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<TITLE>MACRONIX INTERNATIONAL CO., LTD.</TITLE>
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">







<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>








<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>Washington, D.C. 20549</B>
</DIV>

<DIV align="center"><DIV style="font-size: 3pt; margin-top: 12pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 6pt"><B>FORM 20-F</B>
</DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g)&nbsp;OF
THE SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>OR</B></DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#254;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 12%"><B><B>for the fiscal year ended
DECEMBER 31, 2005</B>
</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>OR</B></DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>

<!-- &nbsp; -->
<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>OR</B>
</DIV>
<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD><B>SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 12%"><B><B>Date of event requiring this shell company report </B><U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>
</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Commission file number 0-27884<BR>
(CHINESE CHARACTER)<BR>
(Exact name of Registrant as specified in its charter)</B></DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B>MACRONIX INTERNATIONAL CO., LTD.</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">(Translation of Registrant&#146;s name into English)<BR>
<B>Republic of China</B><BR>
(Jurisdiction of incorporation or organization)<BR>
<B>No.&nbsp;16 Li-Hsin Road<BR>
Science Park<BR>
Hsinchu, Taiwan, Republic of China</B><BR>
(Address of principal executive offices)</DIV>

<DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Securities registered or to be registered pursuant to Section&nbsp;12(b) of the Act.</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
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<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top">Title of each class
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Name of each exchange on which registered</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">None
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">None</TD>
</TR>
<TR style="font-size: 1px">
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Securities registered or to be registered pursuant to Section&nbsp;12(g) of the Act.<BR>
<B>American Depositary Shares representing Common Shares<BR>
Common Shares, par value NT$10 per share*</B></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">(Title of Class)</DIV>




<DIV style="margin-top: 3pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>
<TR valign="top">
    <TD nowrap align="center" colspan="3">*&nbsp;&nbsp;&nbsp;&nbsp;Not for trading in the United States, but only in connection with the registration of the American Depositary Shares.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">Securities for which there is a reporting obligation pursuant to Section&nbsp;15(d) of the Act.</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt">None</DIV>

<DIV align="center"><DIV style="font-size: 3pt; margin-top: 12pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt">(Title of Class)</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate the number of outstanding shares of each of the issuer&#146;s classes of capital or common
stock as of the close of the period covered by the annual report.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>As of December&nbsp;31, 2005, 2,912,305,991 Common Shares were outstanding.</B></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate
by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule&nbsp;405 of the Securities
Act.&nbsp;&nbsp;Yes&nbsp;<FONT face="Wingdings">&#111;</FONT>&nbsp;No&nbsp;<FONT face="Wingdings">&#254;</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
this report is an annual or transition report, indicate by check mark
if the registrant is not required to file reports pursuant to
Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934.&nbsp;Yes&nbsp;<FONT face="Wingdings">&#111;</FONT>&nbsp;No&nbsp;<FONT face="Wingdings">&#254;</FONT></DIV>




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark whether the registrant (1)&nbsp;has filed all reports required to be filed
by Section&nbsp;13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12&nbsp;months (or
for such shorter period that the registrant was required to file such reports), and (2)&nbsp;has been
subject to such filing requirements for the past 90&nbsp;days.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Yes <FONT face="Wingdings">&#254;</FONT> &nbsp;&nbsp;&nbsp; No <FONT face="Wingdings">&#111;</FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of &#147;accelerated filer and large accelerated filer&#148; in Rule 12b-2 of the Exchange Act. (Check one):</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 0pt">Large&nbsp;accelerated&nbsp;filer
<FONT face="Wingdings">&#111;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accelerated&nbsp;filer&nbsp;<FONT face="Wingdings">&#111;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-accelerated&nbsp;filer&nbsp;<FONT face="Wingdings">&#254;</FONT></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark which financial statement item the registrant has elected to follow.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt">Item&nbsp;17
<FONT face="Wingdings">&#111;</FONT>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Item&nbsp;18 <FONT face="Wingdings">&#254;</FONT>
</DIV>

<!-- &nbsp; -->
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this is an annual report, indicate by check mark
whether the registrant is a shell company (as defined in Rule&nbsp;12b-2 of the Exchange
Act).&nbsp;Yes&nbsp;<FONT face="Wingdings">&#111;</FONT>&nbsp;No&nbsp;<FONT face="Wingdings">&#254;</FONT>
</DIV>


<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>

<P align="center" style="font-size: 10pt">
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TABLE OF CONTENTS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#101">Supplemental Information and Exchange Rates</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">3</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#102">Cautionary Statement</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">3</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:45px; text-indent:-15px"><A href="#103"><B>PART I </B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#104">Item&nbsp;1. Identity of Directors, Senior Management and Advisers</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#105">Item&nbsp;2. Offer Statistics and Expected Timetable</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#106">Item&nbsp;3. Key Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#107">Item&nbsp;4. Information on the Company</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">20</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#108">Item&nbsp;5. Operating and Financial Review and Prospects</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">35</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#109">Item&nbsp;6. Directors, Senior Management and Employees</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">61</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#110">Item&nbsp;7. Major Shareholders and Related Party Transactions</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">69</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#111">Item&nbsp;8. Financial Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">71</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#112">Item&nbsp;9. The Offer and Listing</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">75</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#113">Item&nbsp;10. Additional Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">79</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#114">Item&nbsp;11. Quantitative and Qualitative Disclosure About Market Risk</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">95</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#115">Item&nbsp;12. Description of Securities Other than Equity Securities</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">97</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:45px; text-indent:-15px"><A href="#116"><B>PART II</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#117">Item&nbsp;13. Defaults, Dividend Arrearages and Delinquencies</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">97</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#118">Item&nbsp;14. Material Modifications to the Rights of Security Holders and Use of Proceeds</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">97</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#119">Item&nbsp;15. Disclosure Controls and Procedures</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">97</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#120">Item&nbsp;16A. Audit Committee Financial Expert</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">98</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#121">Item&nbsp;16B. Code of Ethics</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">98</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#122">Item&nbsp;16C. Principal Accountant Fees and Services</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">98</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#123">Item&nbsp;16D. Exemptions from the Listing Standards for Audit Committees</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">99</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#124">Item&nbsp;16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">99</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:30px; text-indent:-15px"><A href="#125"><B>PART III</B></A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#126">Item&nbsp;17. Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">99</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#127">Item&nbsp;18. Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">99</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#128">Item&nbsp;19. Exhibits</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">99</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#129">Appendix&nbsp;A &#151; Glossary of Technical Terms</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">A-1</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#130">Signatures</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h00650exv3w1.txt">EX-3.1 ARTICLES OF INCORPORATION</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h00650exv8w1.txt">EX-8.1 LIST OF SUBSIDIARIES</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h00650exv12w1.txt">EX-12.1 CERTIFICATIONS OF PRESIDENT PURSUANT TO SEC.302</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h00650exv12w2.txt">EX-12.2 CERTIFICATIONS OF ASSOCIATE VICE PRESIDENT, FINANCE DEPT., PURSUANT TO SEC. 302</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h00650exv13w1.txt">EX-13.1 CERTIFICATIONS OF PRESIDENT PURSUANT TO SEC.1350</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h00650exv13w2.txt">EX-13.2 CERTIFICATIONS OF ASSOCIATE VICE PRESIDENT, FINANCE DEPT., PURSUANT TO SEC. 1350</A></FONT></TD></TR>
</TABLE>
</DIV>

<DIV align="left">
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</DIV>

<P align="center" style="font-size: 10pt">2
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="101"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SUPPLEMENTAL INFORMATION AND EXCHANGE RATES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As used herein, except as the context otherwise requires, &#147;we&#148;, &#147;us&#148;, &#147;our&#148; or the &#147;Company&#148;
refers to Macronix International Co., Ltd. and our subsidiaries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All references herein to &#147;Taiwan&#148; or the &#147;R.O.C.&#148; are to the island of Taiwan and other areas
under the effective control of the Republic of China. All references herein to the &#147;R.O.C.
Government&#148; and the &#147;R.O.C. Company Law&#148; are references to the government of the Republic of China
and the Company Law of the Republic of China, respectively. All references herein to &#147;R.O.C. GAAP&#148;
and &#147;U.S. GAAP&#148; are to accounting principles generally accepted in the R.O.C. and the United
States, respectively. Any discrepancies in any table between totals and sums of the amounts listed
are due to rounding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We publish our financial statements in New Taiwan dollars, the lawful currency of Taiwan. All
references herein to &#147;United States dollars&#148;, &#147;U.S. dollars&#148; and &#147;US$&#148; are to United States dollars
and references to &#147;New Taiwan dollars&#148;, &#147;N.T. dollars&#148; and &#147;NT$&#148; are to New Taiwan dollars. All
translations from New Taiwan dollars to United States dollars were made, unless otherwise
indicated, on the basis of the noon buying rate in The City of New York for cable transfers in N.T.
dollars per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York
on December&nbsp;31, 2005 of NT$32.80 = US$1.00. On June&nbsp;20, 2006, the noon buying rate between New
Taiwan dollars and United States dollars was NT$32.56 = US$1.00. See &#147;Item&nbsp;10. Additional
Information &#151; D. Exchange Controls&#148;. All amounts translated into United States dollars as described
above are provided solely for the convenience of the reader, and no representation is made that the
New Taiwan dollar or United States dollar amounts referred to herein could have been or could be
converted into United States dollars or New Taiwan dollars, as the case may be, at any particular
rate, the above rates or at all.
</DIV>
<DIV align="left">
<A name="102"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CAUTIONARY STATEMENT</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt;margin-left:2%">This annual report contains various forward-looking statements. These include statements
about:
</DIV>


<DIV align="right" style="margin-top: 6pt">
<TABLE width="98%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>industry and product pricing trends;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>developments in technology affecting the market acceptance and competitiveness of our products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>applications for our products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>competition from other industry participants;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>pricing levels of our and our competitors&#146; products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our development and marketing of new products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our development and maintenance of relationships with our customers and strategic partners;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the expansion and enhancement of our manufacturing capacity;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our development of new process technologies;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ability to obtain funding for our capital expenditure plans;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>economic, political and financial developments in the markets for our products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ability to obtain the necessary raw materials and the prices for these materials; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ability to attract and retain qualified personnel.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">These forward-looking statements are based on current expectations, estimates and projections about
our industry, our management&#146;s beliefs and assumptions made by them. Words such as &#147;anticipates&#148;,
&#147;expects&#148;, &#147;intends&#148;, &#147;plans&#148;, &#147;believes&#148;, &#147;seeks&#148;, &#147;estimates&#148; and similar expressions are
intended to identify these forward-looking statements. Although we believe that these expectations
and projections are reasonable, such forward-looking statements are not guarantees of future
performance or actual results and are inherently subject to risks, uncertainties and assumptions
about us, including, among other things:
</DIV>



<P align="center" style="font-size: 10pt">3
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="margin-top: 6pt">
<TABLE width="98%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our dependence on frequent introduction of new services and technologies based on the latest developments;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the intensely competitive semiconductor industry;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>risks associated with international business activities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our dependence on key personnel;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>natural disasters, such as earthquakes, which are beyond our control;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>general economic and political conditions, including those related to the semiconductor industry;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>possible disruptions in commercial activities caused by natural and human-induced
disasters, including terrorist activity and armed conflict, that may reduce end-user
purchases relative to expectations and orders;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>fluctuations in foreign currency exchange rates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>additional disclosures we make in our previous and future Form 20-F annual reports and
Form 6-K periodic reports to the Securities and Exchange Commission; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>those other risks identified in &#147;Item&nbsp;3. Key Information &#151; D. Risk Factors&#148; of this
annual report.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We undertake no obligation to update or revise any forward-looking statements whether as a
result of new information, future events or otherwise. In light of these risks, uncertainties and
assumptions, the forward-looking events discussed in this annual report might not occur and our
actual results could differ materially from those anticipated in these forward-looking statements.
</DIV>
<DIV align="left">
<A name="103"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>PART I</B></U>
</DIV>

<DIV align="left">
<A name="104"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;1.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>Identity of Directors, Senior Management and Advisers</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>
<DIV align="left">
<A name="105"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;2.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>Offer Statistics and Expected Timetable</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>
<DIV align="left">
<A name="106"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;3.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>Key Information</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>A. Selected Financial Data</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The selected income statement data for the years ended December&nbsp;31, 2003, 2004 and 2005 and
the selected balance sheet data as of December&nbsp;31, 2004 and 2005 presented below are derived from
our audited financial statements included in this annual report, which were prepared on a
consolidated basis. The selected income statement data for the years ended December&nbsp;31, 2001 and
2002 and the selected balance sheet data as of December&nbsp;31, 2001, 2002 and 2003 presented below are
derived from our audited financial statements not included in this annual report, which were also
prepared on a consolidated basis. Certain accounts in the selected balance sheet data as of
December&nbsp;31, 2001, 2002, 2003 and 2004 have been reclassified to conform with the presentation of
the current period as of December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The financial data set forth below should be read in conjunction with, and are qualified in
their entirety by reference to, our consolidated financial statements for the years ended December
31, 2003, 2004 and 2005 and the related notes included in this annual report, &#147;Item&nbsp;8. Financial
Information&#148; and &#147;Item&nbsp;5. Operating and Financial Review and Prospects&#148;. Our consolidated financial
statements are prepared and presented in accordance with R.O.C. GAAP and R.O.C. reporting
practices. For a discussion of certain differences between R.O.C. GAAP and U.S. GAAP, see note 28
to our consolidated financial statements for the years ended December&nbsp;31, 2003, 2004 and 2005
included in this annual report and &#147;Item&nbsp;5. Operating and Financial Review and Prospects &#151; A.
Operating Results &#151; U.S. GAAP Reconciliation&#148;.
</DIV>

<P align="center" style="font-size: 10pt">4
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="36%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="23" style="border-bottom: 1px solid #000000"><B>Year ended, and as of, December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2001</B></TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2002(Note)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2003(Note)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2004(Note)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>(NT$)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>(NT$)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>(NT$)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>(NT$)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>(NT$)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>(US$)</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="23"><B>(in millions except per share and ADS data)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Consolidated Income Statement Data:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>R.O.C. GAAP</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net sales revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,747</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,492</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,712</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,380</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,908</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">576.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Cost of goods sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(11,674</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(17,105</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(20,657</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(18,990</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(18,666</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(569.1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Less: Unrealized profit as of December&nbsp;31,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Realized gross profit (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,073</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(615</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,942</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,388</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">242</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,557</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,212</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,742</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,737</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,116</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(156.0</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Operating income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,516</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,827</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,684</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(349</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,875</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(148.6</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,356</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">466</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,877</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,197</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total other expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,795</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,976</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,370</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,023</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,205</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(97.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Income (loss)&nbsp;before taxes and minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(11,337</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,177</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">247</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,882</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(210.0</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Income tax benefit (expense)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(943</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(20</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(21</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(35</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(215</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6.6</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Income (loss)&nbsp;before minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(866</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(11,357</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,198</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">212</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,098</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(216.4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Minority interest loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net Income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(866</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(11,357</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,198</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">218</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,027</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(214.2</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net income (loss)&nbsp;per share &#151; basic (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.40</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5.32</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3.65</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2.41</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.07</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net income (loss)&nbsp;per share &#151; diluted (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.40</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5.32</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3.65</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2.41</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.07</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>U.S. GAAP</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gross profit (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,598</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,018</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,576</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,052</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Operating income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,263</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(10,186</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,614</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">335</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,356</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(132.8</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net income (loss)&nbsp;before cumulative effect of
change in accounting principle in accordance with
U.S. GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,842</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(13,674</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,027</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(469</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,636</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(141.3</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Basic net income (loss)&nbsp;per share before
cumulative effect of change in accounting principle
in accordance with U.S. GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.79</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6.39</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3.53</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.17</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.59</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.05</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Diluted net income (loss)&nbsp;per share before
cumulative effect of change in accounting principle
in accordance with U.S. GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.79</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6.39</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3.53</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.17</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.59</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.05</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net income (loss) (2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,463</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(13,674</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,027</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(469</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,636</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(141.3</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net income
(loss)&nbsp;per share&#151;basic (3)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2.07</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6.39</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3.53</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.17</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.59</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.05</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net income (loss)&nbsp;per share &#150;diluted (3)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2.07</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6.39</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3.53</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.17</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.59</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.05</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance Sheet Data:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>R.O.C. GAAP</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,358</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,301</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,706</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,027</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">610.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,562</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,029</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,993</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,202</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">494.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,693</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67,450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,919</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,396</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,604</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,390.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,016</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,687</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,717</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,449</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,664</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">325.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Long-term liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,533</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,549</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,954</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">188.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,549</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,236</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,671</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,844</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">513.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,248</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,344</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,558</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">870.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>U.S. GAAP</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,646</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,037</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,398</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,716</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,832</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">604.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72,979</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,509</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,807</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,220</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,409.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,152</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,986</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,445</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,699</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">326.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,679</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,991</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,052</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,877</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">514.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,518</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,149</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,755</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,264</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">892.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Other Data:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>R.O.C. GAAP</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Capital expenditures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,078</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,975</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,606</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,554</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,595</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,742</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,287</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,562</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">221.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net cash provided by operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,209</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">217</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,484</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,987</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,397</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">134.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net income (loss)&nbsp;per ADS &#151; basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(53.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(36.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(24.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.70</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net income (loss)&nbsp;per ADS &#151; diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(53.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(36.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(24.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.70</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Number of common shares outstanding (weighted,
as adjusted) (4)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,157</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,822</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,912</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,912</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Stock dividend per common share (5)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">30</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">10</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Note =
2002, 2003 and 2004 US GAAP data were restated.</DIV>


<P align="center" style="font-size: 10pt">5
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Retroactively adjusted for our capital reduction in 2006 and all subsequent stock dividends
and employee bonuses declared.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>The difference between net income under R.O.C. GAAP and U.S. GAAP was largely derived from
different treatments under these two accounting principles with respect to employee bonus
shares, derivative contracts, plant capacity loss, other-than-temporary decline in value on
marketable securities, and convertible debt securities with beneficial conversion features.
The difference in accounting treatment with respect to employee bonus shares under the two
accounting principles resulted in an additional expense of NT$4,273&nbsp;million in 2001, no
additional expense or income in 2002 and 2003, 2004 and 2005. The differences of accounting
treatment with respect to derivative contracts under the two accounting principles resulted in
additional income of NT$228&nbsp;million in 2001, additional income of NT$616&nbsp;million in 2002,
additional expense of NT$379&nbsp;million in 2003, additional income of NT$34&nbsp;million
in 2004 and additional expense of NT$32&nbsp;million (US$1.0&nbsp;million) in 2005. The
difference in accounting treatment with respect to plant capacity loss under the two
accounting principles resulted in an additional income of NT$528&nbsp;million in 2001, an
additional expense of NT$528&nbsp;million in 2002, and additional income of NT$269&nbsp;million in 2003,
an additional expense of NT$258&nbsp;million in 2004 and additional income of NT$0.4&nbsp;million (US$0.01&nbsp;million) in 2005.
The difference in accounting treatment with respect to other-than-temporary decline in value
on marketable securities under the two accounting principles resulted in an additional expense
of NT$646&nbsp;million in 2001, an additional expense of NT$538&nbsp;million in 2002, no additional
expense or income in 2003, an additional expense of
NT$448&nbsp;million in 2004 and additional income of
NT$1,326&nbsp;million (US$40.4&nbsp;million) in 2005.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Retroactively adjusted for our capital reduction in 2006, all subsequent stock dividends and
employee bonuses declared. See note 22 to our consolidated financial statements for the years
ended December&nbsp;31, 2003, 2004 and 2005 included in this annual report and &#147;Item&nbsp;5. Operating
and Financial Review and Prospects &#151; A. Operating Results &#151; U.S. GAAP Reconciliation&#148;.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Common shares outstanding weighted, as adjusted for our capital reduction in 2006, any
employee share bonus and any subsequent stock dividends declared.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>The percentage of our stock dividend is determined by the number of common shares we
distributed to existing shareholders divided by the common shares outstanding immediately
prior to the share issuance. We did not distribute any cash dividends in any of the periods
presented.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>B. Capitalization and Indebtedness</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>C. Reason for the Offer and Use of Proceeds</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>D. Risk Factors</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Holders of our securities should note that investment in our securities involves risks and
uncertainties that could affect our future business success or financial results. The following
important factors, and those important factors described in other reports submitted to, or filed
with, the Securities and Exchange Commission by our company, among other factors, could adversely
affect our results of operations and could cause our results of operations to differ materially
from those expressed in any forward-looking statements made by, or on behalf of, our company:</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Risks Relating to Our Company</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We recorded gross, operating and net losses in 2003 and 2005. Future losses could materially
adversely affect the value of your investment.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The semiconductor industry was in a severe and protracted downturn that began in the second
half of 2000 and continued through the first half of 2003, resulting in a drop in demand and
general decline in the average selling prices of our products. For 2003, we recorded
</DIV>

