. Mtnf	—	Short-term investment		—	US$	3,795		N/A	US$	3,789
	Amgen Inc.	—	Short-term investment		—	US$	3,005		N/A	US$	2,978
	Amsouth Bk Birmingham Ala	—	Short-term investment		—	US$	1,972		N/A	US$	1,970
	Associates Corp. North Amer	—	Short-term investment		—	US$	2,700		N/A	US$	2,648
	Bank New York Inc.	—	Short-term investment		—	US$	1,525		N/A	US$	1,501
	Bank New York Inc.	—	Short-term investment		—	US$	1,972		N/A	US$	1,974
	Bank Scotland Treas Svcs Plc	—	Short-term investment		—	US$	2,715		N/A	US$	2,717
	Bank Utd Houston Tx Mtbn	—	Short-term investment		—	US$	580		N/A	US$	563
	Bear Stearns Cos Inc.	—	Short-term investment		—	US$	3,757		N/A	US$	3,755
	Bear Stearns Cos Inc.	—	Short-term investment		—	US$	3,518		N/A	US$	3,482
	Bear Stearns Cos Inc. Medium Te	—	Short-term investment		—	US$	2,103		N/A	US$	2,101
	Beneficial Corp. Mtn Bk Entry	—	Short-term investment		—	US$	2,434		N/A	US$	2,404
	Berkshire Hathaway Fin Corp.	—	Short-term investment		—	US$	1,498		N/A	US$	1,482
	British Telecommunications Plc	—	Short-term investment		—	US$	2,104		N/A	US$	2,039
	Cit Group Hldgs Inc.	—	Short-term investment		—	US$	3,203		N/A	US$	3,137
	Cit Group Inc.	—	Short-term investment		—	US$	2,000		N/A	US$	2,002
	Cargill Inc.	—	Short-term investment		—	US$	2,120		N/A	US$	2,041
	Chase Manhattan Corp. New	—	Short-term investment		—	US$	2,246		N/A	US$	2,216
	Chase Manhattan Corp. New	—	Short-term investment		—	US$	1,628		N/A	US$	1,588
	Citicorp	—	Short-term investment		—	US$	1,473		N/A	US$	1,441
	Cogentrix Energy Inc.	—	Short-term investment		—	US$	2,885		N/A	US$	2,833
	Colonial Pipeline Co.	—	Short-term investment		—	US$	1,625		N/A	US$	1,572
	Compaq Computer Corp.	—	Short-term investment		—	US$	3,719		N/A	US$	3,513
	Consolidated Edison Co. Ny Inc.	—	Short-term investment		—	US$	3,688		N/A	US$	3,550
	Corestates Cap Corp.	—	Short-term investment		—	US$	1,062		N/A	US$	1,039
	Countrywide Fdg Corp. Mtn	—	Short-term investment		—	US$	2,158		N/A	US$	2,104

(Continued)

-39-


				June 30, 2005
										Market Value or
										Net Asset
		Relationship with	Financial Statement	Shares/Units		Carrying Value		Percentage of		Value
Held Company Name	Marketable Securities Type and Name	the Company	Account	(In Thousand)		(US$ in Thousand)		Ownership		(US$ in Thousand)		Note