<P align="center" style="font-size: 10pt">6
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">a gross loss of NT$2,942&nbsp;million, an operating loss of NT$7,684&nbsp;million and a net loss of
NT$8,198&nbsp;million. Although conditions in the semiconductor industry improved between the third
quarter of 2003 and the first half of 2004, the industry experienced another downturn that began in
the second half of 2004 and continued throughout 2005. For 2004, we recorded a gross profit of
NT$4,388&nbsp;million, an operating loss of NT$349&nbsp;million and net income of NT$218&nbsp;million. For 2005,
we recorded a gross profit of NT$242&nbsp;million (US$7.4&nbsp;million), an operating loss of NT$4,875
million (US$148.6&nbsp;million) and net loss of NT$7,027&nbsp;million (US$214.2&nbsp;million). However, under U.S.
GAAP, we recorded net losses of NT$7,148&nbsp;million, NT$469&nbsp;million and NT$4,636&nbsp;million (US$141.3
million) in 2003, 2004 and 2005, respectively. We cannot assure you that we will not incur gross,
operating and net losses for the full year 2006.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Primarily as a result of the net loss in 2003 and 2005, as well as the net income in 2004, we
incurred interest expense of NT$974&nbsp;million, NT$582&nbsp;million and NT$277&nbsp;million (US$8.4&nbsp;million) in
2003, 2004 and 2005, respectively. The net investment loss was NT$717million in 2003 and NT$1,237
million (US$37.7&nbsp;million) in 2005, as well as net investment gain was NT$230&nbsp;million in 2004,
respectively. The shareholders&#146; equity declined by 3.2% in 2003 to NT$29,248&nbsp;million, increased by
17.4% in 2004 to NT$34,344&nbsp;million in 2004, and decreased by 16.9% to NT$28,558&nbsp;million in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, we cannot assure you that these losses will not occur again or increase. If we
record losses in the future, the value of your investment may be materially and adversely affected.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Any delay or reduction in orders by Nintendo or the loss of Nintendo as a customer could result in
the loss of a significant portion of our revenue.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2003, 2004 and 2005 our net sales to Megachips Corporation (&#147;Megachips&#148;), which resells our
products to Nintendo, aggregated NT$4,257&nbsp;million, NT$5,240&nbsp;million and NT$5,511&nbsp;million (US$168
million), respectively, or 24.0%, 22.4% and 29.2%, respectively, of our net sales revenue in those
periods. Unit sales volumes or prices of Mask ROMs and other products sold through Megachips to
Nintendo may fluctuate significantly depending on the products offered by Nintendo and its need for
our products. Nintendo faces competitive pressure in the electronics entertainment market, which
is characterized by frequent new product introductions and rapidly shifting consumer preferences.
In particular, Nintendo&#146;s Dual Screen handheld gaming devices (&#147;DSD&#148;) platform (which uses or Mask
ROM products) faces competition from Sony&#146;s PSP portable gaming device. Nintendo may not continue
to place orders with us in the future at the same levels as in prior periods or at all. The loss
of Nintendo as a customer, delayed or reduced orders by Nintendo, decreases in product prices or
significant changes in delivery schedules to Nintendo could materially and adversely affect our
business, financial condition and results of operations. In addition, any negative development in
the relationship between us and Megachips or the relationship between Nintendo and Megachips could
harm our sales to Nintendo.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We have limited liquidity and may be unable to repurchase our outstanding debt securities when
requested by holders, pay certain other obligations as they become due or otherwise meet our
working capital needs.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have a substantial amount of obligations that will or may come due within the next year,
and we may not have sufficient funds to pay these obligations. These obligations include the
maturing of a portion of our long-term debt, payment of our short-term debt, payment of the current
portion of our long-term debt, expenditures required under contractual obligations and the payment
of the costs of the day-to-day operation of our business. See &#147;Item&nbsp;5. Operating and Financial
Review and Prospects &#151; Liquidity and Capital Resources&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2006, we have been or will also be required to pay short-term debt and notes in the
aggregate principal amount of approximately NT$1,894&nbsp;million (US$57.7&nbsp;million) and repay the
principal and current portion of long-term debt and capital lease obligations in the aggregate
principal amount of NT$4,635&nbsp;million (US$141.3&nbsp;million). In addition, we also have obligations
under contracts, which we have entered into for goods and services and for other purposes, which
require us to make minimum payments for our day-to-day business operations of approximately
NT$4,135&nbsp;million (US$126.1&nbsp;million) in 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If our cash flow from operations are not sufficient, we may not be able to meet these payment
obligations when due. At December&nbsp;31, 2005, we had NT$11,134&nbsp;million (US$339.4&nbsp;million) of
unrestricted cash and cash equivalents. We cannot assure you that we will be able to finance any of
these payment obligations by using our current loan facilities or other means of financing. We have
available to use short-term and medium-term loans under which we may drawdown up to an additional
principal amount of NT$4,089&nbsp;million (US$124.9&nbsp;million) as of May&nbsp;31, 2006. We cannot assure you
that any alternate means of financing, if necessary, will be available to us on acceptable terms or
at all. Further, our ability to repurchase the outstanding debt securities may also be limited by
applicable law as well as the terms of our other outstanding indebtedness. See &#147;&#151; Restrictive
covenants and broad default provisions in the agreements governing our existing debt may materially
restrict our operations as well as adversely affect our liquidity, financial condition and results
of operations&#148;.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insufficient liquidity could materially restrict our operations, require us to reduce our
budgeted capital expenditures and otherwise adversely affect our financial condition and results of
operations. Borrowing funds, raising additional equity capital or converting long-term investments
to liquid funds to meet our payment obligations and/or working capital requirements could adversely
affect our financial condition or cause our shareholders to suffer dilution, and thereby adversely
affect the price of our common shares, ADSs or GDSs. In addition, if we are or appear to be unable
to make payments when due, we may be unable to continue operating, bankruptcy or insolvency
proceedings could be commenced against us and, if this occurs, the value of our common shares, ADSs
and GDSs would be materially impaired.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Restrictive covenants and broad default provisions in the agreements governing our existing debt
may materially restrict our operations as well as adversely affect our liquidity, financial
condition and results of operations.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a party to numerous loan and other agreements relating to the incurrence of debt, many
of which include restrictive covenants and broad default provisions. Our loan agreements contain
covenants that require us to maintain specified debt to equity ratio and ratio of current assets to
current liabilities. In November&nbsp;2003, we sold 475,000,000 new common shares for cash to increase
shareholders&#146; equity pursuant to a share offering in Taiwan, and in April&nbsp;2004, we issued
13,125,000 GDS representing 525,000,000 new common shares. Had we not conducted the share and GDS
offerings, we would have had difficulty in meeting the debt to equity ratio contained in our loan
covenants as of the end of 2003 and 2004. In February&nbsp;2006, we cancelled 2,079,474,542 common
shares at the book value of NT$20,794&nbsp;million to offset accumulated deficits in order to improve
our financial structure.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may need to issue additional shares, ADSs or GDSs to increase shareholders&#146; equity, and we
cannot assure you that we will be successful in selling all or any of such common shares, ADSs or
GDSs. If we continue to incur losses, resulting in an erosion of our shareholders&#146; equity, and are
unable to raise additional equity funding or renegotiate the terms of our loan agreements, we may
be in default of financial covenants in the future. Such a default or defaults would seriously
impair our ability to secure debt financing, and could require us to delay or cancel capital
expansion plans, dispose of assets or take other steps to meet the financial ratios. Defaults or
potential defaults in our financial covenants could also impair our ability to raise additional
equity capital.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In general, covenants in the agreements governing our existing debt, and debt we may incur in
the future, may materially restrict our operations, including our ability to incur debt, repurchase
our outstanding debt securities, pay dividends, make certain investments and payments and encumber
or dispose of assets. A default under one agreement may also trigger cross-defaults under our other
agreements. In the event of default, we may not be able to cure the default or obtain a waiver on a
timely basis, and our operations could be significantly disrupted or harmed. An event of default
under any agreement governing our existing or future debt, if not cured or waived, could have a
material adverse effect on our liquidity, financial condition and results of operations and could
seriously impair our ability to secure debt financing.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Our revenues and operating results may decline if we are unable to obtain adequate supplies of raw
materials in a timely manner and at a reasonable price.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our manufacturing operations require that we obtain adequate supplies of raw materials on a
timely basis. Our primary raw materials include six-inch and eight-inch wafers, chemicals and gases
and other inputs, which we purchase from a limited number of suppliers. In particular, wafer
manufacturing capacity and supply in the Taiwan semiconductor industry have from time to time been,
and in the future may be, in short supply, and our future growth will depend in large part on
securing a continuous supply of six-inch and eight-inch wafers. We cannot assure you that we will
be able to obtain adequate supplies of raw materials in a timely manner and at a reasonable price.
Our revenue and operating results could decline if we are unable to obtain adequate supplies of
high quality raw materials in a timely manner or if there are significant increases in the costs of
raw materials that we could not pass on to our customers.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We are vulnerable to cyclical downturns in the semiconductor industry, and our business, financial
condition and results of operations may suffer in future downturns.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The semiconductor industry is highly cyclical. Economic downturns historically have caused
reduced product demand, rapid declines in product prices, low capacity utilization and production
over-capacity. Between the second half of 2000 and the first half of 2003, the semiconductor
industry was adversely affected by the sudden and rapid decline in worldwide demand for electronic
products such as personal computers, computer peripherals, consumer electronics and other
communications devices. As such, electronics systems and applications companies drastically reduced
their orders for semiconductor devices to avoid further inventory accumulation. The severe and
protracted downturn throughout 2001, 2002 and the first half of 2003 resulted in a serious
deterioration in the average selling prices of, as well as demand for, most of our products and
materially adversely affected our operating results and financial
</DIV>

<P align="center" style="font-size: 10pt">8
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">condition. Although conditions in the semiconductor industry improved between the third
quarter of 2003 and the first half of 2004, the industry experienced another downturn that began in
the second half of 2004 and continued through 2005. While conditions in the semi-conductor industry
have improved in 2006, we cannot predict when or whether the industry will recover. Even if the
industry recovers, our product prices, sales volumes and margins may continue to be adversely
affected during future cyclical downturns and our business, financial condition and results of
operations may suffer accordingly.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Our results of operations fluctuate significantly, which may affect the value of your investment</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our historical net sales revenue and other results of operations have varied, at times
significantly, from quarter&#150;to&#150;quarter and from year &#150;to&#150;year. For example, we had a net loss under
R.O.C. GAAP of NT$8,198&nbsp;million in 2003, a net income of NT$218&nbsp;million in 2004 and net losses of
NT$7,027&nbsp;million (US$214&nbsp;million) in 2005. Our future net sales revenue, gross profit (loss),
operating income, net income (loss)&nbsp;and more generally, our business and results of operations, may
vary significantly due to a combination of many factors, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in general economic and business conditions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the cyclical nature of both the semiconductor industry and the markets served by our customers;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>seasonality in demand for our customers&#146; products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in demand for our products and our customers&#146; products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>technology development of our products and competing products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in the average selling prices of our products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>inventory obsolescence;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our customers&#146; adjustments in their inventory;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the loss of or reduction of sales to a key customer or the postponement or cancellation of an order from a key customer;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ability to obtain adequate labor, equipment, components, raw materials, electricity,
water and other required production inputs on a timely and cost-efficient basis;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>capital expenditures and production uncertainties relating to the roll-out of new facilities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ability to achieve target production yields, especially for new products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ability to accurately predict customer demand, as we must commit to significant
capital expenditures in anticipation of future orders;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in our business strategy or technology roadmap;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>natural disasters, such as fires, droughts, floods and earthquakes, or industrial accidents;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the long lead times in securing a qualification from our customers;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>currency and interest rate fluctuations that may not be fully hedged; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>technological changes.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Due to these factors and other risks, many of which are beyond our control, you should not
rely on quarter-to-quarter or year-to-year comparisons to predict our future performance.
Unfavorable changes in any of the above factors may materially and adversely affect our business
and results of operations. In addition, it is possible that in some future periods our operating
results may be below the expectations of public market analysts and investors, which may in turn
cause the prices of our securities to fall.
</DIV>

<P align="center" style="font-size: 10pt">9
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>If we continue to experience significant investment losses from our investments, our financial
condition and results of operations may be adversely affected.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have made and expect to continue to make a series of equity joint venture and strategic
investments in companies located in Taiwan and elsewhere principally related to the semiconductor
industry. As a result of market downturns, many of our invested companies experienced significant
declines in their operating results. This in turn caused us to incur substantial investment losses
as well as a reduction in the value of our equity interests in these companies. We incurred a net
investment loss (which include losses under our equity derivative contract which had our common
shares as the underlying reference securities) and net loss from equity investments of NT$825
million in 2003, NT$155&nbsp;million in 2004 and NT$1,626 (US$49.6&nbsp;million) in 2005. Any further
significant losses from our investments in the future may materially and adversely affect our
financial condition and results of operations.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>As we depend on Mask ROM and Flash sales for a substantial portion of our revenue, a significant
decrease in Mask ROM or Flash sales or average selling prices could result in the loss of a
significant portion of our revenue.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2003, 2004 and 2005 our Mask ROM net sales were NT$7,464&nbsp;million, NT$8,373&nbsp;million and
NT$8,712&nbsp;million (US$265.6&nbsp;million), respectively, or 42.1%, 35.8% and 46.1% respectively, of our
net sales revenue in those periods. In 2003, 2004 and 2005 our Flash net sales were NT$5,810
million, NT$10,715&nbsp;million and NT$6,870&nbsp;million (US$209.5&nbsp;million), respectively, or 32.8%, 45.8%
and 36.3%, respectively, of our net sales revenue in those periods.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Historically, most of our Mask ROM products have been used in video game cartridges. Competing
technological alternatives, such as CD-ROMs, DVD-ROMs, magnetic disks and telephone-linked and
internet databases, have been adopted by some video game machine producers for some applications.
For example, Nintendo, which is our largest customer, migrated in 2001 to a game platform that
utilized a DVD-ROM-based storage system. Nintendo is one of our major customers and accounted for
48.8%, 56.2% and 61.8% of our net Mask ROM sales in 2003, 2004 and 2005 respectively. We are
seeking to sustain our Mask ROM sales volume by diversifying our customer base to include
telecommunications, handheld computing and information devices and office automation equipment
manufacturers and expanding the base of devices that may use Mask ROM. We cannot assure you,
however, that these initiatives will be successful. Further, there has been an overall shrinkage of
the Mask ROM market as products move away from using Mask ROM technologies to competing
technologies, in particular Flash. We also expect that our Mask ROM sales will continue to decline
for the foreseeable future, although we believe that due to our market position we will continue to
be one of the major providers of Mask ROM products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Code Flash products market, in which our Flash products compete, is dominated by large
players, including Spansion LLC. (&#147;Spansion&#148;, which is owned by AMD and Fujitsu), Intel Corporation
(&#147;Intel&#148;), Sharp Corporation (&#147;Sharp&#148;) and STMicroelectronics NV (&#147;STMicroelectronics&#148;), all of
which may have greater financial and other resources than our company. If we are unable to compete
effectively in the Code Flash products market, our business and operating results will suffer. In
addition, due to market conditions, average selling prices for our Flash products declined sharply
beginning in the third quarter of 2004 and continuing into the first half of 2005. Although the
average selling prices for our Flash products remained at the same level since the second half of
2005, we cannot guarantee that the average selling prices for our Flash products will increase in
the future. We also do not produce NAND Flash products and thus do not benefit from the growth in
the NAND Flash market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any significant reduction in the use of Mask ROMs in the video game manufacturing industry and
generally, and in the use of Code Flash generally, will significantly reduce our revenue and
adversely affect our business, financial condition and results of operations.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>A decrease in demand for consumer electronics, computer and computer peripheral and other
communications products may significantly decrease the average selling prices for our products and
reduce our revenue and operating results.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A significant percentage of our net sales revenue (our gross sales revenue less sales returns
and discounts) is derived from customers who use our products for consumer electronics, computers
and computer peripherals and other communications products. The industries in which the
manufacturers of these products operate are subject to rapid technological change, rapidly evolving
industry standards and downward pricing pressures. A significant decrease in the demand for
consumer electronics, computers and computer peripherals and other communications products due to
business cycles or the non-acceptance of our customers&#146; products in the market, may decrease the
demand for our products and could adversely affect our results of operations. Declining prices of
these products also result in significant downward pressure on the prices of our products that are
used in these products, which may cause the average selling prices for our products to decrease and
our revenue and operating results to suffer.
</DIV>

<P align="center" style="font-size: 10pt">10
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>If we cannot compete successfully in our industry, we may lose customers and our revenue may
decrease.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The semiconductor industry is highly competitive. We compete with major international
semiconductor companies, including Intel, Atmel Corporation (&#147;Atmel&#148;), Sharp, Spansion,
STMicroelectronics, Renesas Technology Corporation (&#147;Renesas&#148;), Silicon Storage Technology, Inc.
(&#147;SST&#148;), Hynix Semiconductor Inc. (&#147;Hynix&#148;), Toshiba Corporation (&#147;Toshiba&#148;), Oki Semiconductor Co.
(&#147;Oki&#148;) and various other industry participants. Many of our competitors have greater access to
capital and technology and have substantially greater production, research and development, sales
and marketing and other resources than we do. As a result, these companies may be able to compete
more aggressively over a longer period of time than our company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The principal elements of competition in our industry include:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>technological expertise and technical competence;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>time-to-market;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>ability to obtain raw materials and components on a timely and cost-effective basis;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>research and development capabilities and plans;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>available capacity;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>manufacturing capabilities and yields;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>customer service; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>price.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Moreover, since the basic manufacturing processes for the production of volatile and
nonvolatile memory chips are similar, manufacturers of volatile memory products may migrate into
our nonvolatile memory markets, which would create additional competition. Many of our competitors
have shown a willingness to quickly and sharply reduce prices in order to maintain high capacity
utilization in their facilities during periods of reduced demand. Any renewed erosion in the prices
for our products could cause our profits to decrease and have a material adverse effect on our
financial condition and results of operations.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Due to our high percentage of fixed costs, we will not be profitable if we are unable to achieve
relatively high capacity utilization rates.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our operations are characterized by relatively high fixed costs, such as depreciation, and we
expect this to continue. Our profitability depends not only on absolute pricing levels for our
products, but also on utilization rates for our equipment, commonly referred to as &#147;capacity
utilization rates&#148;. In particular, increases or decreases in our capacity utilization rates can
have a significant effect on gross margins since per-unit costs generally decrease as fixed costs
are allocated over a larger number of units. In periods of low demand, we experience relatively low
capacity utilization rates in our operations, which lead to reduced margins during such periods.
This occurred in 2001, 2002, the first half of 2003 and the first quarter of 2005. Although our
capacity utilization rates improved in 2004 and 2005, except in the first quarter of 2005, we
cannot assure you that we will be able to achieve or maintain profitability if we cannot
consistently achieve or maintain relatively high capacity utilization rates. Furthermore, high
capacity utilization rates in the absence of high demand could result in inventory buildup and
obsolescence, which may result in write-downs of inventory.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Our customers generally do not place purchase orders in advance, which makes it difficult for us to
predict our future revenues, adjust production costs and allocate capacity efficiently and on a
timely basis.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our customers generally place purchase orders between one to two months before the desired
shipment date, and our contracts with customers generally do not require minimum purchases of our
products. Due to the cyclical nature of the semiconductor industry, our customers&#146; purchase orders
have varied significantly from period to period, and it is difficult to forecast future order
quantities. As a result, we do not typically operate with any significant backlog. The lack of
significant backlog makes it difficult for us to forecast our revenues, plan our production and
allocate resources for future periods. Moreover, our expense levels are based in part on our
expectations of future revenue and we may be unable to adjust costs in a timely manner to
compensate for revenue shortfalls. We cannot
</DIV>

<P align="center" style="font-size: 10pt">11
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">assure you that any of our customers will continue to place orders with us in the future and
at the same level as in prior periods. We also cannot assure you that the volume of our customers&#146;
orders will be consistent with our expectations when we plan our expenditures for raw materials,
components, labor and equipment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We depend on select personnel and could be affected by the loss of their services.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We depend on the continued service of our executive officers and skilled technical and other
personnel. Our business could suffer if we lose the services of any of these personnel and cannot
adequately replace them. At present, there is a shortage in Taiwan of persons with the special
technical skill set we require. Further, although some of these personnel have entered into
employment agreements with us, most of these employment agreements do not specify the duration of
employment. Therefore, the relevant personnel may, subject to the terms of the relevant agreements,
terminate such agreements at any time. We are not insured against the loss of any of our personnel.
We may not be able to either retain our present personnel or attract additional qualified personnel
as and when needed. In addition, we may need to increase employee compensation levels in order to
attract and retain our existing officers and employees and the additional personnel that we may
require in the future. Moreover, in order to attract and retain personnel, we must devote
significant resources to training and benefits. These benefits have historically and may in the
future include bonuses in the form of our common shares or otherwise based on the performance of
our stock.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Because of the highly cyclical nature of our industry, our capital requirements are difficult to
plan. If we cannot obtain additional capital when we need it, our growth prospects and future
operating results may be adversely affected.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our capital requirements are difficult to plan in our highly cyclical and rapidly changing
industry. We will need capital to fund the expansion of our facilities as well as research and
development activities in order to remain competitive. We believe that our existing cash and cash
equivalents, short-term investments, expected cash flow from operations and existing credit lines
under our short-term loan facilities will be sufficient to meet our capital expenditures, working
capital, cash obligations under our existing debt and lease arrangements, and other requirements
for at least the next twelve months. However, future capacity expansions or market or other
developments may cause us to require additional funds. Our ability to obtain external financing in
the future is subject to a variety of uncertainties, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our future financial condition, results of operations and cash flows;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our stock price and credit rating;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>general market conditions for financing activities by semiconductor companies; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>economic, political and other conditions in Taiwan and elsewhere.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we are unable to obtain external financing in a timely manner, on acceptable terms or at
all, we may be unable to implement our expansion plans or conduct planned research and development
and develop new products and our growth prospects and future operating results may decline.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>If we are unable to manage our expansion effectively, our growth prospects may be limited and our
future operating results may be affected.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have significantly expanded our operations in recent years. Rapid expansion puts strain on
our managerial, technical, financial, operational and other resources. As a result of our
expansion, we have implemented and may continue to need to implement additional operational and
financial controls and hire and train additional personnel. Any failure to manage our expansion
effectively could lead to inefficiencies and redundancies and result in reduced growth prospects
and operating results.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>If we are unable to effectively manage seasonal fluctuations in the demand for our products, our
business and operating results may be adversely affected.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have in the past experienced, and we expect to continue to experience, seasonal
fluctuations in the demand for our products. In particular, we typically generate higher sales
during the third and fourth quarters of the year. In anticipation of the higher demand in these
quarters and to smooth out and manage rationally the use of our capacity over the course of the
full year, we typically build up inventory in the first and second quarters of the year. However,
if we are unable to increase our manufacturing capacity or build up inventory ahead of demand to
meet seasonal or additional future demand on a timely basis, our customers may seek other
manufacturing
</DIV>

<P align="center" style="font-size: 10pt">12
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">sources to meet their needs and our business and operating results may be adversely affected.
In addition, if we are unable to effectively manage our manufacturing capacity during a seasonal
downturn in demand or if we build up inventory in anticipation of demand that does not materialize,
our results of operations would also be adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>If we are unable to obtain additional equipment in a timely manner and at reasonable cost, our
competitiveness and future operating results may be adversely affected.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We expect to purchase a significant amount of additional equipment from time to time to
continue to improve our technology and manufacturing processes. The market for our equipment is
characterized, from time to time, by intense demand, limited supply and long delivery cycles. In
addition, we do not have binding supply agreements with any of our suppliers and acquire our
equipment on a purchase order basis, which exposes us to substantial risks when market conditions
change. As a result, if we are unable to obtain equipment and upgrade our technology in a timely
manner and at a reasonable cost, we may not be able to compete effectively and fulfill our
customers&#146; requirements, which could adversely affect our growth prospects as well as our financial
condition and results of operations.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Derivative contracts may expose us to risks that may adversely affect our financial condition and
results of operations.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We enter into a variety of derivative transactions from time to time for both hedging and
trading purposes. These derivative contracts may expose us to or increase our exposure to financial
market risks, including foreign currency exchange rates, marketable securities prices (including
those of our common shares and bonds) and changes in interest rates. Even when we enter into
derivative contracts for hedging purposes, there may be imperfect correlation or even no
correlation, between price movements of a derivative instrument and price movements of the
underlying item being hedged, which will result in a less effective or ineffective hedge. Moreover,
although successful hedging strategies could reduce our risk of loss by wholly or partially
offsetting the negative effect of unfavorable price movements in the hedged item, hedging
strategies could also reduce our opportunity for gain by offsetting the positive effect of
favorable price movements in the hedged item.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may also be required to pledge assets as collateral security, maintain segregated accounts
or make margin payments when we take positions in derivative instruments involving obligations to
third parties (i.e., derivative instruments other than purchased options). If we were to be unable
to close out our positions in these derivative instruments, we may be required to continue to
pledge such assets, maintain such accounts or make such payments until the positions expire or
mature. Our ability to close out a position in a derivative instrument prior to its expiration or
maturity depends on the existence of a liquid secondary market or, in the absence of such a market,
the ability and willingness of a counterparty to enter into a transaction closing out the position.
We cannot assure you that we will be able to close out a derivative position at a time and price
that is favorable to us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are also exposed to the credit risk of the counterparties to our derivatives contracts. In
particular, any failure by a counterparty to honor the terms of its derivatives contracts with us
may adversely affect our financial condition and results of operations.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>If needed cash resources are unavailable to us, we will be unable to implement successfully our
research and development plans.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To keep up with the rapid pace of technological change and to develop attractive and
cost-effective products, we need to invest significantly in research and development. We may not be
able to generate cash flow from operations in sufficient amounts to allow us to maintain our
planned level of spending on research and development. Any failure to maintain adequate research
and development spending could reduce our competitiveness and jeopardize our long-term prospects.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We are vulnerable to natural disasters and other events beyond our control, which could severely
disrupt the normal operation of our business and adversely affect our
operating results.</I></B></DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All of our existing manufacturing operations are in Hsinchu, Taiwan, which is vulnerable to
natural disasters. Disruption of operations at our manufacturing facilities for any reason,
including earthquakes, droughts, power outages, typhoons or other events beyond our control, would
cause delays in shipments of our products, which could result in the loss of revenue and/or
customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Taiwan is also susceptible to earthquakes and has experienced severe earthquakes that caused
significant property damage and loss of life, particularly in the central and eastern parts of
Taiwan. These earthquakes damaged production facilities and equipment and adversely affected the
operations of many companies involved in the semiconductor and other industries, including our
company. Moreover, there were interruptions to our production schedule primarily as a result of
power outages caused by these earthquakes.
</DIV>