	Countrywide Home Lns Inc.	—	Short-term investment		—	US$	5,210		N/A	US$	5,079
	Countrywide Fdg Corp. Mtn	—	Short-term investment		—	US$	3,500		N/A	US$	3,498
	Countrywide Finl Corp.	—	Short-term investment		—	US$	3,000		N/A	US$	2,997
	Credit Suisse Fb USA Inc.	—	Short-term investment		—	US$	4,141		N/A	US$	4,090
	Credit Suisse First Boston USA	—	Short-term investment		—	US$	2,249		N/A	US$	2,231
	Credit Suisse First Boston	—	Short-term investment		—	US$	786		N/A	US$	766
	Daimlerchrysler North Amer	—	Short-term investment		—	US$	997		N/A	US$	979
	Daimlerchrysler North Amer Hld	—	Short-term investment		—	US$	749		N/A	US$	746
	Dayton Hudson Corp.	—	Short-term investment		—	US$	2,104		N/A	US$	2,108
	Deere John Cap Corp.	—	Short-term investment		—	US$	5,079		N/A	US$	5,080
	Dell Computer Corp.	—	Short-term investment		—	US$	3,054		N/A	US$	2,962
	Den Danske Bk Aktieselskab	—	Short-term investment		—	US$	2,192		N/A	US$	2,116
	Diageo Plc	—	Short-term investment		—	US$	3,459		N/A	US$	3,454
	Dow Chem Co.	—	Short-term investment		—	US$	921		N/A	US$	885
	European Invt Bk	—	Short-term investment		—	US$	8,315		N/A	US$	8,119
	European Invt Bk	—	Short-term investment		—	US$	3,918		N/A	US$	3,927
	Fpl Group Cap Inc.	—	Short-term investment		—	US$	1,001		N/A	US$	997
	Fpl Group Cap Inc.	—	Short-term investment		—	US$	860		N/A	US$	853
	Shell Finance (U K ) Plc	—	Short-term investment		—	US$	3,604		N/A	US$	3,515
	Fifth Third Bk Cincinnati Oh	—	Short-term investment		—	US$	2,419		N/A	US$	2,449
	First Data Corp.	—	Short-term investment		—	US$	3,013		N/A	US$	2,973
	Fleet Finl Group Inc. New	—	Short-term investment		—	US$	494		N/A	US$	482
	Fleet Finl Group Inc. New	—	Short-term investment		—	US$	975		N/A	US$	946
	Fleet Boston Corp.	—	Short-term investment		—	US$	2,850		N/A	US$	2,810
	Ford Mtr Cr Co.	—	Short-term investment		—	US$	1,542		N/A	US$	1,503
	Gte Corp.	—	Short-term investment		—	US$	2,134		N/A	US$	2,071
	Gannett Co Inc.	—	Short-term investment		—	US$	2,999		N/A	US$	2,996
	General Elec Cap Corp. Mtn	—	Short-term investment		—	US$	8,862		N/A	US$	8,857
	General Elec Cap Corp. Mtn	—	Short-term investment		—	US$	3,989		N/A	US$	3,967
	General Elec Cap Corp. Mtn	—	Short-term investment		—	US$	1,040		N/A	US$	1,023
	General Re Corp.	—	Short-term investment		—	US$	3,500		N/A	US$	3,566
	Genworth Finl Inc.	—	Short-term investment		—	US$	3,412		N/A	US$	3,404
	Goldman Sachs Group L P	—	Short-term investment		—	US$	1,637		N/A	US$	1,563
	Greenpoint Finl Corp.	—	Short-term investment		—	US$	974		N/A	US$	968
	HSBC USA Inc. New	—	Short-term investment		—	US$	1,154		N/A	US$	1,113
	Hancock John Global Fdg II Mtn	—	Short-term investment		—	US$	3,566		N/A	US$	3,562
	Hancock John Global Fdg Mtn	—	Short-term investment		—	US$	1,003		N/A	US$	984
	Hartford Finl Svcs Group Inc.	—	Short-term investment		—	US$	1,435		N/A	US$	1,406
	Hartford Finl Svcs Group Inc.	—	Short-term investment		—	US$	296		N/A	US$	296
	Heller Finl Inc.	—	Short-term investment		—	US$	2,071		N/A	US$	2,039
	Hershey Foods Corp.	—	Short-term investment		—	US$	1,627		N/A	US$	1,570
	Hewlett Packard Co.	—	Short-term investment		—	US$	3,373		N/A	US$	3,252
	Honeywell Inc.	—	Short-term investment		—	US$	3,284		N/A	US$	3,150
	Household Fin Corp.	—	Short-term investment		—	US$	532		N/A	US$	523
	Household Fin Corp.	—	Short-term investment		—	US$	2,993		N/A	US$	2,972
	Household Fin Corp. Mtn Bk Enty	—	Short-term investment		—	US$	3,542		N/A	US$	3,493
	Huntington Natl Bk Columbus Oh	—	Short-term investment		—	US$	2,954		N/A	US$	2,958

(Continued)

-40-


				June 30, 2005
										Market Value or
										Net Asset
		Relationship with	Financial Statement	Shares/Units		Carrying Value		Percentage of		Value
Held Company Name	Marketable Securities Type and Name	the Company	Account	(In Thousand)		(US$ in Thousand)		Ownership		(US$ in Thousand)		Note


	Huntington Natl Bk	—	Short-term investment		—	US$	3,003		N/A	US$	3,001
	ING Sec Life Instl Fdg	—	Short-term investment		—	US$	2,544		N/A	US$	2,543
	Intl Bk For Recon + Dev	—	Short-term investment		—	US$	5,232		N/A	US$	5,009
	International Business Machs	—	Short-term investment		—	US$	2,249		N/A	US$	2,237
	International Lease Fin Corp.	—	Short-term investment		—	US$	2,455		N/A	US$	2,457
	International Lease Fin Corp.	—	Short-term investment		—	US$	1,162		N/A	US$	1,163
	Intl Lease Fin Corp. Mtn	—	Short-term investment		—	US$	3,028		N/A	US$	2,993
	JP Morgan Chase + Co.	—	Short-term investment		—	US$	3,663		N/A	US$	3,570
	Jackson Natl Life Global Fdg	—	Short-term investment		—	US$	1,036		N/A	US$	1,020
	Jackson Natl Life Global Fdg S	—	Short-term investment		—	US$	1,999		N/A	US$	2,000
	Key Bk Na Med Term Nts Bk Entry	—	Short-term investment		—	US$	4,450		N/A	US$	4,479
	Keycorp Mtn Book Entry	—	Short-term investment		—	US$	3,500		N/A	US$	3,505
	Kraft Foods Inc.	—	Short-term investment		—	US$	773		N/A	US$	757
	Kraft Foods Inc.	—	Short-term investment		—	US$	1,037		N/A	US$	1,021
	ING Bank	—	Short-term investment		—	US$	2,114		N/A	US$	2,070
	Credit Suisse Fincl Products	—	Short-term investment		—	US$	1,507		N/A	US$	1,504
	Lehman Brothers Hldgs Inc.	—	Short-term investment		—	US$	1,163		N/A	US$	1,141
	Lehman Brothers Hldgs Inc.	—	Short-term investment		—	US$	3,705		N/A	US$	3,562
	Lehman Brothers Hldgs Inc.	—	Short-term investment		—	US$	2,166		N/A	US$	2,167
	Lilly Eli + Co.	—	Short-term investment		—	US$	3,750		N/A	US$	3,751
	Lincoln Natl Corp. In	—	Short-term investment		—	US$	519		N/A	US$	510
	Ameritech Capital Funding Co.	—	Short-term investment		—	US$	510		N/A	US$	505
	Merita Bk Ltd. Ny Brh	—	Short-term investment		—	US$	538		N/A	US$	522
	Merrill Lynch + Co Inc.	—	Short-term investment		—	US$	3,486		N/A	US$	3,447
	Metropolitan Life Global Mtn	—	Short-term investment		—	US$	1,907		N/A	US$	1,904
	Monumental Global Fdg II	—	Short-term investment		—	US$	1,534		N/A	US$	1,511
	Monumental Global Fdg II 2002a	—	Short-term investment		—	US$	1,045		N/A	US$	1,018
	Morgan Stanley Group Inc.	—	Short-term investment		—	US$	5,557		N/A	US$	5,526
	Morgan Stanley	—	Short-term investment		—	US$	2,136		N/A	US$	2,113
	National City Corp.	—	Short-term investment		—	US$	3,426		N/A	US$	3,415
	National Westminster Bk Plc	—	Short-term investment		—	US$	1,433		N/A	US$	1,391
	Nationwide Bldg Soc	—	Short-term investment		—	US$	3,457		N/A	US$	3,467
	Nationwide Bldg Soc Mtn	—	Short-term investment		—	US$	3,000		N/A	US$	2,995
	Nationwide Life Global Mtn	—	Short-term investment		—	US$	1,463		N/A	US$	1,462
	Northern Rock Plc Medium Term	—	Short-term investment		—	US$	2,002		N/A	US$	1,991
	Pnc Fdg Corp.	—	Short-term investment		—	US$	1,080		N/A	US$	1,052
	Pepsico Inc. Mtn Book Entry	—	Short-term investment		—	US$	3,818		N/A	US$	3,752
	Popular North Amer Inc. Mtn	—	Short-term investment		—	US$	3,042		N/A	US$	2,984
	Premark Intl Inc.	—	Short-term investment		—	US$	2,954		N/A	US$	2,875
	Pricoa Global Fdg 1 Mtn	—	Short-term investment		—	US$	3,500		N/A	US$	3,500
	Protective Life Secd Trs	—	Short-term investment		—	US$	2,920		N/A	US$	2,950
	Prudential Ins Co Amer	—	Short-term investment		—	US$	2,774		N/A	US$	2,768
	Prudential Ins Co Amer	—	Short-term investment		—	US$	2,648		N/A	US$	2,562
	Reinsurance Group Amer Inc.	—	Short-term investment		—	US$	2,091		N/A	US$	2,046
	Royal Bk Scotland Group Plc	—	Short-term investment		—	US$	1,563		N/A	US$	1,515
	Royal Bk Scotland Group Plc	—	Short-term investment		—	US$	369		N/A	US$	357
	Sbc Communications Inc.	—	Short-term investment		—	US$	3,681		N/A	US$	3,559