<P align="center" style="font-size: 10pt">13
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result of the rapid growth of the Taiwan semiconductor industry, which is primarily based
in Hsinchu, there has been increased demand for water and electricity in that region. Any shortage
of water or electricity could have a material and adverse effect on our operations. Many areas in
Taiwan experienced a severe drought in 2002 causing Taiwan authorities to announce water-rationing
measures in the northern parts of Taiwan. If a drought occurs again and authorities are unable to
source water from alternative sources in sufficient quantities, we may be required to temporarily
shut down or substantially reduce production at our facilities in the affected areas, which would
seriously affect our operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Many of our suppliers and customers and providers of semiconductor manufacturing services,
including foundries, are located in Taiwan. If our customers are affected by an earthquake, a
drought or other natural disasters, it could result in a decline in the demand for our products and
services. If our suppliers and providers of semiconductor manufacturing services are affected, our
production schedule could be interrupted or delayed. As a result, a major earthquake, drought or
other natural disaster in Taiwan could severely disrupt the normal operation of business and have a
material adverse effect on our financial condition and results of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While we maintain several insurance policies relating to our business, including business
interruption insurance, we cannot assure you that the insurance coverage will be sufficient to
protect us from potential losses resulting from natural disasters and other events beyond our
control. In addition, we cannot assure you that the premium payable for these insurance policies
upon renewal will not increase substantially, which may adversely affect our financial condition
and results of operations. Furthermore, any failure or inability to obtain the necessary insurance
coverage on a timely basis, or at all, may severely increase our operating risk.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We are subject to stringent environmental regulations and any violation could require us to pay
significant fines, or result in a delay or interruption of our operations.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are subject to environmental regulations relating to our manufacturing processes, including
the use, storage, discharge and disposal of chemical by-products of, and water used in, our
production process. A failure or a claim that we have failed, to comply with these environmental
regulations could result in the assessment of damages or imposition of significant fines, delays in
our production and capacity expansion and negative publicity, all of which could harm our business.
New regulations could also require us to acquire costly equipment or to incur other significant
expenses. In addition, any failure by us to control the use of, or adequately restrict the
discharge of, hazardous substances could subject us to future liabilities that may have a material
adverse effect on our financial condition and results of operations.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>The differences between R.O.C. GAAP and U.S. GAAP result in different amounts of net income under
those standards, which makes evaluating our financial performance difficult.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our consolidated financial statements are prepared under R.O.C. GAAP, which differ in many
significant respects from U.S. GAAP. For example, R.O.C. GAAP does not require the recognition of
the value of shares distributed as bonuses to employees when calculating net income, and R.O.C.
GAAP and U.S. GAAP differ in some important respects in accounting for gains and losses on
derivative financial instruments. Largely as a result of the differences in accounting for employee
bonuses in the form of our common shares, derivative instruments and convertible debt securities
with beneficial conversion features, we reported under U.S. GAAP net loss of NT$7,148&nbsp;million in
2003, NT$469&nbsp;million in 2004 and NT$4,636&nbsp;million (US$141.3&nbsp;million) in 2005, as compared to, under
R.O.C. GAAP, net loss of NT$8,198&nbsp;million in 2003, net income of NT$218&nbsp;million in 2004 and net
loss of NT$7,027&nbsp;million (US$214.2&nbsp;million) in 2005. See note 28 to our consolidated financial
statements for the years ended December&nbsp;31, 2003, 2004 and 2005 included in this annual report.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Risks Relating to Technology and Intellectual Property</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Our return to profitability depends on our ability to respond to rapid technological changes in the
semiconductor industry.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The markets for semiconductors and electronic systems that use semiconductor products are
subject to rapid technological change. This rapid change results in:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>introduction of new and increasingly complex and powerful products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>rapidly evolving industry standards;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>rapid and significant product price declines;</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">14
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>rapid product obsolescence; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>introduction of competing technologies and solutions.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our success depends on our ability to improve and develop our core technologies in a rapidly
changing technological environment. In particular, we expect that we will need to constantly offer
more sophisticated technologies and processes in order to respond to competitive industry
conditions and customer requirements. We cannot assure you, however, that we will be able to
identify new product opportunities or to timely develop and successfully market new products. We
may also experience delays in developing or achieving volume production of new products. Moreover,
our new products may fail to gain market acceptance, and existing products may become obsolete. For
example, our sales of Mask ROM products fell when Nintendo shifted to DVD-ROM technology in its
newer gaming console products, and may continue to fall further as products move to competing
technologies. If we fail to develop, or obtain access to, advances to technologies and processes,
we may become less competitive and be unable to return to profitability.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We depend on our technology partners to advance our portfolio of process technologies, and we may
not be able to advance our portfolio of process technologies if our technology partners fail to
advance their technology, if we fail to maintain our existing arrangements with our technology
partners or if we are unable to enter into new arrangements with other technology providers.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Enhancing our product design and manufacturing process technologies is critical to our ability
to provide products and services for our customers. In particular, we have an internal research and
development team focusing on developing new semiconductor manufacturing process technologies. We
also depend on our technology arrangements with leading integrated device manufacturers and fabless
semiconductor companies, consumer electronics and communications companies and other technology
providers to advance our portfolio of process technologies. We believe these arrangements help
reduce our development costs and capital expenditures and increase the capacity utilization rates
in our fabrication plants. If we are unable to maintain successful technology arrangements on
mutually beneficial economic terms, or are unable to enter into new technology arrangements with
other leading semiconductor companies, electronics companies and other technology providers, we may
not be able to continue providing our customers with leading-edge process technologies, which may
adversely affect our competitiveness as well as our business and prospects.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Our manufacturing processes are highly complex, costly and potentially vulnerable to impurities and
other disruptions that can significantly increase our costs and delay product shipments to our
customers.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our manufacturing processes are highly complex, require advanced and costly equipment and are
continuously being modified to improve manufacturing yields and product performance. Impurities or
other difficulties in the manufacturing process or defects with respect to equipment or supporting
facilities can lower manufacturing yields, interrupt production or result in losses of products in
process. As system complexity has increased and process technology has become more sophisticated,
requirements for precision have become even more stringent. In particular, defective production can
result from a number of factors, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the cleanliness of the manufacturing environment;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>human error;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>equipment malfunction;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>use of defective raw materials; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>inadequate testing.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From time to time, we experience lower than anticipated production yields as a result of these
factors, particularly in connection with the expansion of our capacity or changes in our processing
methods. Our yield on new products is often lower as time is required for us to develop expertise
and experience in producing these products. We typically sell our products on a per-die basis and
lower yields can reduce the number of units we can sell, which causes our revenues and profits to
suffer. If we fail to maintain high quality production standards and yields, our business and
operating results may suffer and our customers may cancel their orders or return our products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Our business depends in part on our ability to obtain and preserve intellectual property rights.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our ability to compete successfully and achieve future growth will depend, in part, on our
ability to protect our proprietary technology. We rely on patents, copyrights and trade secret
protection rights to protect some of our proprietary technologies and
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">products. We cannot assure you that these measures will provide meaningful protection of our
intellectual property or commercial advantage. For example, our competitors may be able to use our
technologies to develop similar or superior products, and we may not have sufficient financial
resources to protect and enforce our rights. We intend to continue to file patent applications when
appropriate to protect our proprietary technologies, but the process of seeking patent protection
can be lengthy and expensive. In addition, patents may not be issued for pending or future
applications. Furthermore, if patents are issued, they may be challenged, invalidated or
circumvented. Moreover, the various countries in which we market our products may not protect our
intellectual property rights to the same extent as does the United States. See &#147;Item&nbsp;5. Operating
and Financial Review and Prospects &#151; Research and Development, Patents and Licenses, etc. &#151;
Research and Development&#148; and &#147;&#151; Intellectual Property&#148;.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We may be subject to intellectual property rights disputes that could expose us to serious
liabilities.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The semiconductor industry is characterized by frequent litigation regarding patent and other
intellectual property rights. Our ability to compete successfully depends on our ability to operate
without infringing the proprietary rights of others. We have no means of knowing what patent
applications have been filed in the United States or elsewhere until the applications or resulting
patent (if one is granted) are made available to the public. Because of the complexity of the
technologies used and the multitude of patents, copyrights and other overlapping intellectual
property rights, it is often difficult for semiconductor companies to determine infringement. We
are currently involved in certain litigation matters involving patent infringement.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">See &#147;Business &#151; Legal Proceedings&#148;. As is typical in the semiconductor industry, from time to time
we receive communications from third parties asserting patents that cover certain of our
technologies and alleging infringement of intellectual property rights. We expect to receive
similar communications in the future. If a valid claim is made against us or our customers, we may
be required to:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>discontinue using process technologies which could cause us to stop manufacturing particular semiconductors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>pay substantial monetary damages:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>seek to develop non-infringing technologies, which may not be feasible; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>seek to acquire licenses to the infringed technology which may not be available on reasonable commercial terms, or at all.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We could be seriously harmed by any of these developments. Litigation, which could result in
substantial costs to us and divert our resources, may also be necessary to enforce our patents or
other intellectual property rights or to defend against claimed infringement of the rights of
others. Our failure to obtain necessary licenses, the occurrence of patent infringement or other
intellectual property litigation could seriously harm our company. In addition, although we have
from time to time made a reserve in anticipation of royalty payments we may potentially be required
to make in relation to any possible claims or allegations, we cannot assure you that we have made,
or will continue to make, sufficient reserve for all claims and allegations against our company for
any patent infringement. See &#147;Item&nbsp;8. Financial Information &#151; A. Consolidated Statements and Other
Financial Information &#151; Legal Proceedings&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Political and Economic Risks</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Strained relations between the R.O.C. and the P.R.C. could adversely affect our business and the
market value of your investment.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our principal executive offices and most of our assets are located in, and most of our revenue
is derived from, our operations in Taiwan. The R.O.C. has a unique international political status.
The People&#146;s Republic of China (&#147;P.R.C.&#148;) asserts sovereignty over all of China, including Taiwan.
The P.R.C. government does not recognize the legitimacy of the R.O.C. government. Although
significant economic and cultural relations have been established in recent years between the
R.O.C. and the P.R.C., relations have often been strained and the P.R.C. government has indicated
that it may use military force to gain control over Taiwan in some circumstances, such as the
declaration of independence by the R.O.C. Relations between the R.O.C. and the P.R.C. have been
particularly strained in recent years. Occasional speeches and statements by President Chen
Shui-Bian hinting at independence issues and reactions of Chinese officials to these
speeches and statements have increased tensions between the R.O.C. and the P.R.C.. In March&nbsp;2005,
the P.R.C. passed an anti-secession law which sanctions the use of force against the R.O.C. if the
R.O.C. formally declares its independence. Past developments in relations between the R.O.C. and
the P.R.C. have on occasion depressed the market price of the securities of R.O.C. companies.
Relations between the R.O.C. and the P.R.C. and other factors affecting the political or economic
conditions in Taiwan could have a material adverse effect on our financial condition and results of
operations, as well as the market price and the liquidity of our securities.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Fluctuations in exchange rates could result in foreign exchange losses.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The majority of our revenue is denominated in U.S. dollars and Japanese yen. Our costs of
revenues and operating expenses, on the other hand, are incurred in several currencies, including
N.T. dollars and U.S. dollars. In addition, a substantial portion of our capital expenditures has
been and is expected to continue to be, primarily denominated in U.S. dollars and Japanese yen.
Fluctuations in exchange rates, primarily among the U.S. dollar, the N.T. dollar and the Japanese
yen, will affect our costs and operating margins. In addition, these fluctuations could result in
exchange losses and increased costs in N.T. dollar and other local currency terms. Despite hedging
and mitigating techniques implemented by us from time to time, fluctuations in exchange rates have
affected, and may continue to affect, our financial condition and results of operations. See &#147;Item
11. Quantitative and Qualitative Disclosures About Market Risk &#151; Foreign Currencies&#148;.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Disruptions in the international trading environment may significantly reduce our international
sales and revenue.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A substantial portion of our net sales revenue is derived from sales from Taiwan to customers
located outside Taiwan. In 2003, 2004 and 2005 export sales from Taiwan to our customers outside
Taiwan accounted for 67.9%, 66.5% and 70.2% respectively, of our net sales revenue. We expect sales
to customers outside Taiwan to continue to represent a significant portion of our net sales
revenue. Accordingly, our financial condition and results of operations and the market price of our
securities may be affected by changes in governmental policies, inflation, increasing interest
rates, social instability and other political, economic or social developments in or affecting the
countries in which we sell our products that are not within our control. As a result, our business
will continue to be vulnerable to disruptions in the international trading environment, including
adverse changes in foreign government regulations, political unrest and international economic
downturns. These disruptions in the international trading environment affect the demand for our
products and the terms upon which we sell our products overseas, which may significantly reduce our
international sales and revenue.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>The trading price of our common shares may be adversely affected by the general activities of the
Taiwan Stock Exchange and the economic performance of Taiwan.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common shares are listed on the Taiwan Stock Exchange. The trading price of our common
shares may be affected by the general activities of the Taiwan Stock Exchange and the economic
performance of Taiwan. The Taiwan Stock Exchange is smaller and, as a market, more volatile than
the securities markets in the United States and a number of European countries. The Taiwan Stock
Exchange has experienced substantial fluctuations in the prices and volumes of sales of listed
securities, and there are currently limits on the range of daily price movements on the Taiwan
Stock Exchange. In the past decade, the Taiwan Stock Exchange Index peaked at 10,202 in February
2000 and subsequently fell to a low of 3,446 in October&nbsp;2001. During 2005, the Taiwan Stock
Exchange Index peaked at 6,575.53 on December&nbsp;29, 2005 and
reached a low of 5,632.97 on October&nbsp;28,
2005. During 2005, daily closing prices of our common shares ranged
from NT$5.19 per share on
September&nbsp;22, 2005 to NT$12.33 per share on January&nbsp;3, 2005. On June&nbsp;9, 2006, the Taiwan Stock
Exchange Index closed at 6,444.63 and the daily closing value of our common shares was NT$7.39 per
share. The Taiwan Stock Exchange is particularly volatile during times of political instability,
such as when relations between Taiwan and the P.R.C. are strained. Moreover, the Taiwan Stock
Exchange has experienced problems such as market manipulation, insider trading and payment
defaults. The recurrence of these or similar problems could decrease the market prices and
liquidity of our common shares, ADSs and GDSs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In response to past declines and volatility in the securities markets in Taiwan, and in line
with similar activities by other countries in Asia, the government of the R.O.C. formed the
Stabilization Fund, which has purchased and may from time to time purchase shares of Taiwan
companies to support these markets. In addition, other funds associated with the R.O.C. government
have in the past purchased, and may from time to time purchase, shares of Taiwan companies on the
Taiwan Stock Exchange or other markets. In the future, market activity by government entities, or
the perception that such activity is taking place, may take place or has ceased, may cause
fluctuations in the market prices of our common shares, ADSs and GDSs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Risks Relating to our Common Shares, ADSs and GDSs</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We cannot assure you that the market for our common shares and ADSs will be active and liquid, and
trading of our GDSs has been extremely illiquid.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The average daily trading volumes for our common shares and ADSs have fluctuated greatly in
the past. During 2005, the daily trading volume of our common shares ranged from approximately
8,664,000 to approximately 139,694,000 shares. During the same period, the average daily trading
volume of our ADSs ranged from approximately 58,000 units to approximately 51,027 units. Since our
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">GDSs began trading in April&nbsp;2004, trading of our GDSs has been extremely illiquid, and
underlying common shares have been withdrawn with respect to a very substantial majority of our
GDSs. As of May&nbsp;31, 2006, GDS holders representing over 99.64% of our GDSs issued in April&nbsp;2004
have withdrawn from our GDS program and converted their GDSs to common shares. We cannot assure you
that the liquidity of our common shares or ADSs will be maintained or enhanced and expect that
trading in our GDSs will continue to be extremely illiquid. Market prices of technology companies&#146;
shares have been and continue to be extremely volatile. As a result, volatility in the price of our
common shares, ADSs and GDSs may be caused by factors outside of our control and may be unrelated
or disproportionate to our operating results.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, the EU Transparency Obligations Directive is currently being finalized and may be
implemented in Luxembourg, where our GDSs are listed, in a manner that is unduly burdensome for our
company. In particular, we may be required to publish financial statements in the EU prepared in
accordance with, or reconciled to, International Financial Reporting Standards. In such
circumstances we may decide to seek an alternative listing for the GDSs on a stock exchange outside
the European Union.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Future sales of securities by our company or existing shareholders or future issuances of
securities by our company may have a dilutive effect and decrease the value of your investment.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The market price of our common shares and ADSs and GDSs could decline as a result of future
sales of a large number of common shares, ADSs or GDSs or the perception that such sales could
occur. If we or the holders of our common shares, ADSs or GDSs sell a large number of common
shares, ADSs or GDSs, or the perception develops that such an event may occur, the market price for
the common shares, ADSs or GDSs could be depressed. In particular, if cash flow from operations is
insufficient to allow us to conduct our day-to-day operations or to redeem or otherwise repay our
debt or if net losses reduce our equity near or below the minimum level stipulated in covenants
under our bank loans, we may need to issue more common shares, ADSs or GDSs in the future, or the
perception may arise that we need to do so.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, we plan to issue, from time to time, additional common shares in connection with
employee compensation as well as to finance possible future investments or acquisitions. The
issuance of additional shares may have a dilutive effect on other shareholders and may cause the
price of our common shares, ADSs and GDSs to decrease. The conversion of our convertible bonds into
common shares (and, where applicable, exercise of the right to deposit those common shares in
exchange for ADSs or GDSs) may also have a dilutive effect. See &#147;Item&nbsp;6. Directors, Senior
Management and Employees &#151; E. Share Ownership &#151; Share Option Plans&#148; for a discussion of the share
option plan that we have adopted for the benefit of all of our officers and employees and those of
our subsidiaries.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>ADS and GDS holders do not have the same voting rights as our common shareholders, which may affect
the value of the ADSs and GDSs.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The voting rights of ADS and GDS holders as to the common shares represented by the ADSs or
GDSs are limited to the extent set forth in the relevant deposit agreement. With respect to matters
other than the election of our directors or supervisors, ADS and GDS holders generally are not able
to exercise voting rights on an individual basis. With respect to matters other than the election
of our directors or supervisors, if holders representing 51% of the outstanding ADSs or GDSs, as
the case may be, instruct the depositary to vote in a particular manner, the depositary will cause
all common shares represented by the ADSs or GDSs to be voted in that manner. If the depositary
does not receive instructions representing at least 51% of the outstanding ADSs or GDSs, as the
case may be, to vote in a particular manner, ADS or GDS holders, as the case may be, will be deemed
to have instructed the depositary to authorize all the common shares represented by their ADSs or
GDSs to be voted at the discretion of our designated representative, which may not be in the
interest of all ADS or GDSs holders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The R.O.C. Company Law and our articles of incorporation provide that a shareholder has one
vote for each common share. There is also cumulative voting for the election of directors and
supervisors.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>The rights of holders of our ADSs and GDSs to participate in our rights offerings may be limited,
which may cause dilution to their holdings.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may from time to time distribute rights to our shareholders, including rights to acquire
our securities. Under the ADS deposit agreement, the depositary will not offer those rights to
holders of ADSs unless both the rights and the underlying securities to be distributed to holders
of ADSs are either registered under the U.S. Securities Act of 1933 (the &#147;Securities Act&#148;) or
exempt from registration under the Securities Act. Under the GDS deposit agreement, the depositary
will not offer those rights to holders of GDSs if it deems the distribution of rights to holders of
GDSs not to be lawful and reasonably practicable. We are under no obligation to file a registration
statement with respect to any such rights or underlying securities or to endeavor to cause such a
registration statement to be
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">declared effective. Accordingly, holders of our ADSs and GDSs may be unable to participate in
our rights offerings and may experience dilution in their holdings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Our public shareholders may have more difficulty protecting their interests than they would as
shareholders of a U.S. corporation.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our corporate affairs are governed by our articles of incorporation and by the laws governing
Taiwanese corporations. The rights and responsibilities of our shareholders and members of our
board of directors under Taiwan law are different from those that apply to a U.S. corporation.
Therefore, our public shareholders may have more difficulty protecting their interests against
certain actions of our management, members of our board of directors or controlling shareholders
than they would as shareholders of a U.S. corporation.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>ADS and GDS holders may be required to appoint agents in Taiwan to handle various tax and
administrative matters if they withdraw common shares from our ADS or GDS program and become
shareholders, which may make share ownership burdensome.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-R.O.C. persons wishing to withdraw their common shares from our ADS or GDS program and
become shareholders are required under current R.O.C. laws and regulations to appoint a local agent
or representative (a &#147;Tax Guarantor&#148;) in Taiwan for making tax payments on their behalf. A Tax
Guarantor must meet certain qualifications set by the R.O.C. Ministry of Finance and, upon
appointment, becomes a guarantor of the holder&#146;s R.O.C. tax obligations. Holders wishing to
repatriate profits derived from the sale of common shares or cash dividends or interest derived
from any such common shares, will be generally required to submit evidence of appointment of a Tax
Guarantor and the approval of the appointment by the R.O.C. tax authorities. We cannot assure you
that you will be able to appoint and obtain approval for a Tax Guarantor in a timely manner.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under R.O.C. law and regulations, citizens of the P.R.C. are not permitted to hold our common
shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, under current R.O.C. law, such ADS or GDS holders will be required to appoint a
local agent in Taiwan to, among other things, open a securities trading account with a local
securities brokerage firm, remit funds and exercise shareholders&#146; rights. They must also appoint a
local bank to act as custodian for handling confirmation and settlement of trades, safekeeping of
securities and cash proceeds and reporting and declaration of information. In addition, they will
be required to register with the Taiwan Stock Exchange for making investments in the R.O.C.
securities market (and if you are an offshore foreign institutional investor, to obtain the prior
approval of the Central Bank of China) prior to withdrawing common shares. Without meeting these
requirements, non-R.O.C. persons will not be able to hold, subsequently sell or otherwise transfer
our common shares on the Taiwan Stock Exchange.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Changes in exchange controls which restrict your ability to convert proceeds received from your
ownership of ADSs or GDSs may have an adverse effect on the value of your investment.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under current R.O.C. law, a holder of our ADSs or GDSs who withdraws and becomes a holder of
our common shares may be required to obtain foreign exchange approval from the Central Bank of
China on a payment-by-payment basis for conversion from N.T. dollars into foreign currencies of the
proceeds from the sale of subscription rights for new common shares. Although it is expected that
the Central Bank of China will grant this approval as a routine matter, we cannot assure you that
in the future any approval will be obtained in a timely manner, or at all.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Furthermore, pursuant to the R.O.C. Foreign Exchange Control Law, the Executive Su of the
R.O.C. government may, without prior notice but subject to subsequent legislative approval, impose
foreign exchange controls in the event of, among others, a material change in international
economic conditions. We cannot assure you that foreign exchange controls or other restrictions will
not be introduced in the future.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>When withdrawing the underlying common shares of the ADSs or GDSs, you may be required to provide
certain information to us or the Depositary, and failure to provide such information may result in
a delay of the withdrawal.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When withdrawing the underlying common shares of ADSs or GDSs, you may be required to provide
certain information to us or the depositary, including the name and nationality of the person to be
registered as the shareholder, the number of common shares to be acquired by such person and the
number of common shares acquired by such person in the past through the date of the withdrawal of
the underlying common shares. Under applicable R.O.C. laws, we are required to report to the R.O.C.
Securities and Futures Commission (the &#147;R.O.C. SFC&#148;) if the person to be registered as a
shareholder (i)&nbsp;is a &#147;related party&#148; of ours as defined in the R.O.C. Statement of Financial
Accounting Standard No.&nbsp;6 or (ii)&nbsp;will hold, immediately following such withdrawal, more than 10%
of the underlying common shares of the ADSs or GDSs. Failure to provide such information may cause
the delay of such withdrawal of the underlying common shares.
</DIV>

<P align="center" style="font-size: 10pt">19
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="107"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;4.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>Information on the Company</B></FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>A. History and Development of the Company</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are an independent semiconductor designer, producer and supplier. Our product portfolio
includes Mask ROM, Flash, EPROM, strategic manufacturing services, or SMS, and system logic center,
or SLC, products. We view ourselves as an integrated provider and treat our principal clients as
strategic partners. We work closely with them starting from early stages of product development to
design silicon chip solutions that meet their specific needs. These partners include Nintendo and
Hewlett-Packard, with whom we have had relationships for over ten years. We differentiate ourselves
by our ability to offer a full range of in-house design, product and process engineering
capabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We organize our operations into two main strategic business groups:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our Microelectronics and Memory Solution Group, which encompasses Mask ROM, Flash, EPROM
products and strategic manufacturing services; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our Integrated Solution Group, which focuses largely on SLC products for the audio,
video, communications and microcontroller markets.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our products are primarily used in applications for the consumer electronics, computer and
communications industries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We were founded and incorporated on December&nbsp;9, 1989 by engineers who returned to Taiwan from
Silicon Valley in the United States. Our founders chose to form our company in Taiwan to take
advantage of the availability of capital and Taiwan&#146;s manufacturing strengths. Today, many of the
world&#146;s largest semiconductor companies are located in Taiwan. Many companies outside Taiwan
outsource some or all of their semiconductor manufacturing needs to Taiwan&#146;s semiconductor
manufacturing service providers. In addition, Taiwan is a center for the design and manufacture of
electronic systems that have semiconductor devices as their primary components.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that we were the first in Taiwan, in August&nbsp;1992, to develop a digital signal
processor, and that we were the world&#146;s first manufacturer to announce the commercial availability
of a 4Mb Flash chip in October&nbsp;1992. Additionally, in 1997, we became one of the first companies in
Taiwan to produce an embedded Flash microcontroller.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In March&nbsp;1995, our common shares were listed on the Taiwan Stock Exchange and we became the
first company to be listed under that stock exchange&#146;s &#147;High Technology&#148; category of companies. In
May&nbsp;1996, our ADSs were accepted for quotation on the Nasdaq National Market and we became the
first Taiwanese company with securities listed in the United States. In April&nbsp;2004, we issued GDSs
which were listed on the Luxembourg Stock Exchange.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to improve our financial structure and to offset accumulated deficits, at a
Provisional Meeting of Shareholders held on November&nbsp;16, 2005, our shareholders approved the
cancellation of 2,079,474,542 shares amounting to NT$20,794,745. The effective date of the
cancellation was February&nbsp;16, 2006. On February&nbsp;17, 2006, we issued 100,000 new shares in a
private placement at NT$8.07 per share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our contact information is:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="81%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top" align="right"><DIV style="margin-left:0px; text-indent:-0px"><B>&#149;</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Business address:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No.&nbsp;16 Li &#150;Hsin Road, Science Park<br>
Hsinchu, Taiwan, Republic of China</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="right"><DIV style="margin-left:0px; text-indent:-0px"><B>&#149;</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Telephone number:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">(8863) 578-6688</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="right"><DIV style="margin-left:0px; text-indent:-0px"><B>&#149;</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Website:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">www.macronix.com</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">20
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Capital Expenditures</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We operate our own fabrication facilities and therefore require significant amounts of capital
to build, expand, modernize and maintain our facilities and equipment. Increases in property, plant
and equipment amounted to NT$1,606&nbsp;million, NT$2,554&nbsp;million and NT$1,595&nbsp;million (US$48.6&nbsp;million)
in 2003, 2004 and 2005, respectively. The following table sets forth our capital expenditures for
2003, 2004 and 2005.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>Year ended December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>(NT$ million)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>(NT$ million)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>(NT$ million)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fab I</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">358</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">134</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fab II</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">228</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">875</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fab III</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">834</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,652</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">456</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">452</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">586</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,606</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,554</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,595</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These amounts include the expansion and upgrade of Fab I and Fab II, the construction of Fab
III and the development of trainee and/or employee facilities and other areas. See &#147;Item&nbsp;4.
Information on the Company &#150; D. Property, Plant and Equipment&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2005, our capital expenditures consisted primarily of residual payments following the
completion of the construction of the shell of Fab III and investments to expand the SLC capacity
of Fab I under our &#147;Evergreen plan&#148;. We believe that we will have sufficient resources available
to meet our planned capital expenditure requirements in 2006. In April&nbsp;2006, we sold Fab III,
along with a clean room and certain adjunctive facilities and equipment, to Powerchip Semiconductor
Corporation, as we did not have immediate plans to utilize Fab III. As part of the sale, Powerchip
agreed to supply sufficient 12-inch wafer production capacity. We purchase these wafers for our
advanced process technology development.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>B. Business Overview</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Our Strategy</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We aim to be a global leader in the non-volatile memory market by offering our customers a
total non-volatile memory solution for their electronic system requirements. We seek to distinguish
ourselves from traditional integrated device manufacturers and wafer foundries by forging strategic
partnerships with our key customers from an early stage of their product development to ensure our
products meet their present and future requirements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The components of our strategic initiatives are as follows:
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Maintain our leadership in Mask ROM and develop the market for one-time programmable memory
products</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although the Mask ROM market has been declining, it remains the preferred low-cost,
high-volume solution for certain applications (such as portable game devices) and hence continues
to be an important segment of our business. We have been able to increase our market share in the
Mask ROM segment over time while maintaining relatively strong margins in spite of declining
average selling prices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have developed, and began to ship from the end of 2004, one-time programmable memory
products based on 2 bit per cell NBit technology, which we term as XtraROM. Our XtraROM can be
electrically programmed in a similar manner to EPROMs, which allows our customer turnaround time to
be reduced from weeks for Mask ROM to a few days for XtraROM. At the same time, the cost of XtraROM
is fairly similar to Mask ROM. We believe that this ability to reduce customer turnaround times
with minimal difference in cost provides us with a significant competitive advantage. We are also
developing 4 bit per cell NBit technology. If we are successful, we believe that one-time
programmable memory products based on 4 bit per cell NBit technology may become equal or lower in
cost than equivalent Mask ROM products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the future, we expect Mask ROM and/or one-time programmable memory products, to continue to
play an important role in our business, and that XtraROM will progressively replace Mask ROM if we
are successful in developing one-time programmable memory products based on 4 bit per cell NBit
technology. We plan to continue to focus on maintaining our competitiveness in the ROM segment by
improving our technology capabilities as well as introducing new applications for Mask ROM and
XtraROM, including, in particular, digitally stored content for mobile and handheld devices.
</DIV>