(Continued)

-41-


				June 30, 2005
										Market Value or
										Net Asset
		Relationship with	Financial Statement	Shares/Units		Carrying Value		Percentage of		Value
Held Company Name	Marketable Securities Type and Name	the Company	Account	(In Thousand)		(US$ in Thousand)		Ownership		(US$ in Thousand)		Note


	Sbc Communications Inc.	—	Short-term investment		—	US$	1,776		N/A	US$	1,757
	Slm Corp. Medium Term Nts	—	Short-term investment		—	US$	2,950		N/A	US$	2,961
	Slm Corp.	—	Short-term investment		—	US$	500		N/A	US$	498
	Sp Powerassests Ltd. Global	—	Short-term investment		—	US$	991		N/A	US$	980
	Safeco Corp.	—	Short-term investment		—	US$	765		N/A	US$	744
	St Paul Cos Inc. Mtn Bk Ent	—	Short-term investment		—	US$	2,661		N/A	US$	2,654
	Sara Lee Corp.	—	Short-term investment		—	US$	1,596		N/A	US$	1,565
	Scotland Intl Fin B V 144a	—	Short-term investment		—	US$	1,533		N/A	US$	1,488
	Suntrust Bks Inc.	—	Short-term investment		—	US$	1,062		N/A	US$	1,035
	Swedbank Sparbanken Svenge Ab	—	Short-term investment		—	US$	1,084		N/A	US$	1,043
	Tiaa Global Mkts Inc.	—	Short-term investment		—	US$	519		N/A	US$	507
	Tribune Co Med Trm Nts	—	Short-term investment		—	US$	2,943		N/A	US$	2,923
	US Bk Natl Assn Cincinnati Oh	—	Short-term investment		—	US$	2,669		N/A	US$	2,681
	Unitedhealth Group Inc.	—	Short-term investment		—	US$	3,119		N/A	US$	3,057
	Virginia Elec + Pwr Co	—	Short-term investment		—	US$	2,884		N/A	US$	2,766
	Vodafone Group Plc New	—	Short-term investment		—	US$	2,559		N/A	US$	2,540
	Wps Resources Corp.	—	Short-term investment		—	US$	1,107		N/A	US$	1,108
	Wal Mart Cda Venture Corp.	—	Short-term investment		—	US$	3,670		N/A	US$	3,549
	Washington Mut Inc.	—	Short-term investment		—	US$	4,735		N/A	US$	4,606
	Washington Mut Fin Corp.	—	Short-term investment		—	US$	1,043		N/A	US$	1,022
	Washington Post Co	—	Short-term investment		—	US$	3,182		N/A	US$	3,130
	Wells Fargo + Co New	—	Short-term investment		—	US$	3,697		N/A	US$	3,568
	Westfield Cap Corp. Ltd.	—	Short-term investment		—	US$	1,999		N/A	US$	2,003
	China Steel Corporation	—	Long-term investment		—		2,936,934		N/A		2,936,479
	Taiwan Power Company	—	Long-term investment		—		908,645		N/A		908,575
	Nan Ya Plastics Corporation	—	Long-term investment		—		272,612		N/A		273,035
	Formosa Plastics Corporation	—	Long-term investment		—		271,181		N/A		271,584
	Formosa Chemicals & Fiber Corporation	—	Long-term investment		—		135,487		N/A		137,529