<P align="center" style="font-size: 10pt">21
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Invest in Flash technologies to develop cost-competitive solutions, particularly for the handheld
device and wireless markets</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe Flash will be the dominant non-volatile memory product in the future and are
committed to expanding our capabilities and market share in Flash technologies. We believe that our
ability to develop expertise in advanced Flash technologies is critical to our long-term
competitiveness and success.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the near term, we plan to focus on medium-density Code Flash products using advanced
manufacturing processes, and reduce line widths and die sizes, to develop cost-effective solutions.
Our research efforts currently include the development of 0.13 micron process technology for Code
Flash products. We are also seeking to shrink die sizes through redesigning our 0.15 micron Flash
products.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Leverage our competitive position in the non-volatile memory market to effectively cross-sell and
diversify our product mix and customer base</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As one of the world&#146;s leading manufacturers of Mask ROMs, we are able to provide our customers
with a cost-effective means to procure large volumes of capacity in a relatively short time frame.
Our Mask ROM business has therefore been critical to our efforts in developing relationships with,
and eventually cross-selling other products to, some of our key customers. For example, we have
successfully sold Flash, SLC and SOC products to Nintendo, which originally began as a customer for
our Mask ROM products only.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We plan to continue to leverage our Mask ROM business with our existing and potential
customers, thereby expanding our ability to cross-sell and diversify product mix and customer base.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Continue to upgrade our process technology and in-house manufacturing capabilities</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our manufacturing facilities enable us to provide a full range of services and timely delivery
to our key clients. We will continue to maintain in-house manufacturing capacities and stress
quality control and operational discipline to enhance production yield at our manufacturing
facilities. Where necessary to enhance our competitive position, we intend to continue migrating
our production to more advanced process technologies by making prudent investments in equipment and
leveraging on our strategic partners&#146; expertise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;However, in light of the capital-intensive nature of semiconductor manufacturing, we plan to
continue to explore ways to align our product portfolio with our manufacturing capabilities. For
example, while we have already migrated Fab I to 0.32 micron process technology for certain chips,
in order to maintain profitability at Fab I and minimize the amount of new investment required, we
have initiated an &#147;Evergreen plan&#148;. This allocates to Fab I manufacturing of products that do not
require leading edge technologies, such as certain of our SLC and SMS products, including high
voltage, microelectronic-mechanical system, or MEMS, LCD driver IC chipsets and embedded ROM
products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As an example of our efforts in managing capacity constraints, we outsource some of our wafer
production requirements to Taiwan Semiconductor Manufacturing Company Limited (&#147;TSMC&#148;) in Taiwan
and Tower Semiconductor Limited (&#147;Tower Semiconductor&#148;) in Israel.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our Business Groups</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently organize our operations into two strategic business units, namely, our
Microelectronics and Memory Solution Group and our Integrated Solution Group. Our Microelectronics
and Memory Solution Group is primarily responsible for the management and operation of our business
relating to our non-volatile memory products, such as Mask ROM, Flash and EPROM products, and for
SMS products. Our Integrated Solution Group is responsible for the management and operation of our
business relating to SLC products. We intend to spin-off our Integrated Solution Group, initially
into four wholly-owned subsidiaries, by the end of the year, focusing on Mobile Audio, Base Band,
Mobile Payment and Design Service, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Microelectronics and Memory Solution Group supports the technologies that enable us to
provide semiconductor products and design services. It focuses primarily on the research and
development of the advanced process technologies that we require for our business and on advancing
our design capabilities, as well as the operation and capacity planning of our manufacturing
facilities. It is also responsible for managing our process technologies and reinforcing our
relationships with our strategic manufacturing partners through technology arrangements.
</DIV>

<P align="center" style="font-size: 10pt">22
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our Integrated Solution Group is responsible for providing value-added design services and
system-level platform solutions to our based on the requirements of the end-market application. In
addition, it is responsible for developing strategic partnerships with our key customers and
leveraging on our platform partners to provide integrated solutions for our key customers. Our
Integrated Solution Group is also our marketing channel for cross-selling our products and services
to key customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our Products and Services</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth our main products, their characteristics and applications, and
the percentage of net sales revenue represented by these products and services in 2003, 2004 and
2005:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="12%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="16%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>% of net sales revenue</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>Year ended December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Product</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Characteristics</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Applications</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD colspan="3" valign="top" align="left" nowrap><B>Microelectronics and Memory Solution Group:</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Mask ROM
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Not re-programmable
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Games, PDAs, word processors, printers, fax modems, VCDs, cellular phones, STBs
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">42.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">35.8</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">46.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Flash
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Re-programmable within the application system
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PDAs, digital cameras, STBs, Web TVs, DVD players, optical disk drive products Fax modems, VCDs
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">32.8</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">45.8</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">36.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">EPROM
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Re-programmable outside the application system using industrial processors
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STBs, Internet applications, CDs
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0.7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0.1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">SMS
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Value-added services
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">DVDs, microcontrollers with embedded Flash technology
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">13.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7.4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">8.8</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left"><B>Integrated Solution Group:</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">SLC
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Highly integrated system- on-a-chip solutions featuring embedded Flash technology
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Cellular phones, flat panel displays, digital still cameras, smart cards, PDAs, electronic<BR>
dictionaries, digital audio products
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7.6</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6.3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Microelectronics and Memory Solution Group</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Mask ROMs</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that we are currently the largest Mask ROM manufacturer in the world. Although the
global Mask ROM market has been shrinking, we have increased our market share in recent years as
certain key competitors have exited the market. We differentiate ourselves by providing customized
solutions, faster turnaround times and higher volume capacity. We continue to focus on the Mask ROM
market because it provides higher margins than our other memory products as well as the opportunity
for us to cross-sell other products to our customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Applications. </I>Mask ROMs are used for applications in a wide range of electronic products,
including the storage of software for video games and data storage for office automation equipment,
such as fonts for laser printers and dictionary data for word processors, as well as applications
for pre-recorded MP3 music, mobile telecommunications, pachinko machines and multimedia devices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We manufacture Mask ROMs using 0.45 micron and 0.15 micron patented process technology in
densities ranging from 1Mb to 512Mb and in a variety of configurations. We believe that our
patented technology allows us to produce Mask ROM products that are smaller in size and with higher
densities than the Mask ROM products from our competitors. We migrated our process technology to
0.18 micron in the second half of 2000 and successfully migrated our process technology to 0.15
micron for both Flash and Mask ROM in the fourth quarter of 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although the majority of the circuitry in a Mask ROM chip is based on a relatively standard
design, we often incorporate customer design specifications into application-specific portions of
the circuitry during the manufacturing process. For example, we have delivered Mask ROM products
with densities ranging from 4 Mb to 32 Mb for use in memory cards of different form factors for use
in a variety of consumer electronic devices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also manufacture a range of Mask ROM products that are compatible with Flash products. This
provides our customers with the benefit of compatibility and the flexibility of using our Flash
devices during their design and development stages where software
</DIV>

<P align="center" style="font-size: 10pt">23
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">modifications are required, while
using our Mask ROM devices in the mass production of their products without the need for software
modification.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have developed, and began to ship from the end of 2004, 64Mb, 128Mb and 256 Mb one-time
programmable memory products based on 2 bit per cell NBit technology, which we term as XtraROM. In
addition, we have lunched pilot programs for 512Mb and 1Gb one-time programmable memory products.
Our XtraROM can be electrically programmed in a similar manner to EPROMs, which allows our customer
turnaround time to be reduced from weeks for Mask ROM to a few days for XtraROM. In the future, we
expect that XtraROM will progressively replace Mask ROM if we are successful in developing one-time
programmable memory products based on 4 bit per cell NBit technology.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table provides an overview of our principal Mask ROM and XtraROM products, and
the percentage of net Mask ROM and XtraROM sales revenue represented by these products in 2003,
2004 and 2005:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="18%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="50%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11"><B>% of our net Mask ROM and</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>XtraROM sales</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>Year ended December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Density</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Sample applications</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">512 Mb(1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Games, entertainment</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">256 Mb(1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Games, memory cards</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">128 Mb(1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Games, PDAs</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">64Mb</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Word processors, games, PDAs, STBs, databanks, printers</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">32 Mb</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Games, DVDs, data communications</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">16 Mb</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Games, word processors</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">8 Mb</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Sound cards, data banks, BIOS, games, sound cards</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">4 Mb</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PHSs, data banks, games</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Pages, data banks, STBs, BIOS, games, word processors, networking</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes XtraROM products.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Competition. </I>The Mask ROM industry is highly competitive. Our major competitors include Oki,
NEC and Hynix.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We believe that with our relative flexibility in adjusting our product mix and allocating our
capacity in Fab II and pursuant to our agreement with Powerchip to purchase 12-inch wafers, we
should be well positioned in the Mask ROM market over the next few years. In the future, we plan to
increase our emphasis on high-density Mask ROM products for use in the games industry, as well as
to explore the demand for applications in other industries to increase demand for our Mask ROM
products.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We plan to maintain our leadership in the Mask ROM market by participating in the product
design process of our existing and prospective customers at an early stage to ensure that our Mask
ROM products meet the requirements in their high-end mobile consumer goods, such as cellular phones
and MP3 players. We also plan to diversify our customer base to increase the variety of
applications of our Mask ROM products in the markets for telecommunications products, toys and
entertainment products, personal digital assistants and office automation equipment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Competing technologies to Mask ROM include CD-ROMs, DVD-ROMs, magnetic disks and on-demand
software available through telephone-linked and Internet databases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Flash</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently focus on medium-density Flash products to take advantage of cost efficiencies. We
seek to increase the cost-effectiveness and our focus on higher density Flash products in the near
future in order to increase our market share and to improve our gross margins.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Applications. </I>Applications for Flash products range from a wide variety of portable, home and
industrial electronic devices. Flash is particularly suited for applications in handheld devices,
as it has the combined benefits of portability, high-density and lower power consumption. Flash
products are also used in various audio products, such as digital answering machines, mobile
telephone systems, MP3 players, networking devices, digital cameras and personal computer
motherboards.
</DIV>

<P align="center" style="font-size: 10pt">24
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The two current major architectural standards for Flash products are the NOR and NAND
standards. These standards are differentiated largely by the manner in which the Flash products
write and erase data. The NOR design architecture, commonly known as Code Flash, produces faster
devices but does not support high-density products at a competitive price. NAND design
architecture, commonly known as Data Flash, can support higher density Flash products at lower
cost, but cannot be used for random access code storage purposes and thus has a higher latency
time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We produce our proprietary PAC-AND design architecture for 0.15micron process technology, and
focus our resources on the development of products based on NBit technology and the mainstream ETOX
(EPROM tunnel oxide) design. Our research efforts currently include the development of 0.13micron
process technology for NOR Flash products based on mainstream ETOX technology, and we seek to
achieve this in 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To support massive content storage as required by the handheld game or portable devices
like e-dictionary and portable multimedia players, we have successfully developed a core technology
to achieve two-bit-per-cell operation based on a novel technology licensed from Saifun
Semiconductor Ltd. (&#147;Saifun&#148;), known as the NROM technology. Such technology has the advantage of simple process steps and reduced cell size that result in high-yielding and low cost
products. We have established &#147;XtraROM&#148; as the unique trade
mark of the NROM product family
and it has been well accepted by major customers like Nintendo and Pachinko.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See &#147;Item&nbsp;5. Operating and Financial Review and Prospects &#151; Intellectual Property&#148;. This
technology enjoys significant advantages over conventional &#147;floating gate&#148; devices, requiring
simpler masking steps and allowing smaller bit size and die size and production cost efficiencies.
We achieved Flash standard specifications and introduced 64Mb Code Flash products based on two bit
per cell and 0.25 micron process technology in the second half of 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table provides an overview of our principal Flash products and the percentage of
Flash memory net sales revenue represented by these products in 2003, 2004 and 2005:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="18%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="50%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>% of our net Flash memory sales</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>Year ended December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Density</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Sample applications</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">256 Mb</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Games</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">128 Mb</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Games</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">64 Mb</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Games, printers, STBs</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">32 Mb</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Printers, PDAs, digital still cameras, ADSL products</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">16 Mb</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">STBs, communication boxes, printers, musical devices, games, web TVs, cellular phones</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">22.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">29.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">31.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">8 Mb</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">DVD Players, STBs, ISDN boxes</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">4 Mb</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">BIOS, CD R/W drives, cable modems</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2 Mb</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">BIOS, HDDs, CD R/W drives, communication boxes</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1 Mb</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">BIOS, HDDs, games, DVD-ROM drives</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">BIOS, HDDs, games</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Competition. </I>The Flash market has been characterized by long production cycles, complex
processes, competing technologies and intense overall competition. Currently, the market for Code
Flash products, in which our Flash products compete, is dominated by Spansion, Intel, Sharp and
STMicroelectronics. We believe our global market share for Code Flash products has been increasing
in recent years. However, due to market conditions, average selling prices for our Flash products
declined sharply beginning in the third quarter of 2004 and continuing into 2005. This decline
stabilized in the first quarter of 2006. We plan to focus on higher density Flash products in the
future in order to further increase our market share and to improve our gross margins.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>EPROM</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Applications. </I>Applications using EPROM include disk drives, video games, fax machines, modems,
cellular phones, pagers and notebook computers, among others. We believe our EPROM devices are
among the least expensive EPROM memory solutions currently available. However, with the continued
decline in prices for Flash products, the price advantage of our EPROM products has eroded.
</DIV>

<P align="center" style="font-size: 10pt">25
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We produce a range of EPROM products with densities ranging from 256Kb to 8Mb. The majority of
our EPROM products have 2Mb density and are used in VCD players and cellular phones.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Competition. </I>While EPROMs remain viable mainly for applications requiring low-cost solutions,
Flash products have begun to replace EPROM in certain applications as the prices of Flash products
have declined. In addition, over the last few years, as the long-term outlook for the EPROM market
has weakened, industry production has declined. For example, Advanced Micro Devices, Intel,
National Semiconductor Corporation and Texas Instruments Incorporated have all reduced EPROM
production during the last few years. Our revenues from EPROM have been declining for more than the
past five years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Strategic Manufacturing Services</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We focus on providing value-added foundry services, which center on providing
application-specific solutions to our strategic customers. We use our strategic manufacturing
services to develop customer relationships with these strategic customers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Competition. </I>We do not plan to compete with foundries with respect to these services, and
provide strategic manufacturing services to selected strategic customers primarily to complement
our other services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Integrated Solution Group</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The principal products of our integrated solution group are SLC and multimedia products. In
2001, we extended our expertise from the non-volatile memory market into the logic area by
combining SLC products with embedded memory to offer comprehensive system solutions to our
customers. Unlike with memory products, our emphasis on SLC and multimedia products is centered
more on product design than on fabrication. One of the responsibilities of our integrated solution
group is to coordinate and integrate our development efforts of our integrated solution group with
those of our subsidiaries and strategic investment entities by which enable use to focus on
identified platforms such as cellular phones. Some of our solutions have therefore been primarily
or jointly developed by our subsidiaries or strategic investments entities. For example, Magic
Pixel, our previous subsidiary, in which we still hold a 44.9% interest, developed some of our
multimedia-related solutions, such as digital still camera controllers, LCD controllers and camera
phone controllers, and Biomorphic Microsystems Corporation, one of our subsidiaries, developed some
of the integrated circuit components in our CMOS sensor camera module used in cellular phones.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We intend to spin-off our Integrated Solution Group, initially into four wholly-owned
subsidiaries, by the end of the year, focusing on Mobile Audio (which will include speech
processors, sound generator chips and audio processors for cellular phones and other audio
applications), Base Band (which will offer GSM and GPRS solutions for cellular phone-related
applications), Mobile Payment (which includes SIM Card IC, microcontroller and portable LCD
solutions) and Design Service (which will create and operate front and back-end design service
environments for IC product design customers) , respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the past, we focused on developing products based on our audio, video, communications and
microcontrollers technology platforms. Subsequent to our reorganization in 2003, we identified two
major application platforms with respect to which we focus development of our solutions:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>cellular phones-related solutions; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>portable LCDs-related solutions.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Cellular Phone-related Solutions</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our cellular phone-related solutions include the following:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Sound Generator Chip. </I>We provide MIDI solutions for cellular handset customers, with
multi-voice polyphonic sound generators based on high-quality wavetable sound synthesizers that
provide enhanced ring-tone sound clarity. Our products include 32-voice and 64-voice polyphonic
sound generator chips for use in cellular phones. The MP3 decoders we began to ship in 2005 include
our 64-voice polyphonic sound generator chips. Under our new structure, this product will be
offered through our Mobile Audio subsidiary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Digital Still Camera Controller. </I>In 2005, we provided to our customers a digital still camera
controller that supports up to 16&nbsp;million pixels, for use in digital cameras, including cellular
phone digital cameras. In 2006, we stopped offering this product and the product is now offered
through Magic Pixel, a company in which we hold a 44.9% interest.
</DIV>

<P align="center" style="font-size: 10pt">26
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>CMOS Sensor Camera Module. </I>We provide to our customers highly integrated CMOS image sensors
and companion processor ICs for use in portable information appliances (such as cellular phones and
PDAs) and in digital cameras. We also offer compact modular solutions to our customers, including
support in hardware design and algorithm development for specific applications. In the second half
of 2005, we began to produce the entire 1.3 megapixel camera module for use in cellular phones. We
transferred the sale of this product to our subsidiary, Biomorphic Microsystems Corporation, in
2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>SIM Card IC. </I>We ship SIM card ICs to SIM card manufacturers. Under our new structure, this
product will be offered through our Mobile Payment subsidiary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Portable LCD-related Solutions</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our portable LCD-related solutions focus on small to medium size (up to around 10 inch)
displays. We produce LCD panel controllers, scalers or graphic controllers, and microcontrollers.
Under our new structure, these products will be offered through our Mobile Payment subsidiary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Other Solutions</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other solutions that we had provided before the formation of our integrated solution group,
and continue to provide, include the following:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Digital Voice Recorder. Our digital voice recorder solution enables the integration of
digital voice recording functions in various devices such as electronic dictionaries,
language learning devices, electronic books and PDAs. Under our new structure, this product
will be offered through our Mobile Audio subsidiary.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Digital Answering Machine IC. Our solutions include integrated circuits for digital
answering machines. The most important technology in these integrated circuits is digital
signal processor technology, which is also necessary for applications in voice messaging,
cordless telephones and cellular telephones. Under our new structure, this product will be
offered through our Mobile Audio subsidiary.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Microcontrollers. In addition to microcontrollers for flat panel displays, our
microcontroller products also include microcontrollers for electronic dictionaries and PDAs,
smart cards and small displays. Under our new structure, this product will be offered
through our Mobile Payment subsidiary.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Others. Clock generators, joystick controllers and wireless game controllers for
Nintendo.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Customers</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>General</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We emphasize customer relations as a key to our growth and profitability. As a key aspect of
our customer development strategy, we strive to have major global computer and electronics
companies accept our products for use in their devices, and seek to do this in part by
participating in the product design process of our existing and prospective customers at an early
stage to ensure that our products meet their present and future requirements. We also strive to
supply products to original equipment manufacturers and subcontractors, who in turn supply these
products to computer, communications and consumer electronics companies. We also plan to continue
to leverage our Mask ROM business with our existing and potential customers, thereby expanding our
ability to cross-sell and diversify product mix and customer base.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Top Customers</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth top customers (by sales) of our products by percentage of our
net sales revenue in 2003, 2004 and 2005 and the type of product purchased:
</DIV>

<P align="center" style="font-size: 10pt">27
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>% of net sales revenue</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>Year ended December 31</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Customers</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Products purchased</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(%)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">NINTENDO</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>Mask ROM, Flash, SLC</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">LG</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Mask ROM, Flash</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">HP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Mask ROM, Flash</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">HIMAX</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">SMS</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SONY</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Mask ROM, Flash</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">DAIICHI</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Mask ROM, Flash</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">LF MACAO</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Mask ROM, SLC</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">HONFFUJIN</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Flash</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">NANAO</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Flash</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">PHILIPS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">SLC</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Represents our sales to Megachips, which on-sells our products to Nintendo</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Nintendo</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The percentage of our total net sales revenue derived from Megachips, which on-sells our
products to Nintendo, was 24.0% in 2003, 22.4% in 2004 and 29.2%in 2005. Nintendo is one of the
world&#146;s largest users of Mask ROMs, which are used in Nintendo hand-held gaming devices, including
Game Boy Advance and Nintendo Dual Screen. We have historically, since the beginning of our
relationship, sold our products to Nintendo through Megachips, although we work directly with
Nintendo with regard to technical matters. We believe that our long-term relationship with Nintendo
is based on trust, as evidenced by the fact that Nintendo supplies sensitive game codes to us as
part of the design and production process. Our relationship is also predicated on our ability to
supply quality products in a timely manner at competitive prices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We primarily produce Mask ROMs used in game cartridges for Nintendo&#146;s handheld gaming devices,
including Game Boy Advance, which was released in the spring of 2001, Game Boy Advance Super, which
was released in 2003, and Nintendo Dual Screen, which was released in December&nbsp;2004. We expect that
demand for Mask ROMs for handheld gaming devices will continue to increase. See &#147;Item&nbsp;3. Key
Information &#151; D. Risk Factors &#151; Risks Relating to Our Company &#151; Any delay or reduction in orders by
Nintendo or the loss of Nintendo as a customer could result in the loss of a significant portion of
our revenue&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the third quarter of 2001, we entered into a capital lease agreement with Nintendo for the
use of manufacturing equipment with a cost of NT$1,751&nbsp;million payable over a thirty-six month
period in monthly installments from July&nbsp;31, 2002 to
June&nbsp;30, 2005. We have now acquired title to the manufacturing
equipment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Hewlett Packard</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are the main supplier of Mask ROMs to Hewlett-Packard, world&#146;s largest manufacturer of
laser and inkjet printers, which require Mask ROMs to store fonts in its laser and inkjet printers.
We have had a relationship with Hewlett-Packard for over 10&nbsp;years. We also supply Flash to
Hewlett-Packard. The percentage of our total net sales revenue derived from Hewlett Packard was
9.8% in 2003, 5.3% in 2004 and 4.1% in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>LG Electronics Inc.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have been increasing our focus on the market in South Korea and developing our business
relationship with LG in recent years. We supply Mask ROM and Flash products to LG. The percentage
of our total net sales revenue from LG was 1.2% in 2003, 2.4% in 2004 and 5.0% in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Sales and Marketing</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We distribute our products on a global basis. The following table sets forth percentages of
net sales revenue based on the geographic regions of our customers:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>Year ended December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Area</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(%)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Japan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Taiwan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Hong Kong, the P.R.C., Singapore and South Korea</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">United States</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Europe and other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">28
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have relationships with over 199 distributors and manufacturers&#146; representatives to market
our products worldwide. The distributors purchase our products at a discount while the
manufacturers&#146; representatives generally receive a commission of 5% of the goods sold. We maintain
sales offices in Taipei, San Jose, Chicago, Brussels, Tokyo, Osaka, Singapore and Hong Kong. These
offices conduct sales efforts and monitor the effectiveness of distributors and manufacturers&#146;
representatives.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We originate sales for our products within Taiwan either directly from our Taipei sales office
or through non-exclusive distributorships. Sales to Asia excluding Taiwan and Japan are also
conducted through non-exclusive distributorships. Sales to Nintendo are made indirectly through
Megachips. Megachips receives a discount on all products purchased from us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We sell our products in Japan (with the exception of sales to Nintendo, which is conducted
solely through Megachips) through third-party distributors with marketing and technical support
from our sales offices in Tokyo and Osaka. These distributors usually maintain small inventories
and they distribute our products in Japan on a non-exclusive basis. Our customers in Japan include
major Japanese semiconductor and consumer electronics product producers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We sell and distribute our products in North America and Europe through our wholly-owned
subsidiaries, Macronix America and Macronix Europe N.V., which sell the products through
manufacturers&#146; representatives and distributors. Representatives generally do not maintain a
product inventory; instead, their customers place orders directly with us. Distributors generally
handle smaller volume orders and they usually maintain small inventories but also carry
competitors&#146; products. Our agreements with our representatives and domestic and international
distributors are generally terminable by either party on short notice.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Manufacturing and Quality Control</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Manufacturing</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We use complementary metal oxide silicon process technology to manufacture our semiconductor
products. This manufacturing technology involves a sequence of numerous complex processes in which
200 to 500 different steps are taken in the manufacture of a single chip. These steps include a
series of cleaning, patterning, etching, deposition and implantation processes. At the end of these
processes, the chips are tested for functionality and assembled. Depending on the product line, we
either sub-contract this &#147;back-end&#148; work to companies in Taiwan and Hong Kong, including Advanced
Semiconductor Engineering Inc., Siliconware Precision Industries Co., Ltd. and other R.O.C.
assembly subcontractors, or perform the work ourselves. In 2005, we sub-contracted over 29.2% of
the testing and assembly of our SLC products, while testing most of our Mask ROM products
internally.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth our wafer fabrication capacity, in terms of wafers per month,
at Fab I and Fab II as of December&nbsp;31, 2003, 2004 and 2005, and our expected capacity as of
December&nbsp;31, 2006, which is subject to adjustment depending on market conditions and product mix:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fab I (six-inch wafers)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fab II (eight-inch wafers)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to maintain utilization rate at Fab I, which uses 0.32 micron and above process
technology, and minimize the amount of new investment required, we have allocated to Fab I
manufacturing of products that do not require leading edge technologies, such as low-density Flash
and ROM products and certain of our SLC and SMS products, including high voltage, MEMS and embedded
ROM products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We began to manufacture Mask ROMs at Fab II at line widths of 0.18 micron from the second half
of 2000 and successfully migrated to 0.15 micron process technology for both Flash and Mask ROM in
the fourth quarter of 2002. We also converted a significant part of our Mask ROM manufacturing
capacity in Fab II to Flash manufacturing capacity in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our sales and capacity utilization tend to follow seasonal trends, particular with respect to
Mask ROM, and typically peak around the end of the third quarter and the beginning of the fourth
quarter of each year. In order to maximize our capacity utilization rate during the low season and
to cope with demands during the high season, we typically use our excess capacity during the low
season to build up an
</DIV>