	Agency bonds
	Fed Hm Ln Pc Pool G11295	—	Short-term investment		—	US$	1,999		N/A	US$	1,983
	Fed Hm Ln Pc Pool E89857	—	Short-term investment		—	US$	2,247		N/A	US$	2,228
	Federal Natl Mtg Assn Gtd	—	Short-term investment		—	US$	1,842		N/A	US$	1,803
	Fnma Pool 254507	—	Short-term investment		—	US$	2,731		N/A	US$	2,725
	Fnma Pool 254834	—	Short-term investment		—	US$	1,967		N/A	US$	1,984
	Federal Natl Mtg Assn	—	Short-term investment		—	US$	2,949		N/A	US$	2,892
	Federal Natl Mtg Assn	—	Short-term investment		—	US$	1,064		N/A	US$	1,051
	Federal Home Ln Mtg Corp.	—	Short-term investment		—	US$	6,096		N/A	US$	6,024
	Federal Natl Mtg Assn	—	Short-term investment		—	US$	3,432		N/A	US$	3,375
	Federal Natl Mtg Assn	—	Short-term investment		—	US$	4,051		N/A	US$	4,056
	Federal Home Ln Mtg Corp.	—	Short-term investment		—	US$	3,993		N/A	US$	3,982
	Federal Home Ln Mtg Corp.	—	Short-term investment		—	US$	3,558		N/A	US$	3,496
	Federal Home Ln Mtg Corp.	—	Short-term investment		—	US$	2,466		N/A	US$	2,443
	Federal Home Ln Mtg Corp.	—	Short-term investment		—	US$	5,335		N/A	US$	5,340
	Fnma Pool 685116	—	Short-term investment		—	US$	918		N/A	US$	910
	Fnma Pool 725095	—	Short-term investment		—	US$	1,777		N/A	US$	1,760
	Fnma Pool 730033	—	Short-term investment		—	US$	1,992		N/A	US$	2,010

(Continued)

-42-


				June 30, 2005
										Market Value or
										Net Asset
		Relationship with	Financial Statement	Shares/Units		Carrying Value		Percentage of		Value
Held Company Name	Marketable Securities Type and Name	the Company	Account	(In Thousand)		(US$ in Thousand)		Ownership		(US$ in Thousand)		Note


	Fnma Pool 740934	—	Short-term investment		—	US$	1,997		N/A	US$	2,014
	Fnma Pool 790828	—	Short-term investment		—	US$	4,145		N/A	US$	4,096
	Fnma Pool 793025	—	Short-term investment		—	US$	3,767		N/A	US$	3,759
	Fnma Pool 793932	—	Short-term investment		—	US$	904		N/A	US$	897
	Fnma Pool 794040	—	Short-term investment		—	US$	964		N/A	US$	956
	Fnma Pool 795548	—	Short-term investment		—	US$	866		N/A	US$	859
	Fnma Pool 806642	—	Short-term investment		—	US$	1,856		N/A	US$	1,841
	Gnma II Pool 081150	—	Short-term investment		—	US$	941		N/A	US$	931
	Gnma II Pool 081153	—	Short-term investment		—	US$	3,525		N/A	US$	3,474
	Government Natl Mtg Assn	—	Short-term investment		—	US$	365		N/A	US$	355
	Federal Home Ln Mtg Corp.	—	Short-term investment		—	US$	6,978		N/A	US$	6,913
	Federal Home Ln Mtg Corp.	—	Short-term investment		—	US$	3,388		N/A	US$	3,410
	Federal Home Ln Mtg Corp. Mtn	—	Short-term investment		—	US$	4,930		N/A	US$	4,911
	Federal Home Loan Mtg Assn	—	Short-term investment		—	US$	4,847		N/A	US$	4,874
	Federal Home Loan Mtg Corp.	—	Short-term investment		—	US$	4,903		N/A	US$	4,916
	Federal Home Ln Mtg Corp.	—	Short-term investment		—	US$	9,997		N/A	US$	9,917
	Federal Home Loan Corp.	—	Short-term investment		—	US$	7,989		N/A	US$	7,985
	Federal Farm Cr Bks	—	Short-term investment		—	US$	3,985		N/A	US$	3,988
	Federal Home Ln Bks	—	Short-term investment		—	US$	2,532		N/A	US$	2,481
	Federal Home Ln Bks	—	Short-term investment		—	US$	1,042		N/A	US$	1,009
	Federal Home Ln Bks	—	Short-term investment		—	US$	7,887		N/A	US$	7,822
	Federal Home Ln Bks	—	Short-term investment		—	US$	3,379		N/A	US$	3,345
	Federal Home Ln Bks	—	Short-term investment		—	US$	9,134		N/A	US$	9,142
	Federal Home Ln Bks	—	Short-term investment		—	US$	4,927		N/A	US$	4,918
	Federal Home Ln Bks	—	Short-term investment		—	US$	2,990		N/A	US$	2,975
	Federal Home Ln Bks	—	Short-term investment		—	US$	2,962		N/A	US$	2,954
	Federal Home Ln Bks	—	Short-term investment		—	US$	2,454		N/A	US$	2,471
	Federal Home Ln Bks	—	Short-term investment		—	US$	3,932		N/A	US$	3,943
	Federal Home Ln Bks	—	Short-term investment		—	US$	7,018		N/A	US$	6,947
	Federal Home Ln Bks	—	Short-term investment		—	US$	4,997		N/A	US$	4,954
	Federal Home Ln Bks	—	Short-term investment		—	US$	6,098		N/A	US$	6,032
	Federal Home Ln Bks	—	Short-term investment		—	US$	3,976		N/A	US$	3,959
	Federal Home Ln Bks	—	Short-term investment		—	US$	13,953		N/A	US$	13,868
	Federal Home Ln Bks	—	Short-term investment		—	US$	4,939		N/A	US$	4,935
	Federal Home Ln Bks	—	Short-term investment		—	US$	13,981		N/A	US$	13,882
	Federal Home Ln Bks	—	Short-term investment		—	US$	4,136		N/A	US$	4,117
	Federal Home Ln Bks	—	Short-term investment		—	US$	2,233		N/A	US$	2,234
	Federal Home Ln Bks	—	Short-term investment		—	US$	4,965		N/A	US$	4,968
	Federal Home Ln Bks	—	Short-term investment		—	US$	7,558		N/A	US$	7,576
	Federal Home Ln Bks	—	Short-term investment		—	US$	8,594		N/A	US$	8,586
	Federal Home Ln Mtg Corp.	—	Short-term investment		—	US$	999		N/A	US$	995
	Federal Home Ln Mtg Corp.	—	Short-term investment		—	US$	4,933		N/A	US$	4,943
	Federal Natl Mtg Assn	—	Short-term investment		—	US$	5,270		N/A	US$	5,228
	Federal Natl Mtg Assn	—	Short-term investment		—	US$	5,337		N/A	US$	5,340
	Federal Natl Mtg Assn	—	Short-term investment		—	US$	4,430		N/A	US$	4,421
	Federal Natl Mtg Assn	—	Short-term investment		—	US$	4,921		N/A	US$	4,908
	Federal Natl Mtg Assn	—	Short-term investment		—	US$	3,470		N/A	US$	3,466