<P align="center" style="font-size: 10pt">29
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">inventory of partially manufactured Mask ROMs and store them in Mask ROM
banks. This then allows us to complete the manufacture of Mask ROMs, incorporating our customers&#146;
software codes, in a shorter time during the high season. See &#147;Item&nbsp;5. Operating and Financial
Review and Prospects &#151; Overview &#151; General&#148; for quarterly capacity utilization rates for the past
three years and &#147;Item&nbsp;5. Operating and Financial Review and Prospects &#151; Capital Resources and
Capital Expenditures&#148; for our capital expenditure plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In April&nbsp;2006, we sold Fab III, along with a clean room and certain adjunctive facilities and
equipment, to Powerchip Semiconductor Corporation, as we did not have immediate plans to utilize
Fab III. As part of the sale, Powerchip agreed to supply sufficient 12-inch wafer production
capacity. We purchase these wafers for our advanced process technology development.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Tower Semiconductor</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In August&nbsp;2000, we entered into a five-year manufacturing and technology cooperation agreement
with Tower Semiconductor whereby Tower Semiconductor will provide silicon wafer manufacturing
processing services to us that can employ its microFLASH(r) technology. This technology is based on
the proprietary N-ROM technology licensed from Saifun. Under the agreement with Tower
Semiconductor, Tower Semiconductor will be obligated to manufacture for us up to an agreed number
of six-inch wafers per month upon receiving our orders. To date, due to adverse market conditions,
we have placed orders for less wafers than we could have required Tower Semiconductor to
manufacture for us, and have used Tower&#146;s manufacturing services to manufacture only our EPROM and
SLC products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2000, we entered into a foundry agreement with Tower Semiconductor. Until the
agreement expires in 2011 or if we cease to own a minimum number of shares in Tower Semiconductor,
Tower Semiconductor is obligated to make available to us, and in the event we decide to provide
foundry services using NBit technology, we are obligated to purchase, certain minimum numbers of
wafers based on percentages of the manufacturing capacity of a specified production line in Tower
Semiconductor&#146;s manufacturing facility, up to certain limits. Tower Semiconductor&#146;s Fab II
fabrication facility began production in December&nbsp;2003. So long as we own a minimum number of
shares in Tower Semiconductor, Tower Semiconductor is also obliged to grant us favorable pricing
treatment for up to a designated amount of wafers per month. We continue to own at least the
specified minimum number of shares in Tower Semiconductor. See &#147;Item&nbsp;7. Major Shareholders and
Related Party Transactions &#151; B. Related Party Transactions&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Quality Control</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All of our products undergo final testing before shipment. In most cases, externally packaged
chips are returned to us for final testing before shipment. We occasionally sub-contract final
testing work, which allows us to use the sub-contractors&#146; drop shipment services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fab I and Fab II operate 360&nbsp;days a year on a two shift, twelve hours per shift basis, which
minimizes downtime between shift changes as compared to operation on a three shift, eight hours per
shift basis. Operators at Fab I and Fab II work on a two-day-on, two-day-off rotation. We believe
that these production arrangements, together with our operator discipline, quality of maintenance
and level of equipment utilization, have resulted in a high level of productivity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to minimize the introduction of particles into the manufacturing process, Fab I
operates a Class&nbsp;1 clean room, with less than one particle of 0.1 micron or greater per cubic foot,
and Fab II uses the SMIF Box system, an advanced system whereby we isolate and keep clean the
localized manufacturing environment surrounding the integrated circuits, rather than the entire
plant. Although the manufacturer guarantees our SMIF Box system to have less than one particle of
0.1 micron or greater per cubic foot, we believe that our system is cleaner than the guaranteed
amount based on our manufacturing experience. Both Fab I and Fab II use advanced systems to filter
our chemical, gas and water supplies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As part of our quality assurance program, we conduct three tests during the production
process:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the wafer acceptance test, which detects faults from the manufacturing process;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the wafer sort test, which probes defaults in circuitry; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the final test, which reviews the operation of each integrated circuit.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also offer &#147;burn-in&#148; testing of our products when necessary. Burn-in is the process of
electrically stressing a device, usually at high temperature and voltage, for a period of time long
enough to cause the failure of marginal devices. We have experienced customer returns of less than
10 pieces per one million pieces shipped, which is in line with industry standards.
</DIV>

<P align="center" style="font-size: 10pt">30
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We operate a matrix system of quality assurance under which we maintain a single, company-wide
quality engineering center. At the same time, quality control personnel in each strategic business
unit monitor design and production processes to ensure high quality products, and are involved from
initial design to production.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We received the International Standards Organization (&#147;ISO&#148;) 9001 certification in January
1994 from the Lloyd&#146;s Register Quality Assurance for our quality management system. In August&nbsp;1997,
we received the ISO 14001 certification for our environmental management system. In September&nbsp;2001,
we received the Quality System 9000 certification from the Lloyd&#146;s Register Quality Assurance for
our quality system. In March&nbsp;2002, we received the Occupation Health and Safety Assessment Series
(&#147;OHSAS&#148;) 18001
certification for our occupational health and safety assessment. In January&nbsp;2004, we received
the ISO/TS 16949 certification from the Lloyd&#146;s Register Quality Assurance for our quality system.
The certification process involves subjecting our production processes and the quality management
systems at our factories to review and surveillance for various periods. The ISO certifications
also provide independent verification to our customers as to the quality control in our
manufacturing processes. We also received the SONY Green Partner certification in June&nbsp;2004 for
Environmental Quality Management.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Raw Materials</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our primary raw materials are silicon wafers, certain chemicals and gases. To date, all of
these raw materials have generally been available to us from a limited number of sources, at
competitive prices, in adequate quantities and on reasonable delivery terms. We typically order our
target metals, specialty gases and chemicals on a just-in-time basis to minimize the cost of
inventory.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The prices of most of the raw materials used by us have been relatively stable during the
period of our operation. Raw material costs as a percentage of our net sales revenue was 5.2% in
2003, 4.5% in 2004 and 5.3% in 2005. We currently believe that if we were to lose access to one or
more of our suppliers, we would be able to obtain substitute quantities from other suppliers
without any material interruption of our operations and without any material adverse effect on the
price we would pay for the relevant supplies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Silicon Wafers</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our future growth will depend in large part on securing a continuous supply of both six-inch
and eight-inch wafers. Wafer capacity in the semiconductor industry has from time to time been, and
in the future may be, insufficient. However, in anticipation of possible shortages, we maintain a
one and one-half month inventory of six-inch wafers and a two-month inventory of eight-inch wafers.
Between December&nbsp;31, 2003 and December&nbsp;31, 2004, prices for six-inch wafers and for eight-inch
wafers both decreased on average by approximately 7.5%. Between December&nbsp;31, 2004 and December&nbsp;31,
2005, prices for six-inch wafers and for eight-inch wafers both decreased on average by
approximately 8.3%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We obtain our wafer supplies principally from four suppliers, namely Toshiba Ceramics Co.,
Ltd., Sumitomo Corporation, Tokyo office, and Siltronic Japan Corporation, which are overseas
suppliers, and Taisil Electronic Materials Corp., an R.O.C. company. We settle all our wafer
purchases in U.S. dollars.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Chemicals</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We obtain our supplies of industrial chemicals principally from a Taiwan joint venture entity
formed by Merck Group of Germany and Kanto Kagaku (K.K.) of Japan. We obtain our supplies of bulk
gases, such as nitrogen, oxygen and hydrogen, principally from our investee, United Industry Gas
Co., Ltd., an affiliate of Lian Hwa Gas Co., Ltd., and our specialty gases from several overseas
suppliers. Other raw materials used in the production process include target metals and photo
resist. These materials are also principally obtained from several overseas suppliers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Water</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Water is critical in the production of semiconductors. We obtain our water supplies from a
state-owned water company. The R.O.C. government also operates a purified water supply system by
which we clean our integrated circuits during the fabrication process. Fab I and Fab II both have
advanced water recycling systems that allow us to reclaim approximately 73% of the water used in
our fabrication process. Although we have experienced several water shortages in the past, we are
not currently experiencing any water shortages. In the event of any short-term water shortage, we
have our own 5,000-ton water reserve that is capable of supplying two and a half days of water for
Fab I and 21,000-ton water reserve that is capable of supplying seven days of water for Fab
II.
</DIV>


<P align="center" style="font-size: 10pt">31
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since the beginning of 2002, Taiwan has experienced a serious water shortage, particularly in
the northern Taiwan region. The R.O.C. government has taken a series of measures to alleviate the
impact of the water shortage, including restricting agricultural water usage. However, if the water
shortage occurs again, the government may further restrict industrial water usage and our
production may be materially adversely affected. See &#147;Item&nbsp;3. Key Information &#151; D. Risk Factors &#151;
Risks Relating to Our Company &#151; We are vulnerable to natural disasters and other events beyond our
control, which could severely disrupt the normal operation of our business and adversely affect our
earnings&#148;. To alleviate long-term water shortages, the government has constructed a major pipeline
connecting the Science Park to a reservoir in Miao-li County. The government has also indicated
that it intends to construct a dam in Hsinchu in 2005 or 2006 to meet the water supply requirements
of the Hsinchu Science Park. (The status remained the same).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Electricity</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Electricity is our main source of energy and we receive all of our electricity supplies from
the Taiwan Power Company, the national power utility. As a resident of the Science Park, we have
priority in obtaining our supply of electricity from the Taiwan Power Company over businesses
outside the Science Park. Although we experience power supply reductions scheduled by the Taiwan
Power Company from time to time during the summer season, we receive advance notice of the timing
of these reductions and can rely on our own internal emergency generators during these periods.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to obtain and maintain reliable electric power supplies, we are connected to the
national grid through a 69 kilovolt and a 161 kilovolt double loop electric supply system located
within the Science Park. We maintain several back-up electricity generators to ensure continuous
Fab I operation in the event of interruptions to the external power supply. We also maintain
back-up power supply systems at Fab II capable of supplying close to 100% of the power normally
used to run Fab II. Fab II is one of the first semiconductor facilities in Taiwan to use a dynamic
uninterrupted power supply system utilizing emergency power back-up generators that operate with no
time delay.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Backlog and Order Process</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our business is characterized by short-term order and shipment schedules. The majority of our
sales are made primarily by way of standard purchase orders instead of long-term contracts. We
foster customer relationships by focusing on timely delivery of product, competitive pricing,
product performance and reliability, continuing customer service (including technical support),
responsiveness to customer requirements and advanced technology.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We produce a portion of our products in advance of the receipt of a formal purchase order
based on anticipated purchase schedules discussed between us and our significant customers. In
addition, since the yield of dies in the production process varies, we must manufacture a slightly
greater number of dies, usually up to 2% higher than the actual number of dies our customers order.
To the extent we improve our yield during the manufacturing process, we may produce additional dies
beyond the number ordered by customers. These additional dies are kept in inventory to fill any
additional purchase orders for the product involved.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Environmental Matters</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our manufacturing operations use a variety of chemicals and gases, and our use, storage,
discharge and disposal of these chemicals and gases and other emissions and waste are regulated by
R.O.C. environmental authorities. Over the course of our operating history, we have consistently
invested in equipment and processes designed to comply fully with our environmental
responsibilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We spent an aggregate of NT$267&nbsp;million in installing pollution prevention equipment,
operation, waste treatment and pollutant composition in 2003, NT$110&nbsp;million in 2004 and NT$139
million (US$4.2&nbsp;million) in 2005. We dispatch some of our industrial waste solvents for disposal
by outside waste treatment companies approved by the R.O.C. Environmental Protection
Administration. Certain common waste gases are processed and disposed of by the Science Park
environmental cleaning team. In addition, we have also established environmental protection
policies and have put in place environmental management teams trained by the R.O.C. Environmental
Protection Administration. Fab II was designed as an environmentally friendly facility and includes
a modern waste water treatment and recycling system. We received ISO 14001 certification for our
environment management system in August&nbsp;1997.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that our current and proposed operations comply in all material respects with all
presently applicable environmental laws and regulations.
</DIV>

<P align="center" style="font-size: 10pt">32
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Insurance</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our insurance coverage as of December&nbsp;31, 2005 includes:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>property damage all-risk insurance on our fixed assets, equipment and inventory;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>business interruption insurance;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>third-party liability insurance to cover claims in respect of personal injury or property damage arising from accidents;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>directors&#146; and officers&#146; liability insurance;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>fidelity bond insurance on all employees, providing coverage against losses due to employee fraud or dishonesty;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>marine cargo insurance;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>employee group insurance;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>employer liability insurance; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>construction all-risk coverage.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe our insurance is adequate and in conformity with industry standards prevailing in
Taiwan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Strategic Investments</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have made and expect to continue to make a series of equity joint venture and strategic
investments in companies located in Taiwan and elsewhere. We believe that our participation in
these companies allows us to enhance and complement our product offerings, expand our capacity,
secure access to raw materials and services and keep up-to-date with technological changes in the
semiconductor industry. As of December&nbsp;31, 2005, these participations included:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Tower Semiconductor, Ltd. (&#147;Tower Semiconductor&#148;) &#151; A 13.1% indirect interest in Tower
Semiconductor. Tower Semiconductor is an independent foundry manufacturer of semiconductor
integrated circuits on silicon wafers. As at December&nbsp;31, 2005, Tower Semiconductor had a
capital of US$538.8&nbsp;million, net assets of US$30.1&nbsp;million and accumulated deficits of
US$559.8&nbsp;million. For the year ended December&nbsp;31, 2005, Tower Semiconductor recorded a net
loss of US$203.1&nbsp;million. As of December&nbsp;31, 2005, we held the shares of Tower Semiconductor
at a value of NT$541&nbsp;million (US$16.5&nbsp;million). The shares of Tower Semiconductor held
by us are fully paid-up. For the year ended December&nbsp;31, 2005, we did not receive any
dividend on the shares of Tower Semiconductor. For the year ended December&nbsp;31, 2005 there
were no inter-company loans between us and Tower Semiconductor.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>ProComm Inc. &#151; A 38.4% direct equity interest in ProComm Inc. ProComm Inc. designs and
sells integrated chipsets and application-specific integrated circuits for applications used
in the wireless communications industry. We acquired our equity interest in Prominent
Communications Inc. in late 1999 as part of an arrangement to jointly develop integrated
circuits for 900MHz cordless telephones. Pursuant to a share swap transaction agreed among
Prominent Communications Inc., its shareholders and ProComm Inc. on September&nbsp;1, 2004,
Procomm Inc. issued its own stock to shareholders of Prominent Communications Inc. in
exchange for shares of Prominent Communications Inc. Accordingly, we received. 7,300,000
shares of Prominent Communications Inc. in exchange for 10,132,513 shares of ProComm Inc.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Magic Pixel Inc. &#151; A 44.9% direct and indirect equity interest in Magic Pixel Inc., which
focuses on IC design of video and related products. Our shareholding was diluted in 2003
from 100% as a result of a private placement of shares by Magic Pixel Inc. to its employees.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>C. Organizational Structure</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the identity of our subsidiaries and their jurisdictions of
incorporation as of December&nbsp;31, 2005.
</DIV>

<P align="center" style="font-size: 10pt">33

</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="34%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD nowrap align="right" style="border-bottom: 0px solid #000000">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" style="border-bottom: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Direct or</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 0px solid #000000"><B>Total Paid-in</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Indirect</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Jurisdiction of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 0px solid #000000"><B>Capital of such</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Equity</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Name of subsidiary</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Main business</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>incorporation</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Entity</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Interest</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Hui Ying Investment Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT style="white-space: nowrap">Investment</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT style="white-space: nowrap">Taiwan, R.O.C.</FONT></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" style="border-bottom: 0px solid #000000"><FONT style="white-space: nowrap">NT$500,000,000</FONT></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Run Hong Investment Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Investment</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Taiwan, R.O.C.</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" style="border-bottom: 0px solid #000000">NT$500,000,000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Kang Bao Investment Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Investment</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Taiwan, R.O.C.</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" style="border-bottom: 0px solid #000000">NT$500,000,000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Joyteck Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Systems Solutions</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Taiwan, R.O.C.</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" style="border-bottom: 0px solid #000000">NT$96,775,000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">87.98</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Macronix America, Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Sales and marketing</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">California, U.S.A.</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="right" style="border-bottom: 0px solid #000000">EUR62,000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Macronix Europe N.V.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap valign="top">Sales and marketing</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Belgium</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" style="border-bottom: 0px solid #000000">US$63,984</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Macronix (B.V.I.) Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Investment</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>British Virgin Islands</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" style="border-bottom: 0px solid #000000">US$174,147,826</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">New Trend Technology Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">IC design</TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap valign="top">California, U.S.A.</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" style="border-bottom: 0px solid #000000">US$23,850,000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Wedgewood International Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Investment</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">British Virgin Islands</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" style="border-bottom: 0px solid #000000">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Macronix Pte Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Sales and marketing</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Singapore</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" style="border-bottom: 0px solid #000000">US$100,000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">MaxNova Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">IC design</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Taiwan, R.O.C.</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" style="border-bottom: 0px solid #000000">NT$85,500,000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">85.5</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Macronix Japan (Cayman Islands)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Investment</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Cayman Islands</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" style="border-bottom: 0px solid #000000">US$500,000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Macronix (Hong Kong) Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Sales and marketing</TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap valign="top">Hong Kong</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" style="border-bottom: 0px solid #000000">US$2,500,000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Macronix Microelectronics (Suzhou)
Co., Ltd</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">System Solution</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Suzhou China</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" style="border-bottom: 0px solid #000000">US$2,000,000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Biomorphic Microsystems Corporation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">IC design</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Taiwan, R.O.C</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" style="border-bottom: 0px solid #000000">NT$542,921,739</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">54.77</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Macronix (BVI)&nbsp;Co., Ltd. (&#147;Macronix BVI&#148;)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Macronix BVI is an investment holding company. As at December&nbsp;31, 2005, we beneficially owned
100% of the issued share capital of Macronix BVI. As at December&nbsp;31, 2005, Macronix BVI had a
capital of US$174.1&nbsp;million, net assets of US$(7.1) million and accumulated deficits of US$185.5
million. For the year ended December&nbsp;31, 2005, Macronix BVI recorded a net loss of US$71.4&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As at December&nbsp;31, 2005, we held the shares of Macronix BVI at a value of US$(7.1) million.
The shares of Macronix BVI held by us are fully paid-up. For the year ended December&nbsp;31, 2005, we
did not receive any dividend on the shares of Macronix BVI. For the year ended December&nbsp;31, 2005
there were no inter-company loans between us and Macronix BVI.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Wedgewood International Ltd. (&#147;Wedgewood&#148;)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Macronix (B.V.I.) Co., Ltd (the &#147;Surviving Company&#148;) merged with Wedgewood International
Limited (the &#147;Merging Company&#148;) on June&nbsp;15, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Biomorphic Microsystems Corporation (&#147;BMC&#148;)</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;BMC develops and markets intelligent imaging sensors for digital cameras, automobiles and
industrial applications. Pursuant to a share swap transaction agreed among Biomorphic VLSI, Inc.,
its shareholders, and BMC on May&nbsp;14, 2004, BMC issued its own stock to shareholders of Biomorphic
VLSI, Inc. in exchange of Biomorphic VLSI, Inc.&#146;s stock. Accordingly, we received 14,900,531 shares
of BMC in exchange for 18,160,252 shares of Biomorphic VLSI, Inc. We injected a further NT$65
million in capital into BMC through Rui Hon Investment Ltd. and NT$43&nbsp;million in capital into BMC
through Hui Ying Investment Ltd on June&nbsp;25, 2004. In addition,
we disposed of 6,420,000 shares of
BMC to other venture capital investors in the second half of 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>D. Property, Plant and Equipment</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our headquarters and Fabs I and II are located in Hsinchu, Taiwan. Currently, all of our
internal wafer fabrication is carried out at Fabs I and II. Our location in the Science Park in
Hsinchu provides certain advantages, including preferential tax treatment, streamlined customs
administration and government-subsidized development grants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fab I commenced commercial operations in 1992. Fab I occupies approximately 172,000 square
feet on land that is leased from the Science Park Administration. The lease expires in March&nbsp;2010
but is renewable at our option. The facility has a production area
of approximately 67,888 square
feet. Fab I&#146;s test operations are located in a building adjacent to Fab I, which sits on a lot of
approximately 80,000 square feet.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fab II commenced commercial operations in October&nbsp;1997. Fab II occupies approximately 883,000
square feet on land that is leased from the Science Park Administration. The lease expires in June
2015 but is renewable at our option. The facility has a production area
</DIV>

<P align="center" style="font-size: 10pt">34
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">of approximately 84,000 square feet and a production support area of approximately 32,000
square feet. Space has also been reserved for testing facilities in Fab II, although Fab II
currently shares Fab I&#146;s test operations plant for all of Fab II&#146;s eight-inch wafers. Fab II has
modernized production equipment, incorporates computer automated production systems and will be
able to support 0.13 micron process technology without the need for major upgrades. Fab II is
equipped with a total energy management system and an advanced waste treatment system. We own all
the facilities comprising Fab I and Fab II.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Science Park Administration has granted us a parcel of land adjacent to our Fab II under a
lease that is renewable annually for a maximum of 20&nbsp;years. This land is to be used to build
research and development laboratories.
</DIV>
<DIV align="left">
<A name="108"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;5.</B></FONT> <FONT style="font-variant: SMALL-CAPS"> <B>Operating and Financial Review and Prospects</B></FONT>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>The following discussion and analysis should be read in conjunction with our audited
consolidated financial statements and the related notes included in this annual report. These
financial statements have been prepared in accordance with R.O.C. GAAP, which differ in certain
material respects from U.S. GAAP. See note 28 to our consolidated financial statements for the
years ended December&nbsp;31, 2003, 2004 and 2005 included in this annual report and &#147;A. Operating
Results &#150; U.S. GAAP Reconciliation&#148;.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Overview</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>General</I></B>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The semiconductor industry has been cyclical, with periods of growth being followed by downturns
due to global economic growth trends, inventory adjustments as well as periodic mismatches between
semiconductor demand and manufacturing capacity. From mid-1999 through mid-2000, we experienced
significant growth in net sales revenue and operating income. The severe and protracted
semiconductor industry downturn began in the second half of 2000 and continued throughout 2001,
2002 and the first half of 2003, with continued erosion of the average selling prices of our
products. In 2002, net sales revenues declined by 24.2% compared to 2001, and our cost of goods
sold, a substantial portion of which consists of depreciation and amortization, exceeded our net
sales revenue, resulting in a realized gross loss of NT$615&nbsp;million and an operating loss of
NT$6,827&nbsp;million. Due primarily to price erosion and related inventory losses, we recorded a net
loss of NT$11,357&nbsp;million in 2002.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The semiconductor industry began to show signs of recovery at the end of the second quarter of
2003. In particular, we recorded a reversal of inventory and spare parts loss provision of NT$1,185
million in 2003. In 2003, net sales revenue increased by 7.4% compared to the 2002, but our cost of
goods sold continued to exceed our net sales revenue, resulting in a realized gross loss of
NT$2,942&nbsp;million and an operating loss of NT$7,684&nbsp;million. In 2003, we recorded a net loss of
NT$8,198&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although conditions in the semiconductor industry improved between the third quarter of 2003
and the first half of 2004, the industry experienced another downturn that began in the second half
of 2004 and continued throughout 2005. Industry conditions have improved in 2006. We recorded a
reversal of inventory and spare parts loss provision of NT$919&nbsp;million in 2004
and our net sales revenue increased by 32.0% in 2004 compared to the 2003, reflecting the recovery
that continued during the first half of 2004. For 2005, we recorded a gross profit of NT$242
million (US$7.4&nbsp;million), an operating loss of NT$4,875&nbsp;million (US$148.6&nbsp;million) and net loss of
NT$7,027&nbsp;million (US$214.2&nbsp;million). However, under U.S. GAAP, we recorded net losses of
NT$4,636million (US$141.3&nbsp;million) in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our capacity utilization rate is calculated using our actual production in the respective
period divided by total production capacity. Our quarterly capacity utilization rates were,
respectively, approximately 49%, 64%, 89% and 89% in 2003, approximately 91%, 100%, 103% and 88% in
2004 and approximately 53%, 81%, 107% and 106% in 2005. Our capacity utilization for the first
quarter of 2006 was 89%. We cannot assure you that our capacity utilization rates will not decline
in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nintendo continued to be our single largest customer in 2003, 2004 and 2005. We primarily
produce Mask ROMs used in game cartridges for Nintendo&#146;s handheld gaming devices, including Game
Boy Advance, which was released in the spring of 2001, Game Boy Advance Super, which was released
in 2003, and Nintendo Dual Screen, which was released in December&nbsp;2004. In addition, we currently
supply other accessories for the Game Cube video game platform. Our sales of Mask ROMs to Nintendo
in 2003, 2004 and 2005 for use in Game Boy Advance software cartridges accounted for a large
portion of our total sales of Mask ROMs. See &#147;Item&nbsp;3. Key Information &#151; D. Risk Factors &#151; Risks
Relating to Our Company &#151; Any delay or reduction in orders by Nintendo or the loss of Nintendo as a
customer could result in the loss of a significant portion of our revenue&#148;.
</DIV>

<P align="center" style="font-size: 10pt">35
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We continue to make adjustments in our product mix and in our customer profile on an on-going
basis. See &#147;Item&nbsp;4. Information on the Company &#151; B. Business Overview &#151; Our Strategy&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For certain material developments of our company with respect to our financial condition and
results of operations since December&nbsp;31, 2005, please refer to the discussion set forth in &#147;Item&nbsp;4.
Information on the Company &#151; B. History and Development of the Company &#151; Recent Developments&#148;
included elsewhere in this annual report.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Sales Revenue</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We derive our sales revenue primarily from the provision and sale of five categories of
semiconductor products and services: Mask ROM, Flash, SMS, SLC and other products. We earn
additional revenues primarily from royalty income, masking charges and profit sharing arrangements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The majority of our products are used in consumer electronics applications. We have
experienced in the past, and we expect to continue to experience, seasonal fluctuations in the
demand for our products. In particular, we generally earn higher sales revenues during the third
and fourth quarters of the year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Product Pricing Trends</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The global semiconductor industry is highly competitive, and average selling prices typically
decrease over the life of a semiconductor product. Average selling prices for our ROM and Flash
memory products have generally declined on an annual basis since 1995, with the exception of 2000
and Mask ROM products in 2003, as discussed below. We seek to offset this general decline in
average selling prices by constantly improving the density, sophistication and performance of our
products and by customizing our products to suit the needs of our strategic partners and other
customers. In addition, we rely on our leadership, market share and technology in the Mask ROM
market to minimize the impact of a general decline in average selling prices. When this approach is
successful, particularly in the Mask ROM market, we may be able to minimize declines in the average
selling prices of our products and maintain our gross profit margins despite general industry-wide
declines.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2001, we experienced a decrease in the average selling prices for almost all of our memory
products, particularly Flash products, as compared to 2000. These price declines continued
throughout 2001 and 2002. In 2003, prices for Flash products continued to decline while prices for
Mask ROM products increased slightly due to more shipments of higher density Mask ROM products. For
the full year 2004, average selling prices for Mask ROM products decreased slightly while prices
for Flash products increased, although due to market conditions, average selling prices for our
Flash products declined sharply beginning in the third quarter of 2004 and continuing into 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the average selling prices per die for our Mask ROM and Flash
products for the periods indicated:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>Year ended December 31</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(NT$ per die)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mask ROM</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Flash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25.7</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the average megabit (Mb) per die for our Mask ROM and Flash
memory products for the periods indicated:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>Year ended December 31</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(Mb per die)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mask ROM (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Flash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.4</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>The significant increase in megabit per die for Mask ROM products from 2003 to 2005 resulted
from the increase in demand for high-density Mask ROM products in 2004 and 2005.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">36
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">






<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Cost of Goods Sold</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our cost of goods sold consists principally of:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>overhead, including depreciation of property, plant and equipment and amortization of intangible assets;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>costs of raw materials, including wafers, chemicals and other inputs, for semiconductor fabrication;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>costs of outsourcing production to third parties;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>direct labor costs; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>service charges paid for testing and packaging services.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result of the price trend discussed above, beginning in 2002 our cost of goods sold, a
substantial portion of which consists of depreciation and amortization, was higher than our net
sales revenue. For this reason, in 2003, our cost of goods sold remained higher than our net sales
revenue, which resulted in a realized a gross loss of NT$2,942&nbsp;million and an operating loss of
NT$7,684&nbsp;million. In 2004, our cost of goods sold was lower than our net sales revenue, which
resulted in a realized a gross profit of NT$4,388&nbsp;million and an operating loss of NT$349&nbsp;million.
In 2005, our cost of goods sold was lower than our net sales revenue, which resulted in a realized
gross profit of NT$242&nbsp;million (US$7.4&nbsp;million) and an operating loss of NT$4,875&nbsp;million (US$148.6
million).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Capital Expenditures and Depreciation</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The semiconductor industry is capital intensive. This requires us to invest in plant and
equipment on an on-going basis in order to increase capacity and upgrade technology. In particular,
fixed costs, primarily depreciation expenses, are a major component of our cost of goods sold. As a
result, increases or decreases in capacity utilization rates can have a significant effect on gross
profit or loss margins. Higher capacity utilization results in lower fixed costs per-unit as fixed
costs, such as equipment depreciation expenses, are allocated over a larger number of units. Our
ability to maintain or improve our margins will continue to depend to a large extent on our ability
to effectively manage capacity utilization levels.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An additional element affecting our overall profitability is the impact of our capital
expenditure program, which will result in higher depreciation costs, as well as interest charges
accruing from the debt incurred to finance our capital expansion. In 2003, depreciation and
amortization increased by 6.2% from NT$8,742&nbsp;million in 2002 to NT$9,287&nbsp;million due to the capital
expansion program at Fab II and the commencement of depreciation at Fab III. The level of our
depreciation expense peaked in 2003. In 2004, depreciation and amortization decreased by 18.6% from
NT$9,287&nbsp;million in 2003 to NT$7,562&nbsp;million. In 2005, depreciation and amortization decreased by
4.1% from NT$7,562&nbsp;million to NT$7,253 (US$221.1&nbsp;million). Although we anticipate that our
depreciation expense will continue to decrease in 2006 since we sold Fab III to Powerchip in 2006,
our future depreciation expense will depend on our capital expenditure program.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2003, 2004 and 2005, our depreciation expense was NT$8,615&nbsp;million, NT$7,092&nbsp;million, and
NT$6,741 (US$205.5&nbsp;million), and represented 48.6%, 30.3% and 35.7% of net sales revenue,
respectively. In 2003, the decrease in depreciation expense as a percentage of net sales revenue
despite the increase in depreciation expenses reflected the increase in net sales revenue. In 2004,
the decrease in depreciation expense as a percentage of net sales revenue reflected the decrease in
depreciation expenses and the increase in net sales revenue. In 2005, the increase in depreciation
expense as a percentage of net sales revenue resulted from the decrease in net sales revenue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We begin depreciating our equipment when it is placed into service. There may sometimes be a
time lag between when our equipment is placed into service and when it achieves commercial levels
of utilization. In periods of depressed industry conditions, such as those that have prevailed in
2001, 2002, the first half of 2003 and the second half of 2004 through 2005, we may experience
lower than expected demand from customers and a sharp decline in average selling prices, resulting
in an increase in depreciation expense relative to net sales revenue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Inventory</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Due to seasonal fluctuations in the demand for our products, we choose to build up inventory
during low demand periods to decrease customer turnaround time and to minimize fluctuations in
levels of production during the year. This seasonal buildup in our inventory increases our risk of
inventory loss due to obsolescence.
</DIV>

<P align="center" style="font-size: 10pt">37
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Adverse market conditions in the semiconductor industry between the second half of 2000 and
the first half of 2003 resulted in a decline in average selling prices for our products generally
and a corresponding decrease in the stated value of our inventories. We make provisions for
inventory and spare parts loss based on product age and our evaluation of historical data and
projected sales price and volume to determine current trends so as to identify products or product
classes that are at risk of obsolescence or are slow moving. We recorded a reversal of inventory
and spare parts loss provision of NT$477&nbsp;million (US$14.5&nbsp;million) in 2005, NT$919&nbsp;million in 2004
and NT$1,185&nbsp;million in 2003 due to improving market conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Research and Development</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that research and development is critical to our future success. We incurred
expenses of NT$2,738&nbsp;million in 2003, NT$2,577&nbsp;million in 2004 and NT$3,110&nbsp;million (US$94.8
million) in 2005 on research and development, or 15.5%, 11.0% and 16.5% of net sales revenue in
those periods, respectively. See &#147;&#151; Results of Operations&#148; for a more detailed discussion of our
research and development expenditures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our reorganization in 2003 enabled us to consolidate our research and development efforts and
reduce the total number of projects by approximately two-thirds. As a result, we have reduced our
level of research and development expenditures. See &#147;Item&nbsp;5. Operating and Financial Review and
Prospects &#151; Research and Development, Patents and Licenses, etc. &#151; Research and Development&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Cost Reduction Initiatives</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our average selling prices for our products have generally declined over time. As a result, we
need to reduce our costs continuously in order to maintain the margins on our products. The need
for such measures will increase following our strategy to increase our production of Flash
products, which have a higher per unit cost. We seek to reduce our unit fixed costs by focusing on
technology migration and product development, as well as improving manufacturing capabilities and
maximizing sales volumes and capacity utilization. In addition, we seek to leverage our memory
products capabilities for strategic manufacturing services for certain key customers in order to
minimize capacity loss during slow demand periods. For example, we have been able to obtain cost
reductions through our continuing efforts to improve yields of functional dies per wafer, decrease
line widths by improving die-size technology and increase economies of scale. We currently employ
0.4 micron process technology, 0.35 micron process technology and, to a limited extent, 0.32 micron
process technology for certain chips at Fab I. We originally employed 0.25 micron process
technology at Fab II for our primary Mask ROM products. We migrated to 0.18 micron process
technology for our Mask ROM products produced at Fab II in the second half of 2000, and
successfully migrated to 0.15 micron process technology for both Flash and Mask ROM in the fourth
quarter of 2002. We began mass production using 0.15 micron process technology for Flash in the
second quarter of 2003. We expect to migrate to 0.13 micron process technology for Flash, and later
Mask ROM products, produced at Fab II in 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Production Capacity</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2003, our wafer production in terms of eight-inch wafer equivalents increased 4.8% to
444,915 wafers. In 2004, our wafer production increased 43.97% to 640,548 wafers. In 2005, our wafer
production decreased 1.4% to 631,463 wafers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to decrease customer turnaround time and to utilize greater economies of scale in the
future, we have supplemented and increased our manufacturing capacity. We have supplemented our
logic process manufacturing capacity by contracting for wafer fabrication on a foundry basis by
third parties, including TSMC and Tower Semiconductor. We also have increased our overall
manufacturing capacity through the enhancement of Fab I and Fab II.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth our wafer production (eight-inch equivalents) by product for
each of the periods indicated:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="23" style="border-bottom: 1px solid #000000"><B>Year ended December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(number of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(% of total</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(number of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(% of total</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(number of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(% of total</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>wafers)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>production)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>wafers)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>production)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>wafers)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>production)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mask ROM</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">166,627</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">236,722</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">303,605</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48.1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Flash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">247,730</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">288,747</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">192,536</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30.5</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">EPROM</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,737</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,013</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,319</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SMS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,734</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114,149</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SLC (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,821</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,332</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,855</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.1</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,915</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">640,548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">631,464</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">38
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Yields of dies per wafer vary with each type of logic product manufactured by us and a change
in product mix may cause variations in both wafer production and dies per wafer.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Geographic Markets</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We distribute our products to a wide variety of customers in a number of geographical markets,
including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Japan;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Taiwan;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Singapore and Hong Kong;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the United States; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Europe.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the breakdown of our net sales revenue and percentages of net
sales revenue by geographic regions, based on sales generated by our sales branches located in such
regions:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="23" style="border-bottom: 1px solid #000000"><B>Year ended December 31 (1)</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(millions</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(% of total net sales</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(millions</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(% of total net</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(millions</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(% of total net</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>in NT$)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>revenue)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>in NT$)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>sales revenue)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>in NT$)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>sales revenue)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Japan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,269</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,364</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,707</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Taiwan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,679</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,839</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,636</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Singapore and Hong Kong</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,487</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,119</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,076</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">United States</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">823</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">981</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">629</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Europe</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">454</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,077</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,712</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,380</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,908</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>See note 26 to our consolidated financial statements for the years ended December&nbsp;31, 2003,
2004 and 2005 for a discussion of our export sales. The numbers in this table do not represent
sales by shipping destination or by end customer origin.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our sales to Japan are generally denominated in U.S. dollars and Japanese yen, our sales to
Taiwan are generally denominated in U.S. dollars and N.T. dollars, and our sales to other countries
are generally denominated in U.S. dollars. In 2003, 2004 and 2005, 96.3%, 96.2% and 97.1%,
respectively, of our net sales revenue was denominated in currencies other than N.T. dollars,
primarily U.S. dollars and Japanese yen.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We use hedging techniques such as foreign currency borrowings, forward exchange rate contracts
and foreign currency swaps to mitigate our currency exposure risks.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Critical Accounting Policies</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our discussion and analysis of our financial condition and results of operations are based upon our
consolidated financial statements, which have been prepared in accordance with R.O.C. GAAP. We also
provide a reconciliation from our R.O.C. GAAP financial statements to U.S. GAAP in note 28 to our
consolidated financial statements for the years ended December&nbsp;31, 2003, 2004 and 2005. The
preparation of our consolidated financial statements requires management to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and
related disclosure of contingent assets and liabilities. We record estimates based on historical
experience and on various other assumptions that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily available from other sources. Actual results may
differ from these estimates under different assumptions or conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that the following critical accounting policies are the more significant policies
used in the preparation of our consolidated financial statements.
</DIV>

<P align="center" style="font-size: 10pt">39
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Inventories</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A principal risk in our industry is the rapid rate of obsolescence of products due to changes
in technology or other economic factors. Our financial and production management evaluates
historical experience, current trends and projected sales prices and volumes to identify products
or classes of products that are at risk for obsolescence or are slow moving, and accordingly, we
record a provision for this potential obsolescence. Our projected sales volumes are based on
projected demand information provided by our customers and our estimates of general market
conditions. We recorded a reversal of inventory and spare parts loss provision of NT$1,185&nbsp;million
in 2003 and NT$919&nbsp;million in 2004 and NT$477&nbsp;million (US$14.5&nbsp;million) in 2005 due to improving
market conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Stock Appreciation Right Program</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We entered into a derivative contract to hedge our risk related to our stock appreciation
right (&#147;SAR&#148;) program. This derivative contract, as amended, expired and was fully settled on May
5, 2005. We received or paid the benefit or obligation represented by the fair market value of our
share price in N.T. dollars divided by the then prevailing exchange rates between the N.T. dollar
and the U.S. dollar compared with the strike price in the contract. We could settle portions of the
contract at our discretion up to the expiration date. Under R.O.C. GAAP, we allocated a portion of
the gains or losses from the derivative contract to SAR expense by correlating the number of rights
in the SAR plan that had vested with the same number of shares referenced in the derivative
contract. We recorded gains or losses on the portion of the derivative contract related to the SAR
based on the difference between the strike price in the derivative contract and the employees&#146;
exercise price. We recorded as investment gains or losses changes in the value of the derivative
contract that did not correlate with vested rights. Therefore, to the extent the employees&#146;
exercise price on vested rights exceeded the fair market value of our shares, a portion of the
derivative obligation was not recorded. To the extent that employees vested in rights for which the
exercise price exceeded the fair market value of our shares, the obligation recorded related to the
derivative contract may be reduced, having a positive impact on our earnings. Due to the expiration
of the SAR program, there were no unrecorded obligations relating to the derivative contract as of
December&nbsp;31, 2005. Furthermore, since the strike price of the derivative contract is in U.S.
dollars, changes in the value of the contract may not correlate with changes in our obligations
under the SAR program.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Net Deferred Tax Assets</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under R.O.C. GAAP, our income tax expense is recorded based on calculations using the
statutory tax rate of each entity&#146;s jurisdiction of incorporation. As of December&nbsp;31, 2005, our
deferred tax assets consisted principally of investment credits that expire between 2006 and 2008
and loss carry-forwards that expire in 2006 and 2007. See note 18 to our consolidated financial
statements for the years ended December&nbsp;31, 2003, 2004 and 2005. The realization of these assets is
based upon estimates of future taxable income. In preparing estimates of future taxable income, we
have used the same assumptions and projections utilized in our internal forecasts. Based on these
projections, we estimate that a portion, but not all, of these tax credits will be utilized prior
to their expiration. We expect to achieve future earnings through the expansion of our business.
However, we may not be able to generate sufficient additional income to fully utilize our deferred
tax assets. In particular, an additional valuation allowance may be required to the extent we are
not able to fully utilize our deferred tax assets. As of December&nbsp;31, 2005, our deferred tax assets
exceeded our deferred tax liabilities by NT$10,198&nbsp;million (US$310.9&nbsp;million), and we recorded a
valuation allowance of NT$8,500&nbsp;million (US$259.1&nbsp;million) against our tax assets resulting in net
deferred tax assets of NT$1,699&nbsp;million (US$51.8&nbsp;million).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Cost Method Investments</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under R.O.C. GAAP, unrealized losses on marketable equity securities held for short-term
investment are recorded as investment loss in the statement of operations, and unrealized gains are
not recognized. Unrealized losses on marketable equity securities held for long-term investment are
reported as a reduction of shareholders&#146; equity, and the unrealized gains are not recorded.
Non-marketable equity securities are recorded at cost. In determining if and when a cost method
investee&#146;s decline in value below cost is not recoverable, we evaluate the market conditions,
offering prices, trends of earnings, price multiples and other key measures for our investments.
When such a decline in value is deemed to be a permanent diminution, we recognize an impairment
loss in the current period operating results to the extent of the decline. As of December&nbsp;31, 2005,
we recorded a cumulative unrealized loss of NT$1,352&nbsp;million
(US$41.2&nbsp;million), which was primarily
attributable to our investment in Tower Semiconductor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Results of Operations</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth, for the periods indicated, certain financial data from our
statements of operations, expressed in each case as a percentage of net sales revenue:
</DIV>