(Continued)

-43-


				June 30, 2005
										Market Value or
										Net Asset
		Relationship with	Financial Statement	Shares/Units		Carrying Value		Percentage of		Value
Held Company Name	Marketable Securities Type and Name	the Company	Account	(In Thousand)		(US$ in Thousand)		Ownership		(US$ in Thousand)		Note


	Federal Natl Mtg Assn	—	Short-term investment		—	US$	6,903		N/A	US$	6,913
	Federal Natl Mtg Assn	—	Short-term investment		—	US$	4,981		N/A	US$	4,938
	Federal Natl Mtg Assn	—	Short-term investment		—	US$	4,061		N/A	US$	4,069
	Federal Natl Mtg Assn	—	Short-term investment		—	US$	7,892		N/A	US$	7,905
	Federal Natl Mtg Assn	—	Short-term investment		—	US$	4,943		N/A	US$	4,954
	Federal Natl Mtg Assn	—	Short-term investment		—	US$	17,888		N/A	US$	17,904
	Federal Natl Mtg Assn	—	Short-term investment		—	US$	14,952		N/A	US$	14,913
	Federal Natl Mtg Assn Mtn	—	Short-term investment		—	US$	15,787		N/A	US$	15,753
	Federal Natl Mtg Assn Mtn	—	Short-term investment		—	US$	9,758		N/A	US$	9,769
	Fed Hm Ln Pc	—	Short-term investment		—	US$	3,466		N/A	US$	3,465
	Federal Natl Mtg Assn Mtn	—	Short-term investment		—	US$	7,000		N/A	US$	6,932

	Corporate issued asset-backed securities
	Aesop Fdg II L L C	—	Short-term investment		—	US$	4,955		N/A	US$	4,951
	Aegis Asset Backed Secs Tr	—	Short-term investment		—	US$	2,000		N/A	US$	2,007
	American Home Mtg Invt Tr	—	Short-term investment		—	US$	690		N/A	US$	690
	Americredit Automobile Rec Tr	—	Short-term investment		—	US$	1,055		N/A	US$	1,042
	Americredit Auomobile Receiv	—	Short-term investment		—	US$	513		N/A	US$	512
	Americredit Automobile Receivb	—	Short-term investment		—	US$	4,949		N/A	US$	4,902
	Americredit Automobile Rec Tr	—	Short-term investment		—	US$	2,000		N/A	US$	1,989
	Atlantic City Elc Trns Fdg LLC	—	Short-term investment		—	US$	810		N/A	US$	802
	Bmw Veh Owner Tr	—	Short-term investment		—	US$	4,978		N/A	US$	4,945
	Banc Amer Coml Mtg Inc.	—	Short-term investment		—	US$	4,917		N/A	US$	4,862
	Banc Amer Mtg Secs Inc.	—	Short-term investment		—	US$	4,030		N/A	US$	3,995
	Bank Of Amer Lease Equip Tr	—	Short-term investment		—	US$	4,023		N/A	US$	3,974
	Bear Stearns Alt A Tr	—	Short-term investment		—	US$	1,230		N/A	US$	1,232
	Cit Equip Coll Tr	—	Short-term investment		—	US$	4,999		N/A	US$	4,957
	Cnh Equip Tr	—	Short-term investment		—	US$	4,999		N/A	US$	4,920
	Cwabs Inc.	—	Short-term investment		—	US$	1,030		N/A	US$	1,035
	Cwabs Inc.	—	Short-term investment		—	US$	5,000		N/A	US$	5,008
	Cwabs Inc.	—	Short-term investment		—	US$	2,895		N/A	US$	2,899
	Cwalt Inc.	—	Short-term investment		—	US$	2,963		N/A	US$	2,938
	Cwmbs Inc.	—	Short-term investment		—	US$	1,686		N/A	US$	1,667
	Cwmbs Inc.	—	Short-term investment		—	US$	3,711		N/A	US$	3,721
	California Infrastructure Dev	—	Short-term investment		—	US$	1,578		N/A	US$	1,546
	Capital Auto Receivables Asset	—	Short-term investment		—	US$	2,622		N/A	US$	2,598
	Capital One Auto Fin Tr	—	Short-term investment		—	US$	438		N/A	US$	436
	Capital One Auto Fin Tr	—	Short-term investment		—	US$	3,000		N/A	US$	2,982
	Capital One Auto Fin Tr	—	Short-term investment		—	US$	2,650		N/A	US$	2,649
	Capital One Multi Asset Execut	—	Short-term investment		—	US$	4,957		N/A	US$	4,940
	Caterpillar Finl Asset Tr	—	Short-term investment		—	US$	10,008		N/A	US$	9,880
	Caterpillar Finl Asset Tr	—	Short-term investment		—	US$	3,299		N/A	US$	3,260
	Cendant Rent Car Fdg Aesop LLC	—	Short-term investment		—	US$	11,626		N/A	US$	11,603
	Centex Home Equity Ln Tr	—	Short-term investment		—	US$	3,500		N/A	US$	3,468
	Citicorp Mtg Secs	—	Short-term investment		—	US$	1,701		N/A	US$	1,693
	Comm	—	Short-term investment		—	US$	4,600		N/A	US$	4,604
	Credit Suisse First Boston Mtg	—	Short-term investment		—	US$	1,767		N/A	US$	1,752