<P align="center" style="font-size: 10pt">40
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>Year ended December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Less: Sales returns</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.3</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Sales discounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">MMSG:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Mask ROM</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Flash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">EPROM</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">SMS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">ISG:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">SLC</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other(1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of goods sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(116.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(81.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(98.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross profit (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(16.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Selling expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6.9</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Research and development expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(15.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(11.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(16.5</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(26.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(20.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(27.1</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(43.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(25.8</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(13.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(16.9</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income (loss)&nbsp;before taxes and minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(46.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(36.4</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax benefit (provision)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.1</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD>*</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(46.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(37.1</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Other sales revenue includes royalty revenues, masking charges, profit-sharing revenues and
other operating revenues.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>Less than 0.1%.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Year Ended December&nbsp;31, 2005 compared to Year Ended December&nbsp;31, 2004</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Net Sales Revenue. </I>Our total net sales revenue decreased 19.1% to NT$18,908&nbsp;million (US$576.5
million) in 2005 from NT$23,380&nbsp;million in 2004. This decrease was primarily due to lower average
sales prices for our Mask ROM, Flash and SLC products due to weaker industry conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our net sales revenue from Mask ROM products increased 4.1% to NT$8,712&nbsp;million (US$265.6
million) in 2005 from NT$8,373&nbsp;million in 2004. This increase was primarily due to an increase in
sales volumes of Mask ROM products in 2005 which was partially offset by a decrease in the average
selling prices for Mask ROM products. Sales volume increased to 172.9&nbsp;million dies in 2005
compared to 152.4&nbsp;million dies in 2004 as a result of improvement of production technology to
produce more dies. The average selling prices for Mask ROM products decreased to NT$50.3 per die
in 2005 from NT$54.2 per die in 2004, principally as a result of a general industry downturn. The
proportion of our net sales revenue from Mask ROM products increased to 46.1% in 2005 from 35.8% in
2004, primarily due to the general industry downturn.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our net sales revenue from Flash products decreased 35.9% to NT$6,870&nbsp;million (US$209.5
million) in 2005 from NT$10,715&nbsp;million in 2004. This decrease was primarily due to the lower
average selling prices. Sales volume increased to 268.9&nbsp;million dies in 2005 compared to 235.9
million dies in 2004 due to improvements in the technology processes for producing dies. The
proportion of our net sales revenue from Flash products decreased to 36.3% in 2005 from 45.8% in
2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our net sales revenue from SMS products decreased 4.1% to NT$1,662&nbsp;million (US$50.7&nbsp;million)
in 2005 from NT$1,733&nbsp;million in 2004. The proportion of our net sales revenue from our SMS
products increased to 8.8% in 2005 from 7.4% in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our net sales revenue from SLC products decreased 33.3% to NT$1,192&nbsp;million (US$36.3million)
in 2005 from NT$1,787&nbsp;million in 2004. This decrease was principally due to lower average selling
prices of our LCD products and delays in the customer designs of our cellular phone products. The
proportion of our net sales revenue from our SLC products decreased to 6.3% in 2005 from 7.6% in
2004.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other sales revenue includes royalty revenues, masking charges, profit-sharing revenues and
other operating revenues. Other sales revenue decreased 20.7% to
NT$484&nbsp;million (US$14.8&nbsp;million)
in 2005 from NT$610&nbsp;million in 2004. The proportion of our net sales revenue from others decreased
to 2.5% in 2005 from 2.6% in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Cost of Goods Sold and Gross Profit (Loss). </I>Cost of goods sold decreased 1.7% to NT$18,666
million (US$569.1million) in 2005 from NT$18,990&nbsp;million in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result of the foregoing, our realized gross profit (loss)&nbsp;decreased to a realized gross
profit of NT$242&nbsp;million (US$7.4&nbsp;million) in 2005 from a
realized gross profit of NT$4,388&nbsp;million
in 2004. We had a positive gross margin of 1.3% in 2005 compared to 18.8% in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Operating Expenses. </I>Total operating expenses increased by 8.0% to NT$5,116&nbsp;million (US$156.0
million) in 2005 from NT$4,737&nbsp;million in 2004. Research and development expenses increased 20.7%
to NT$3,110&nbsp;million (US$94.8&nbsp;million) in 2005 from NT$2,577&nbsp;million in 2004. Administrative
expenses decreased slightly by 8.7% to NT$1,307&nbsp;million (US$39.8&nbsp;million) in 2005 from NT$1,431
million in 2004. Selling expenses decreased 4.1% to NT$699&nbsp;million (US$21.3&nbsp;million) in 2005
compared to NT$729&nbsp;million in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Operating Loss. </I>As a result of the foregoing, our operating loss increased to NT$4,875&nbsp;million
(US$148.6&nbsp;million) in 2005 from NT$349&nbsp;million in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Non-Operating Income. </I>Non-operating income decreased 26.1% to NT$1,197&nbsp;million (US$36.5
million) in 2005 from NT$1,619&nbsp;million in 2004. Reversal of inventory and spare parts loss
provision decreased 48.1% to NT$477&nbsp;million (US$14.5&nbsp;million) in 2005 from NT$919&nbsp;million in 2004,
due to improved inventory management and unusually high inventory levels in 2004. The gain on
disposal of long-term investments decreased 93.6% in 2005 from NT$24&nbsp;million (US$0.7&nbsp;million) to
NT$375&nbsp;million in 2004. Others decreased 25.8% to NT$121&nbsp;million (US$3.7&nbsp;million) in 2005 from
NT$163&nbsp;million in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Non-Operating
Expenses. </I>Non-operating expenses increased 213.3% to NT$3,204&nbsp;million (US$97.7
million) in 2005 from NT$1,023&nbsp;million in 2004. Net investment loss increased to NT$1,536&nbsp;million
(US$46.8&nbsp;million) in 2005 from NT$56&nbsp;million in 2004, because losses related to our investment in
Tower Semiconductor. Loss on allowance for prepaid expenses was
NT$142&nbsp;million (US$4.4&nbsp;million) in
2005, compared to nil in 2004 as a result of increased pre-payments for wafers to Tower
Semiconductor. Interest expense decreased 44.9% to NT$377.3&nbsp;million (US$11.5&nbsp;million) in 2005 from
NT$684&nbsp;million in 2004, due to the redemption of our outstanding convertible bonds in 2005. Others
increased 116.7% to NT$65&nbsp;million (US$2.0&nbsp;million) in 2005 from NT$30&nbsp;million in 2004. We recorded a
foreign exchange loss of NT$88&nbsp;million (US$2.7&nbsp;million) in 2005 compared to a foreign exchange loss
of NT$154&nbsp;million in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Income Tax Expense. </I>Total income tax expense increased to NT$215&nbsp;million (US$6.6&nbsp;million) in
2005 from NT$35&nbsp;million in 2004. This increase resulted primarily because of a reversal of tax
credits used in prior years, which we had to reverse because of our net loss in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Net Income (Loss). </I>As a result of the foregoing, we recorded net losses of NT$7,027&nbsp;million
(US$214.2million) in 2005 compared to net income of NT$218&nbsp;million in 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Year Ended December&nbsp;31, 2004 compared to Year Ended December&nbsp;31, 2003</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Net Sales Revenue. </I>Our total net sales revenue increased 32.0% to NT$23,380&nbsp;million in 2004 from NT$17,712&nbsp;million in 2003. This increase was primarily due to increases in
sales revenue of Mask ROM, Flash and SLC, which were partially offset by the decreases in sales
revenue of SMS and EPROM.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our net sales revenue from Mask ROM products increased 12.2% to NT$8,373&nbsp;million in 2004 from NT$7,464&nbsp;million in 2003. This increase was primarily due to an increase in
sales volumes of Mask ROM products in 2004, which was partially offset by a decrease in the average
selling prices for Mask ROM products. Sales volume increased to 152.4&nbsp;million dies in 2004 compared
to 128&nbsp;million dies in 2003 as a result of a general industry upturn in the first half of 2004 as
well as shipments for game cartridges for Nintendo&#146;s new portable dual screen devices that began in
the fourth quarter of 2004. The average selling prices for Mask ROM products decreased to NT$54.2
per die in 2004 from NT$56.9 per die in 2003, principally as a result of decreasing prices per Mb
of Mask ROM products in line with general industry trends, partially offset by increased sales of
high-density Mask ROM products. The proportion of our net sales revenue from Mask ROM products
decreased to 35.8% in 2004 from 42.1% in 2003, primarily due to the increase in Flash sales.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our net sales revenue from Flash products increased 84.4% to NT$10,715&nbsp;million in 2004 from NT$5,810&nbsp;million in 2003. This increase was primarily due to an increase in
the sales volume of our Flash products as well as our average selling prices. Sales volume
increased to 235.9&nbsp;million dies in 2004 compared to 115.1&nbsp;million dies in 2003 due to an increased
demand for Flash products used in optical disk drives and DVD players which arose as a result of
our successful penetration into the markets for these products in 2004, as well increased demand
for Flash products used in printers, ADSL modems and other consumer applications. Average selling
prices for Flash products increased to NT$45.8 per die in 2004 from NT$40.8 per die in 2003,
principally as a result of strong demand for Flash products in the first half of 2004. The
proportion of our net sales revenue from Flash products increased to 45.8% in 2004 from 32.8% in
2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our net sales revenue from SMS products decreased 25.6% to NT$1,733&nbsp;million in 2004 from NT$2,328&nbsp;million in 2003. This decrease was mainly due to the expiration of our
agreement to provide manufacturing services to Renesas. The proportion of our net sales revenue
from our SMS products decreased to 7.4% in 2004 from 13.1% in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our net sales revenue from SLC products increased 35.6% to NT$1,787&nbsp;million in 2004 from NT$1,318&nbsp;million in 2003. This increase was principally due to the general industry
upturn in 2004. The proportion of our net sales revenue from our SLC products increased to 7.6% in
2004 from 7.4% in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other sales revenue includes royalty revenues, masking charges, profit-sharing revenues and
other operating revenues. Other sales revenue increased 25.0% to NT$610&nbsp;million in 2004 from NT$488&nbsp;million in 2003. This increase was primarily due to increases in masking
charges and other operating revenue. The proportion of our net sales revenue from others decreased
to 2.6% in 2004 from 2.8% in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Cost of Goods Sold and Gross Profit (Loss). </I>Cost of goods sold decreased 8.1% to NT$18,990
million in 2004 from NT$20,657&nbsp;million in 2003. This decrease was primarily due
to the technology migration to smaller line-widths which resulted in more dies per wafer and lower
manufacturing costs per unit, and a 17.7% decrease in depreciation expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result of the foregoing, our realized gross profit (loss)&nbsp;changed to a realized gross
profit of NT$4,388&nbsp;million (US$138.3&nbsp;million) in 2004 from a realized gross loss of NT$2,945
million in 2003. We had a positive gross margin of 18.8% in 2004 compared to a negative gross
margin of 16.6% in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Operating Expenses. </I>Total operating expenses decreased slightly by 0.1% to NT$4,737&nbsp;million
in 2004 from NT$4,742&nbsp;million in 2003. This decrease was primarily due to a
decrease in research and development expenses and a slight decrease in administrative expenses,
partially offset by an increase in selling expenses. Research and development expenses decreased
5.9% to NT$2,577&nbsp;million in 2004 from NT$2,738&nbsp;million in 2003, due to our
strategic policy of integrating our resources and streamlining the number of research and
development projects. Administrative expenses decreased slightly by 0.8% to NT$1,431&nbsp;million
in 2004 from NT$1,443&nbsp;million in 2003. Selling expenses increased 29.9% to NT$729
million in 2004 compared to NT$561&nbsp;million in 2003, due to increased sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Operating Loss. </I>As a result of the foregoing, our operating loss decreased 95.4% to NT$349
million in 2004 from NT$7,684&nbsp;million in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Non-Operating Income. </I>Non-operating income decreased 13.7% to NT$1,619&nbsp;million in 2004 from NT$1,877&nbsp;million in 2003. This decrease was primarily due to recording a
foreign exchange loss in 2004 compared to a foreign exchange gain in 2003 and a decrease in
reversal of inventory and spare parts loss provision, partially offset by an increase in gain on
disposal of long-term investments and others. We recorded a foreign exchange loss of NT$154&nbsp;million in 2004, principally as a result of the appreciation of the NT$ against the U.S.
dollar and Japanese yen, compared to a foreign exchange gain of NT$375&nbsp;million in 2003. Reversal of
inventory and spare parts loss provision decreased 22.4% to NT$919&nbsp;million in
2004 from NT$1,185&nbsp;million in 2003, due to decreased sales out of inventory that was written off
for obsolescence in prior periods. Gain on disposal of long-term investments increased 485.9% to
NT$375&nbsp;million in 2004 from NT$64&nbsp;million in 2003, primarily due to the disposal
of a portion of our investments in in Biomorphic and Chipbond in 2004, and in Powertech in 2004
following its IPO in 2003. Others increased 92.6% to NT$192&nbsp;million in 2004 from
NT$100&nbsp;million in 2003, primarily due to a NT$63&nbsp;million debt extinguishment gain in connection
with our repurchase and cancellation in 2004 of US$169.1&nbsp;million of our 0.5% convertible bonds due
February&nbsp;7, 2007 and dividend income of NT$24&nbsp;million in 2004 compared to nil in
2003.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Non-Operating Expenses. </I>Non-operating expenses decreased 56.8% to NT$1,023&nbsp;million in 2004 from NT$2,370&nbsp;million in 2003. This decrease was primarily due to decreases in net
investment loss, loss on allowance for prepaid expenses, interest expense and others, partially
offset by recording a foreign exchange loss in 2004 compared to a foreign exchange gain in 2003.
Net investment loss decreased 92.4% to NT$56&nbsp;million in 2004 from NT$737&nbsp;million
in 2003, because we had no significant additional losses in 2004 under our equity derivative
contract which had our common shares as the underlying reference securities, as the trading price
of our common shares stabilized in 2004, whereas our net investment loss in 2003 was primarily due
to a loss under the same equity derivative contract, as a result of a significant decline in the
trading price of our common shares in 2003, offset by a NT$178&nbsp;million reversal of estimated SAR
expenses that we had recognized previously. Loss on allowance for prepaid expenses decreased 100.0%
to nil in 2004 from NT$335&nbsp;million in 2003, due to reserves for unused prepaid credit for wafer
production in 2003 compared to no loss in 2004. Interest expense decreased 36.5% to NT$684&nbsp;million
in 2004 from NT$1,078&nbsp;million in 2003, due to the decrease of our outstanding
convertible bonds in 2004. Others decreased 77.3% to NT$30&nbsp;million in 2004 from
NT$132&nbsp;million in 2003, primarily due to decreases in the depreciation of the idle assets and
losses from the obsolescence of the idle assets. We recorded a foreign exchange loss of NT$154
million in 2004, principally as a result of the appreciation of N.T. dollars to
U.S. dollars and Japanese Yen as well as because our average net assets in U.S. dollars and
Japanese Yen were greater than our liabilities in those foreign currencies, compared to a foreign
exchange gain of NT$375&nbsp;million in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Income Tax Expense. </I>Total income tax expense increased 66.7% to NT$35&nbsp;million in 2004 from NT$21&nbsp;million in 2003. This increase resulted primarily from tax expenses paid by
Macronix (America) and Macronix HK, our subsidiaries, as a result of increased profits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Net Income (Loss). </I>As a result of the foregoing, we recorded net income of NT$218&nbsp;million
(US$6.9&nbsp;million) in 2004 compared to net loss of NT$8,198&nbsp;million in 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Inflation</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not believe that inflation in Taiwan has had a material impact on our results of
operations. The average annual rate of change in Taiwan&#146;s Wholesale Price Index was approximately
2.48% in 2003, 7.21% in 2004 and 0.67% in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Taxation</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our facilities, Fab I and II, and Fab III, which we sold in April&nbsp;2006, are located in the
HsinChu Science Park. We enjoy preferential tax treatment in some respects under the R.O.C. Statute
for the Establishment and Administration of Science Park (referred to in this section as the
&#147;Science Park regulations&#148;). We are entitled to a temporary exemption from income taxes for our
income attributable to sales of our products manufactured at Fab I and Fab II after subtracting any
value-added amount to our products attributable to third-party contractors. We were entitled to
choose a tax exemption period of five years for Fab I and four years for Fab II. The tax exemption
period commences from the first date of sales, although we may defer the tax exemption for up to
four years. We chose the period from January&nbsp;1, 1994 to December&nbsp;31, 1998 as the five-year
exemption period for Fab I. Because we completed a substantial expansion of Fab II in 2001, we are
entitled to choose separate tax expansion periods for Phase I and Phase II of Fab II. For Phase I
of Fab II, we have chosen the period from January&nbsp;1, 2001 to December&nbsp;31, 2004 as the four-year tax
exemption period. We have not chosen the tax exemption period for Phase II of Fab II. Although this
tax exemption benefit has been rescinded under an amendment to the Science Park regulations
effective on January&nbsp;20, 2000, we are still entitled to claim the tax exemption period for Phase II
of Fab II. After the expiration of the relevant exemption periods, we will apply for new tax
exemptions under the Statute of Upgrading Industries for the expansion of Fab II in the future. Due
to our net loss in 2002, 2003 and 2005, we did not receive a benefit from this exemption for such
years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Statute for Upgrading Industries, we are also entitled to other tax incentives
generally available to R.O.C. companies. We may take tax credits currently at rates ranging between
5% and 20% of the amount spent on qualifying machinery and equipment,
and at rates up to 35% for qualifying research and development costs and employee training
expenses. An additional tax credit is also available to us, equal to 50% of the amount by which the
qualifying research and development costs or employee training expenses in a given year exceed the
average qualifying research and development costs or employee training expenses for the previous
two years. The tax credit may be utilized within five years from the date of its occurrence. The
available tax credit in each year is limited to 50% of the corporate tax payable in that year,
except for the last of the five years, for which there is no limit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We utilized no investment credits in 2003, none in 2004 and 2005. As of December&nbsp;31, 2005,
unused investment credits available to reduce future tax payments amounted to NT$2,920&nbsp;million
(US$89.0&nbsp;million), which will expire between the period 2006 and 2009.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net operating losses may be carried forward for a period of five years. As of December&nbsp;31,
2005, loss carry-forwards available to reduce future taxable income totaled NT$17,764&nbsp;million
(US$541.6&nbsp;million) of which NT$6,059&nbsp;million (US$184.7&nbsp;million) expire in 2007, NT$8,604&nbsp;million
(US$262.3&nbsp;million) expire in 2008, NT$338&nbsp;million (US$10.3&nbsp;million) expire in 2009 and NT$2,763
million (US$84.2&nbsp;million) expire in 2010. See note 18 to our consolidated financial statements for
the years ended December&nbsp;31, 2003, 2004 and 2005 included in this annual report.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
recorded an income tax expense of NT$21&nbsp;million in 2003, NT$35&nbsp;million in 2004 and NT$215
million in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Equity Derivative Contracts</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We entered into a derivative contract with our common shares as the underlying reference
securities in connection with our stock appreciation rights plan in order to provide liquidity.
This contract also included a reference to foreign currency exchange rates. This contract
significantly affected our net income or loss during the period 2002 through 2004. The portion of
the contract with a reference to foreign currency exchange rates expired in May&nbsp;2003. We extended
the portion of the contract with a reference to our common shares as the underlying reference
securities until May&nbsp;2005. As at December&nbsp;31, 2004, the underlying reference securities was
53,253,964 of our common shares, the carrying amount of this contract was a receivable of
US$1.7&nbsp;million (NT$54&nbsp;million) and the fair value of this contract was a receivable of US$1.4
million (NT$44&nbsp;million). Our additional loss under this contract in 2004 was US$0.3&nbsp;million (NT$10
million), and total accumulated loss under this contract as of December&nbsp;31, 2004 was US$60.6
million (NT$1,922&nbsp;million). Between March&nbsp;17, 2005 and April&nbsp;28, 2005, we reduced the number of
common shares which formed the underlying reference securities for the contract to nil, and we
settled the contract on May&nbsp;5, 2005. Our additional loss under the contract in 2005 up to the date
of settlement of the contract was US$4.4&nbsp;million (NT$140&nbsp;million). See &#147;Item&nbsp;11. Quantitative and
Qualitative Disclosures About Market Risk.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>U.S. GAAP Reconciliation</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>General</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our consolidated financial statements are prepared in accordance with R.O.C. GAAP, which
differ in certain significant respects from U.S. GAAP. The following tables set forth comparisons
of our net income (loss)&nbsp;and shareholders&#146; equity accounts in accordance with R.O.C. GAAP and U.S.
GAAP:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000"><B>Year ended December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>(NT$)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>(NT$)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>(NT$)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>(US$)</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>(in millions)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background:#cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)&nbsp;in accordance with:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">R.O.C. GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,198</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">218</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,027</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(214.2</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background:#cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">U.S. GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,027</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(469</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,636</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(141.3</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000"><B>Year ended December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>(NT$)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>(NT$)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>(NT$)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>(US$)</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15"><B>(in millions)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background:#cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shareholders&#146; equity in accordance with:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">R.O.C. GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,248</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,558</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">870.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background:#cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">U.S. GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,755</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,264</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">892.2</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Note 28 to our consolidated financial statements for the years ended December&nbsp;31, 2003, 2004
and 2005 included in this annual report provides a description of the principal differences between
R.O.C. GAAP and U.S. GAAP as they relate to us, and a reconciliation to U.S. GAAP of specific
items, including net income (loss)&nbsp;and shareholders&#146; equity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We had a gross loss in accordance with U.S. GAAP of NT$1,912&nbsp;million in 2003, gross profit of
NT$5,052&nbsp;million in 2004 and gross profit of NT$546&nbsp;million (US$16.6&nbsp;million) in 2005. Under U.S.
GAAP, we had negative gross margin of 8.9% in 2003, positive gross margin of 21.6% and 3.6% in 2004
and 2005, respectively. Under U.S. GAAP we had an operating loss of NT$6,649&nbsp;million in 2003,
operating profit of NT$335&nbsp;million in 2004 and operating loss of NT$4,356&nbsp;million (US$132.8
million) in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Differences between R.O.C. GAAP and U.S. GAAP, which have an effect on our net income or loss
as reported under R.O.C. GAAP, relate to:
</DIV>

<P align="center" style="font-size: 10pt">45
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>plant capacity expense variances;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>income taxes;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>additional pension gain on an actuarial basis;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>marketable securities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>amortization of goodwill;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>derivative financial instruments;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>compensation expense pertaining to stock performance-based employee bonuses; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>convertible debt securities with beneficial conversion features.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Gross Profit (Loss) and Operating Income (Loss)</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;R.O.C. GAAP permits government subsidies for research and development, inventory loss
provision, allowance for prepayments and long-lived assets to be abandoned and the reversal of bad
debt expense to be presented below the operating income subtotal in the statement of operations.
Under U.S. GAAP, the inventory loss provision is included in the determination of gross profit or
loss, while the government subsidies for research and development, allowance for prepayments and
long-lived assets to be abandoned and the reversal of bad debt expense are included in the
determination of operating income or loss.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Plant Capacity Expense Variances</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under R.O.C. GAAP, all plant capacity expense variances may either be charged to the statement
of operations or allocated between cost of goods sold and inventory using an appropriate allocation
method. Our policy is to expense such variances.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under U.S. GAAP, such plant capacity variances may only be allocated between cost of goods
sold and inventory. This may result in additional inventory allowances by NT$740&nbsp;million, NT$25
million and NT$28&nbsp;million as of December&nbsp;31, 2003, 2004 and 2005, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Income Taxes</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our undistributed earnings generated after 1997 are subject to a 10% tax in compliance with
the R.O.C. Income Tax Law. Under R.O.C. GAAP, the 10% tax on undistributed earnings is recorded as
an expense at the time our shareholders resolve that earnings be retained. Under U.S. GAAP, we
measure income tax expense, including the tax effects of temporary differences, using the tax rate
that includes the tax on undistributed earnings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under R.O.C. GAAP, the criteria used in the determination of the valuation allowance is less
stringent than under U.S. GAAP. Under U.S. GAAP, if a company has experienced cumulative losses in
recent years, it is not generally able to consider more subjective projections of future operating
profits for the purpose of determining the valuation allowance for deferred income tax assets. A
valuation allowance is provided on deferred tax assets to the extent that it is not &#147;more likely
than not&#148; that such deferred tax assets will be realized. The valuation allowance that we recorded
under U.S. GAAP as of December&nbsp;31, 2003, 2004 and 2005 were
NT$8,305&nbsp;million, NT$10,302&nbsp;million and
NT$12,096&nbsp;million (US$368.8&nbsp;million), respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Pension Expense</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to 1996, in accordance with R.O.C. GAAP, pension expense was recognized based on
contributions required under government regulations, while under U.S. GAAP, pension obligations and
expense are determined on an actuarial basis. Under the &#147;Accounting for Pensions&#148; guidelines issued
by the R.O.C. Accounting Research Development Foundation in 1991, which are substantially similar
to U.S. Statement of Financial Accounting Standards (&#147;SFAS&#148;) No.&nbsp;87 under U.S. GAAP, each R.O.C.
listed company, including our company, was required, beginning in 1996, to accrue its un-funded or
under-funded &#147;accumulated pension obligations&#148; as a liability in its balance sheet on an actuarial
basis and to expense amounts related to these obligations in its statement of operations
systematically
</DIV>

<P align="center" style="font-size: 10pt">46
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">over the estimated service lives of the employees covered by the pension plan. See note 3to
our consolidated financial statements for the years ended December&nbsp;31, 2003, 2004 and 2005 included
in this annual report. For U.S. GAAP reconciliation purposes, we amortize our related pension
obligation differences in accordance with U.S. SFAS No.&nbsp;87 over a period of 21&nbsp;years, retroactive
from 1993. This adjustment reduced net loss before taxes under U.S. GAAP by NT$3&nbsp;million in 2003,
NT$3&nbsp;million in 2004 and NT$3&nbsp;million (US$0.1&nbsp;million) in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Marketable Securities</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under R.O.C. GAAP, marketable equity securities held as short-term investments are carried at
the lower of aggregate cost or market value. The unrealized losses of marketable equity securities
held as short-term investments are recorded as investment loss in the statement of operations,
while unrealized gains of marketable equity securities held as short-term investments are not
recognized. Marketable equity securities held as long-term investments are carried at cost, or
lower of aggregate cost or market value if the market price is available. The unrealized losses of
marketable equity securities held as long-term investments are reported as a reduction of
shareholders&#146; equity, while the unrealized gains are not recognized. An other-than-temporary
decline in value is not required to be recognized under R.O.C. GAAP due to the less prescriptive
nature of the principles.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;U.S. SFAS No.&nbsp;115, &#147;Accounting for Certain Investments in Debt and Equity Securities&#148;,
requires that all applicable investments be classified as trading securities, available-for-sale
securities or held-to-maturity securities. We did not have any investments classified as trading
securities or held-to-maturity securities during the periods presented. SFAS No.&nbsp;115 further
requires that available-for-sale securities be reported at fair value, with unrealized gains and
losses excluded from earnings but reported in a separate component of shareholders&#146; equity until
they are sold. Under U.S. GAAP, if an other-than-temporary decline in value of a long-term
investment exists, the unrealized loss should be charged to the statement of operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Derivative Financial Instruments</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under R.O.C. GAAP, the Company is required to disclose certain information in the financial
statements regarding derivative financial instruments but there are no specific accounting
requirements for derivative financial instruments (except for outstanding put options and foreign
currency forward exchange contracts for which the accounting is documented in note 2a and for which
there is no significant difference in the accounting treatment with U.S. GAAP prior to January&nbsp;1,
2001). In addition, R.O.C. GAAP has no specific regulations with respect to the accounting for
derivative financial instruments indexed to the Company&#146;s own stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to January&nbsp;1, 2001, under U.S. GAAP, generally, written options are marked to market
through earnings in all situations, unless they are part of a combination of options which also
includes a purchased option of equal or greater fair value. Purchased options are eligible for
hedge accounting and changes in the intrinsic value of the option are treated as an adjustment of
the basis of the hedged assets or liabilities. For derivative financial instruments indexed to the
Company&#146;s own stock, the Company is required to record those agreements which are required to be
settled in cash at their fair values, with changes in fair value reported in earnings (See note
21.f). Differences between R.O.C. GAAP and U.S. GAAP in accounting for derivative financial
instruments are detailed below:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><I>Options contracts</I></U></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under R.O.C. GAAP, gains and losses on option contracts are recognized upon exercise. Unrealized
gains and losses are not required to be recorded in the financial statements. However, effective
the quarter ended December&nbsp;31, 2004, in accordance with No.&nbsp;32 ruling issued by Accounting
Research and Development Foundation in 2005, &#147;The Accounting Treatment of Foreign Exchange Option
Contract Before the Effectiveness of Financial Accounting Standards No.&nbsp;34&#148;, outstanding put
options at balance sheet date shall be accounted for at their fair values with the differences
included in the current net income. This change in accounting principles did not have significant
impact on the Company&#146;s financial statements.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>For periods prior to January&nbsp;1, 2001, U.S. GAAP requires that unrealized gains and losses on
option contracts that do not qualify as hedges be recorded in the statement of operations. The
majority of option contracts entered into by the Company for hedging purposes, did not qualify as
hedges for financial reporting purposes and accordingly have been carried in the financial
statements at fair value.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U><I>Structured deposits</I></U></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under R.O.C. GAAP, the respective interest on the deposits is accrued. The gains and losses
arising from the settlement of the contracts are dealt with in the statement of operations.
Unrealized gains and losses are not recognized.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">47
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>For periods prior to January&nbsp;1, 2001, under U.S. GAAP, the option element of these contracts is
measured at fair value and is recognized on the balance sheet, subsequent changes in the fair
value of the option are recognized in earnings in the period of change.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In June&nbsp;1998, the U.S. Financial Accounting Standards Board (&#147;U.S. FASB&#148;) issued Statement
133, &#147;Accounting for Derivative Instruments and Hedging Activities&#148;. The Statement requires the
Company to recognize all derivatives on the balance sheet date at fair value. Derivatives that are
not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending
on the nature of the hedge, changes in the fair value of derivatives are either offset against the
change in fair value of assets, liabilities, or firm commitments through earnings or recognized in
other comprehensive income until the hedged item is recognized in earnings. The ineffective portion
of a derivatives&#146; change in fair value will be immediately recognized in earnings. The adoption of
Statement No.&nbsp;133 on January&nbsp;1, 2001 resulted in the cumulative effect of an accounting change of
NT$620,503 being recognized in earnings in the consolidated statement of operations and a charge of
nil to other comprehensive income. Subsequent to December&nbsp;31, 2000, none of the Company&#146;s
derivative positions qualified as hedges under U.S. GAAP. The Company has issued certain
convertible debt instruments that contain embedded derivatives because the currency in which the
instrument is denominated is different from the currency in which the underlying stock is
denominated. The Company has bifurcated such conversion options in accordance with FAS 133 and
accounted for the bifurcated derivative instrument in accordance with FAS 133 and the host
instrument in accordance with the applicable standards. In addition, as discussed in note 11, the
Company repurchased and redeemed certain convertible bonds that included such embedded derivatives.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For derivative financial instruments indexed to and potentially settled in our own common
shares, we are required to record those agreements which are required to be settled in cash at
their fair values, with changes in fair value reported in earnings. See notes 25 and 28 to our
consolidated financial statements for the years ended December&nbsp;31, 2003, 2004 and 2005 included in
this annual report.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After application of these principles, our net loss for U.S. GAAP purposes increased by NT$545
million in 2003, decreased by NT$70&nbsp;million in 2004 and increased by NT$34&nbsp;million (US$1.0&nbsp;million)
in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Stock Performance-Based Employee Bonus Plan</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In April&nbsp;1999, our board of directors approved a program similar to a stock appreciation
rights plan under which our employees who are eligible to participate would receive cash bonuses
based on increases in the market price of our common shares. Our board of directors has authorized
our chairman to use his discretion to alter the terms of this plan, including the vesting period
and the amount of the bonus allocated to our employees. We initially allocated 61,179,500 shares
upon the establishment of the plan. Rights to receive cash bonuses under the plan are scheduled to
vest with respect to 25% of the common shares allocated to the plan on August 1 of each year,
starting August&nbsp;1, 2000 through 2002. In April&nbsp;2002, our board of directors approved an amendment
of the plan, changing the vesting date for the final 25% to August&nbsp;1, 2002 from March&nbsp;31, 2003.
Employees who discontinue their employment before the scheduled vesting dates will forfeit the
rights to receive cash bonuses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Between the establishment of the plan and December&nbsp;31, 2002, rights to receive cash bonuses
with respect to a total of 6,197,600 shares have been forfeited, and rights to receive cash bonuses
with respect to a net additional 17,227,048 shares were allocated under the plan as a result of
stock dividends made on the shares allocated to the plan, exercise of rights under the plan and
allocation of additional rights. As of December&nbsp;31, 2002, rights to receive cash bonuses with
respect to 72,208,948 shares were outstanding under the plan, of which all were vested. In April
2003, all remaining rights to receive cash bonuses under the plan, with respect to 72,208,948
shares, expired and were cancelled.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;U.S. GAAP requires us to account for this plan in accordance with Accounting Principles Board
Opinion No.&nbsp;25 (&#147;APB No.&nbsp;25&#148;), &#147;Accounting for Stock Issued to Employees&#148;. Under APB No.&nbsp;25, we
recognize compensation expense for the plan based on the amount by which the quoted market value of
our shares covered by the grant exceeds the exercise price of the rights. Compensation determined
in accordance with the preceding sentence will be accrued as a charge to expense over the vesting
period during which the employee performs the related services. Due to the reversal of compensation
expense accrued on an R.O.C. GAAP basis, we recorded an increase in income adjustment of nil for
2003, 2004 and 2005 for this plan under U.S. GAAP. Unlike U.S. GAAP, R.O.C. GAAP has no specific
accounting provisions for stock appreciation rights plans. For R.O.C. GAAP reporting purposes, we
do not recognize compensation expense until the year in which these appreciation rights vest. When
the rights vest, we recognize compensation expense that is calculated based on the difference
between (i)&nbsp;the fair market value of our shares plus additional costs related to the rights vested
and (ii)&nbsp;the aggregate exercise price of the rights having vested in the period. We have entered
into a number of equity derivative contracts to
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">cover the rights under the plan. We recognized a reversal of compensation expense for the
stock appreciation rights under R.O.C. GAAP of nil in 2003, 2004 and 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Purchase and Sale of Our Own Shares</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under R.O.C. GAAP, the net gain or loss resulting from the purchase and sale of our own common
shares for trading purposes is recorded as non-operating income or loss in the consolidated
statement of operations. However, effective from January&nbsp;1, 2002, purchases or sales of our own
shares are treated as a treasury stock transaction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;U.S. GAAP requires that if we or our affiliates acquire our own common shares for purposes
other than retirement, the cost of the acquired shares may be shown separately as a deduction from
the total of capital stock, additional paid-in capital and retained earnings, or may be accorded
the accounting treatment appropriate for retired stock. &#147;Gains&#148; on sales of the repurchased stock
not previously accounted for as constructively retired are credited to additional paid-in capital;
losses may be charged to additional paid-in capital to the extent that previous net &#147;gains&#148; from
sales or retirements of the same class of stock are included therein, otherwise to retained
earnings. We had nil gain or loss in 2003, 2004 and 2005 on the purchase and sale of our common
shares for R.O.C. GAAP purposes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Investment in Equity Investees</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under R.O.C. GAAP, if an investee company issues new shares and the original shareholders do
not purchase new shares proportionally such that the investor increases its percentage of
ownership, the difference between the investment cost for the portion of the investee acquired and
the acquired net assets is charged to equity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under U.S. GAAP, if an investee company issues new shares and the original shareholders do not
purchase new shares proportionally such that the investor increases its percentage of ownership,
the difference between the investment cost for the portion of investee acquired and the acquired
net assets is recorded as part of the investment. The difference is assigned to individual assets
and liabilities acquired on the basis of the assets&#146; and liabilities&#146; fair values. Any remaining
difference between the cost of the investment and net assets acquired is allocated to goodwill.
Goodwill for equity method investments is not separable from the instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Research and Development Expense</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under R.O.C. GAAP, our royalty expense is included in research and development expense. Under
U.S. GAAP, our royalty expense is included in selling expense or administrative expense depending
on the nature of the expense. Accordingly, on a U.S. GAAP basis, research and development expenses
were NT$2,535&nbsp;million in 2003, NT$2,418&nbsp;million in 2004 and NT$2,784&nbsp;million (US$84.9&nbsp;million) in
2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Rights Issues and Earnings Per Share</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under U.S. GAAP, a rights issue with exercise price less than the fair value of the shares
contains a bonus element that is similar to a stock dividend and is accounted for as such
accordingly. As a result, the basic and diluted earnings per share are adjusted retroactively for
the bonus element for all periods presented. There are no requirements under R.O.C. GAAP to adjust
earnings per share arising from the bonus element of a rights issue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under R.O.C. GAAP, earnings per share is retroactively adjusted for shares issued for employee
bonus. Under U.S. GAAP, shares issued for employee bonus will affect the current period&#146;s earnings
per share only.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Employee Stock Options</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under R.O.C. GAAP, there were no specific regulations with respect to the accounting for stock
options prior to 2004. Accordingly, we elected not to account for stock options in the financial
statements. Effective from January&nbsp;1, 2004, companies are required to use either the fair value
method or the intrinsic value method to account for its stock options. Under the fair value method,
stock options are stated on the fair value calculated by pricing models such as Black-Scholes or
binomial model. Under the intrinsic value method, stock options are recorded by the excess of the
market price of the underlying shares at the grant date over the exercise price of the stock
option. The fair value method is encouraged but not required. If the intrinsic value is used,
companies are required to disclose pro-forma net income and earnings per share assuming the fair
value method is used.
</DIV>