(Continued)

-44-


				June 30, 2005
										Market Value or
										Net Asset
		Relationship with	Financial Statement	Shares/Units		Carrying Value		Percentage of		Value
Held Company Name	Marketable Securities Type and Name	the Company	Account	(In Thousand)		(US$ in Thousand)		Ownership		(US$ in Thousand)		Note


	Credit Suisse First Boston Mtg	—	Short-term investment		—	US$	2,593		N/A	US$	2,591
	Daimlerchrysler Auto Tr	—	Short-term investment		—	US$	4,991		N/A	US$	4,958
	Daimlerchrysler Auto Tr	—	Short-term investment		—	US$	2,927		N/A	US$	2,924
	Daimlerchrysler Auto Tr	—	Short-term investment		—	US$	4,897		N/A	US$	4,886
	Deere John Owner Tr	—	Short-term investment		—	US$	2,501		N/A	US$	2,505
	Fifth Third Auto Tr	—	Short-term investment		—	US$	3,000		N/A	US$	2,987
	First Horizon Abs Tr	—	Short-term investment		—	US$	1,554		N/A	US$	1,557
	First Union Lehman Bros Mtg Tr	—	Short-term investment		—	US$	3,022		N/A	US$	2,942
	Ford Cr Auto Owner Tr	—	Short-term investment		—	US$	10,999		N/A	US$	10,918
	Gs Mtg Secs Corp.	—	Short-term investment		—	US$	1,347		N/A	US$	1,347
	Gs Auto Ln Tr	—	Short-term investment		—	US$	2,948		N/A	US$	2,973
	Granite Mtgs Plc	—	Short-term investment		—	US$	5,000		N/A	US$	5,000
	Harley Davidson Motorcycle Tr	—	Short-term investment		—	US$	2,434		N/A	US$	2,415
	Harley Davidson Motorcycle Tr	—	Short-term investment		—	US$	5,999		N/A	US$	5,893
	Holmes Fing No 8 Plc	—	Short-term investment		—	US$	5,001		N/A	US$	5,048
	Hyundai Auto Receivables Tr	—	Short-term investment		—	US$	3,500		N/A	US$	3,444
	Hyundai Auto Receivables Tr	—	Short-term investment		—	US$	3,250		N/A	US$	3,250
	Hyundai Auto Receivables Tr	—	Short-term investment		—	US$	3,999		N/A	US$	3,999
	Impac Cmb Tr	—	Short-term investment		—	US$	934		N/A	US$	934