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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under U.S. GAAP, we elected to follow Accounting Principles Board Opinion No.&nbsp;25, &#147;Accounting
for Stock Issued to Employees&#148; (&#147;APB 25&#148;) and related interpretations in accounting for our
employee stock options because, as discussed below, the alternative fair value accounting provided
for under SFAS No.&nbsp;123, &#147;Accounting for Stock-Based Compensation,&#148; requires use of option valuation
models that were not developed for use in valuing employee stock options. Under APB No.&nbsp;25. if the
exercise price of our employee stock options equals the market price of the underlying stock on the
date of grant, we are not required to recognize any compensation expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Reclassification of Capital Account to Accumulated Deficit</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under R.O.C. GAAP, under the approval of shareholders, a company may reclassify its additional
paid-in capital account to cover up its accumulated deficit. Under R.O.C. GAAP, we reclassified
NT$2,631&nbsp;million and NT$315,704 of our additional paid-in capital to the accumulated deficit
account for 2003 and 2005, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
U.S.&nbsp;GAAP, according to SAB Topic 5S, the SEC staff believes a deficit reclassification
of any nature is considered to be quasi-reorganization. As such, a company may not reclassify or
eliminate a deficit in retained earnings unless all requisite conditions for a quasi-reorganization
are satisfied. Under U.S. GAAP, this reclassification is eliminated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Convertible Debt Securities with Beneficial Conversion Feature</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
R.O.C.&nbsp;GAAP, when convertible bonds are issued, the entire instrument is recorded as a
liability at an amount equal to the proceeds received. Any discount or premium to the par value of
the convertible bond is amortized to the statement of income by using the effective interest rate
method. If the convertible bonds contain a redemption premium above its par value amount, the
excess is accrued, using the effective interest rate method, over the period to redemption as a
charge to interest expense. Upon conversion, the carrying value of the bond is credited to common
stock at its par value and the difference between the carrying value of the bond and the par value
of stock is recorded to capital reserve. No gain or loss is recognized. Effective from January&nbsp;1,
2006, ROC SFAS No.&nbsp;34 and ROC SFAS No.&nbsp;36, &#147;Financial Statement Presentation and Disclosure of
Financial Instruments&#148; (&#147;ROC SFAS 36&#148;) require derivative embedded in hybrid instrument, if not
clearly and closely related to the host contract, to be bifurcated and accounted for at fair value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company issued certain convertible debt instruments that contained embedded
derivatives based upon the features set in the convertible bond contracts. Under R.O.C. GAAP, there
is no accounting guidance specific to the embedded derivatives and beneficial conversion features.
The Company accounted for the convertible bonds with the aforementioned features in the manner
similar to the conventional bonds without the aforementioned features.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under U.S. GAAP, the Company considered whether the convertible bonds contain the embedded
derivative features using the guidance provided in U.S. SFAS No.&nbsp;133. Convertible bonds with
premium put options contain embedded derivatives subject to bifurcation in accordance with EITF
85-29. To the extent the embedded derivatives are determined to exist, the embedded derivatives are
bifurcated and accounted for in accordance with SFAS No.&nbsp;133 and EITF 85-29. If there are no
embedded derivatives presented, the Company then considers whether there are beneficial conversion
features. To the extent the beneficial conversion features exist, the
Company would account for the
beneficial conversion features in accordance with EITF 98-5 and EITF 00-27.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under U.S. GAAP, in accordance with EITF 00-27 &#147;Application of EITF98-5 Accounting for
Convertible Securities with Beneficial Conversion Features&#148; (EITF 00-27), convertible securities
with beneficial conversion features or contingently adjustable conversion ratios are recognized and
measured by allocating a portion of the proceeds equal to the intrinsic value of that feature to
additional paid-in capital. The amount to be allocated should be calculated at the commitment date
as the difference between the conversion price and the fair value of the common stock into which
the security is convertible, multiplied by the number of shares into which the security is
convertible. The resulting discount on the convertible security is accreted, as interest expense,
from the date the beneficial conversion feature is fixed to the stated redemption date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
All convertible bonds outstanding as of December&nbsp;31, 2003, 2004 and 2005 contained
embedded derivative features that require bifurcation in accordance
with SFAS No.&nbsp;133
and the Company bifurcated the embedded derivatives from the host contracts for these
convertible bonds. The host bond contract was then accreted from the initial
amount to the maturity amount over the period from the date of issuance to the
maturity date using the effective interest method.  The net difference between
R.O.C.&nbsp;GAAP and U.S.&nbsp;GAAP represents 1)&nbsp;change in fair value of embedded derivatives,
and 2)&nbsp;difference between accretion period under both GAAP, and premium or
discounts subject to accretion under both GAAP.
</DIV>

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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>New Accounting Pronouncements</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>U.S. GAAP</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In March&nbsp;2004, the FASB approved the consensus reached on the Emerging Issues Task Force
(EITF)&nbsp;Issue No.&nbsp;03-1, &#147;The Meaning of Other-Than-Temporary Impairment and Its Application to
Certain Investments.&#148; The Issue&#146;s objective is to provide guidance for identifying
other-than-temporarily impaired investments. EITF 03-1 also provides new disclosure requirements
for investments that are deemed to be temporarily impaired. In September&nbsp;2004, the FASB issued a
FASB Staff Position (FSP)&nbsp;EITF 03-1-1 that delays the effective date of the measurement and
recognition guidance in EITF 03-1 until further notice. In November&nbsp;2005, the FASB issued a FASB
Staff Position (FSP)&nbsp;FAS 115-1/124-1 that addresses the measurement and recognition guidance for
identifying other-than-temporarily impaired investments. This FSP also includes accounting
consideration subsequent to the recognition and requires certain disclosures about unrealized
losses that have not been recognized as other-than-temporary impairment. The disclosure
requirements of EITF 03-1 and FSP 115-1/124-1 are effective with this annual report for fiscal 2004
and 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In November&nbsp;2004, FASB issued FASB Statement No.&nbsp;151, which amended the guidance in ARB No.
43, Chapter&nbsp;4, &#147;Inventory Pricing,&#148; to clarify the accounting for abnormal amounts of idle facility
expense, freight, handling costs, and wasted material (spoilage). SFAS No.&nbsp;151 requires that those
items be recognized as current-period charges and requires the allocation of fixed production
overheads to inventory based on the normal capacity of the production facilities. The guidance is
effective for inventory costs incurred during fiscal years beginning after June&nbsp;15, 2005. The
Company expected to adopt the guidance on January&nbsp;1, 2006. The adoption of this Statement is
expected to increase cost of goods sold and reduce inventory balance on a US GAAP basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December, 2004, the Financial Accounting Standards Board (FASB)&nbsp;issued FASB Statement No.
123(R), &#147;Share-Based Payment&#148;, which is a revision of FASB Statement No.&nbsp;123, &#147;Accounting for
Stock-Based Compensation&#148;. Statement 123(R) supersedes APB Opinion No.&nbsp;25, &#147;Accounting for Stock
Issued to Employees&#148;, and amends FASB Statement No.&nbsp;95, &#147;Statement of Cash Flows&#148;. Generally, the
approach in Statement 123(R) is similar to the approach described in Statement 123. However,
Statement 123(R) requires all share-based payments to employees, including grants of employee stock
options, to be recognized in the income statement based on the fair values. Pro forma disclosure is
no longer an alternative.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Statement 123(R) must be adopted no later than January&nbsp;1, 2006. Early adoption will be
permitted in periods in which financial statements have not yet been issued. We expect to adopt
Statement 123(R) on January&nbsp;1, 2006. Statement 123(R) permits public companies to adopt its
requirements using one of two following methods:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A &#147;modified prospective&#148; method in which compensation cost is recognized beginning with the
effective date (a)&nbsp;based on the requirements of Statement 123(R) for all share-based payments
granted after the effective date and (b)&nbsp;based on the requirements of Statement 123 for all awards
granted to employees prior to the effective date of Statement 123(R) that remain unvested on the
effective date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A &#147;modified retrospective&#148; method which includes the requirements of the modified prospective
method described above, but also permits entities to restate based on the amounts previously
recognized under Statement 123 for purposes of pro forma disclosures either (a)&nbsp;all prior periods
presented or (b)&nbsp;prior interim periods of the year of adoption.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are currently evaluating the above methods of adoption.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As permitted by Statement 123, the company currently accounts for share-based payments to
employees using intrinsic value method. Accordingly, the adoption of fair value method will have
the impact on our result of operations, although it will have no impact on our overall financial
position. Had the company adopted Statement 123(R) in prior periods, the impact of that standard
would have approximated the impact of Statement 123 as described in the disclosure of pro forma net
income and earnings per share in Note 28 to the consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2004, the FASB issued SFAS No.&nbsp;153, &#147;Exchanges of Nonmonetary Assets, an amendment
of APB Opinion No.29.&#148; APB Opinion No.29, &#147;Accounting for Nonmonetary Transactions,&#148; is based on
the principle that exchanges of nonmonetary assets should be measured based on the fair value of
the assets exchanged. SFAS No.&nbsp;153 amends APB Opinion No.&nbsp;29, eliminating the exception to fair
value accounting for nonmonetary exchanges of similar productive assets and replaces it with a
general exception to fair value accounting for nonmonetary exchanges that do not have commercial
substance if the future cash flows of the entity are expected to change significantly as a result
of the exchange. The statement is effective for non-monetary asset exchanges occurring in fiscal
periods beginning after June&nbsp;15, 2005. The Company does not expect this statement to have a
material impact on the financial condition or results of operation.
</DIV>

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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May&nbsp;2005, the FASB issued SFAS No.&nbsp;154 &#147;Accounting Changes and Error Corrections&#148;. SFAS No.
154 replaces APB Opinion No.&nbsp;20 &#147;Accounting Change&#148;, and SFAS No.&nbsp;3 &#147;Reporting Accounting Changes
in Interim Financial Statements&#148; and changes the requirements for the accounting for and reporting
of a change in accounting principle. SFAS No.&nbsp;154 also applies to all voluntary changes in
accounting principle and changes required by an accounting pronouncement in the unusual instance
that the pronouncement does not include specific transition provision. The statement also defines
&#147;retrospective application&#148; and &#147;restatement&#148;. The retrospective application of a change in
accounting principles is limited to the direct effects of the changes. The statement should be
affective for accounting changes made in fiscal years beginning after December&nbsp;15, 2005. The
Company does not expect this statement to have a material impact on the financial condition or
results of operation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In February&nbsp;2006, the FASB issued SFAS No.&nbsp;155 &#147;Accounting for Certain Hybrid Financial
Instruments &#150; An Amendment of SFAS No.&nbsp;133 and 140&#148;. The Statement permits fair value remeasurement
for any hybrid financial instrument that contains an embedded derivative that otherwise would
require bifurcation; establish a requirement to evaluate interests in securitized financial assets
and allow a qualifying special-purpose entity from holding a derivative financial instrument that
pertains to a beneficial interest other than another derivative financial instrument. The statement
is effective for all financial instruments acquired or issued after the beginning of an entity&#146;s
first fiscal year that begins after September&nbsp;15, 2006. The Company is currently evaluating the
potential impact of this standard on its financial position and the result of operations, but does
not believe the adoption of SFAS No.&nbsp;155 will have a material effect on the result of operations or
financial position of the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;<B><I>R.O.C. GAAP</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;25, 2003, the R.O.C. Accounting Research and Development Foundation (&#147;ARDF&#148;)
issued Statement of Financial Accounting Standards No.&nbsp;34, &#147;Accounting for Financial Instruments&#148;,
which is effective for financial statements with fiscal years ending on or after December&nbsp;31, 2006.
Early adoption of this statement is not allowed. SFAS No.&nbsp;34 requires that all financial
instruments, excluding certain financial instruments specified in this statement, as either
trading, available-for-sale or held-to-maturity. Debt securities owned with positive intent and
ability to hold to maturity are classified as held-to-maturity securities and reported at amortized
cost. Debt and equity securities that are purchased and traded for short-term profit are classified
as trading securities and reported at fair value, with unrealized holding gains and losses reported
as part of net income. Debt and equity securities not classified as either held-to-maturity or
trading are classified as available-for-sale securities, which should be reported at fair value,
with unrealized gains and losses reported as a separate component of stockholders&#146; equity. In
addition, all derivatives are required to be reported at fair value. The Company is currently
evaluating the effect of the adoption of this statement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In July&nbsp;1, 2004, the R.O.C. ARDF issued SFAS No.&nbsp;35, &#147;Accounting for Impairment of Assets&#148;,
which is effective for financial statements with fiscal years ending on or after December&nbsp;31, 2005.
This statement requires that impairment loss should be recognized whenever events or changes in
circumstance indicate the carrying amount of an asset may be lesser than its recoverable amount.
The Company is currently evaluating the effect of the adoption of this statement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;9, 2004, the R.O.C. ARDF issued the revision for SFAS No.&nbsp;5(R), &#147;Accounting for
Long-Term Equity Investment&#148;, which is effective for financial statements with fiscal years
beginning on or after January&nbsp;1, 2005. This revision of the guidance requires that operating losses
of investees evaluated under equity method be allocated between controlling and non-controlling
interest until those losses exceed the non-controlling interest&#146;s investment. In that event, the
excess of any further losses are charged to the controlling interest except to the extent that the
minority interest has a binding obligation to, and is able to undertake the losses. The Company
does not expect SFAS No.&nbsp;5(R) have a material impact on the financial condition or results of
operation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;9, 2004, the R.O.C. ARDF issued the revision for SFAS No.&nbsp;7(R), &#147;Consolidated
Financial Statements&#148;, which is effective for financial statements with fiscal years beginning on
or after January&nbsp;1, 2005. This revision of the guidance requires the Company to consolidate all
investees under the control of the Company. Control is not only presumed when the parent company
owns over 50% of voting rights of the investee but also evidenced by control under certain
situations specified in SFAS No.&nbsp;7(R). In addition, the threshold for the determination of whether
to consolidate an investee was revoked. Before the adoption of SFAS No.&nbsp;7(R), the Company was not
required to file consolidated financial statements to SFC in Taiwan, as none of the investees of
the Company pass the threshold for consolidation. However, after the adoption of this revised
statement, the Company will be required to file the semi-annual consolidated financial statements
to SFC in Taiwan.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In June&nbsp;2005, the R.O.C. ARDF issued SFAS No.&nbsp;36 &#147;Financial Instruments: Disclosure and
Presentation&#148;, which is also required to be applied by the Company on January&nbsp;1, 2006. SFAS No.&nbsp;36
will require the Company for the presentation of financial instruments and identifies the
information that should be disclosed about them. The presentation requirements apply to the
classification of financial instruments, from the perspective of the issuer, into financial assets,
financial liabilities and equity instruments; the classification of related interest, dividends,
losses and gains; and the circumstances in which financial assets and financial liabilities should
be offset. The guidance requires disclosure of information about factors that affect the amount,
timing and certainty of an entity&#146;s future cash flows relating to financial instruments and the
accounting policies applied to those instruments. The guidance also requires disclosure of
information about the nature and extent of an entity&#146;s use of financial instruments, the business
purposes they serve, the risks associated with them, and management&#146;s policies for controlling
those risks. SFAS No.&nbsp;36 complements the principles for recognizing and measuring financial assets
and financial liabilities in SFAS No.&nbsp;34 &#147;Accounting for Financial Instruments&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Liquidity and Capital Resources</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have historically financed our business with cash flow from operations, short-term and
long-term debt (including debt convertible into our common shares) and proceeds from the issuance
of equity securities. Our ability to meet our working capital needs through cash flow from
operations is affected by the demand for, and prices of, our products, which in turn may be
affected by several factors. Many of these factors are beyond our control, such as economic
downturns and declines in the prices of our products caused by a downturn in the semiconductor
industry. The average selling prices of our products are likely to be subject to further downward
pressure in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To the extent we do not generate sufficient cash flow from our operations to meet our cash
requirements, we will have to rely on external financing. However, our ability to access external
sources of financing could be materially adversely affected by our recent and forecast gross,
operating and net losses. We cannot give any assurances that we will be able to secure financing on
satisfactory terms, or at all.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our net cash provided by operating activities was NT$4,397&nbsp;million (US$134.1&nbsp;million) in 2005,
compared to NT$5,987&nbsp;million in 2004 and NT$1,484&nbsp;million in 2003. The decrease in cash flows from
operating activities in 2005, compared to the cash flows from operating activities in 2004, was due
to the significant net loss we experienced in 2005. The net loss was partially offset by increases
in cash after taking account of non-cash adjustments and net changes in operating assets and
liabilities. Our net cash provided by operating activities was NT$1,484&nbsp;million in 2003. The
improvement in operating cash flows in 2003 compared to 2002 was primarily due to the lower net
loss after taking into account non-cash adjustments and net changes in operating assets and
liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our non-cash adjustments in 2005 included a write off of long-term investments of NT$1,536
million (US$46.8&nbsp;million), impairment losses of NT$906&nbsp;million (US$27.6&nbsp;million), depreciation
and amortization of NT$7,253&nbsp;million (US$221.1&nbsp;million) and a reversal of inventory and spare parts
loss provision of NT$477&nbsp;million (US$14.5&nbsp;million) and a net gain on short-term investments of
NT$365&nbsp;million (US$11.1&nbsp;million). Net changes in our operating assets and liabilities which
affected our net cash provided by operating activities in 2005 primarily included net increase in
inventories of NT$1,655&nbsp;million (US$50.5&nbsp;million) and net increase in notes and accounts payable of
NT$635&nbsp;million (US$19.4&nbsp;million).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our non-cash adjustments in 2004 included depreciation and amortization of NT$7,562&nbsp;million
and a reversal of inventory and spare parts loss provision of NT$919&nbsp;million and a gain on disposal
of long-term investments of NT$375&nbsp;million. Net changes in our operating assets and liabilities
which affected our net cash provided by operating activities in 2004 primarily included net
decrease in accrued expenses of NT$300&nbsp;million, net decrease in notes and accounts payable of
NT$270&nbsp;million and net decreases in interest payable of debentures of NT$337&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our non-cash adjustments in 2003 included depreciation and amortization of NT$9,287&nbsp;million
and an inventory and spare parts loss provision reversal of NT$1,185&nbsp;million. Net changes in our
operating assets and liabilities which affected our net cash provided by operating activities in
2003 primarily included net decreases in inventories of NT$2,268&nbsp;million, net increase in notes and
accounts payable of NT$569&nbsp;million and net decreases in interest payable of debentures of NT$990
million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash flows from investing activities was NT$130&nbsp;million (US$4.0&nbsp;million) in 2005. The net
cash flows from investing activities in 2005 primarily included payments for the purchase of
property, plant and equipment of NT$1,774&nbsp;million (US$54.1&nbsp;million), proceeds from disposals of
property, plant and equipment of NT$3&nbsp;million (US$1.0&nbsp;million), payments for purchase of
marketable securities of NT$11,468&nbsp;million (US$349.6&nbsp;million), proceeds from disposals of
marketable securities of NT$12,996&nbsp;million (US$396.2&nbsp;million) and decreases in restricted
investment of NT$358&nbsp;million (US$10.9&nbsp;million). Net cash flows from in investing activities were
NT$3,629&nbsp;million in 2004. The net cash flows from investing activities in 2004 included the payment
of NT$2,769&nbsp;million for the
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">purchase of property, plant and equipment, and increases in intangible assets of NT$533
million. Net cash used in investing activities was
NT$423&nbsp;million in 2003. The most significant components of these investing activities were the
payment of NT$2,616&nbsp;million for the purchase of property, plant and equipment relating to the
construction of Fab III and decreases in restricted investments of NT$1,528&nbsp;million relating to a
sinking fund for our convertible bonds that matured in May&nbsp;2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our net cash used in financing activities was NT$3,466&nbsp;million (US$105.7&nbsp;million) in 2005. The
net cash flows from financing activities in 2005 primarily included repayment of long term debts
and capital lease obligations of NT$2,063&nbsp;million (US$62.9&nbsp;million), decreases in short-term debts
of NT$1,070&nbsp;million (US$32.6&nbsp;million), and decreases in debentures of NT$415&nbsp;million (US$12.7
million). The net cash flows from financing activities in 2004 were NT$2,951&nbsp;million. The net
cash flows from financing activities in 2004 primarily included decreases in long-term debt and
capital lease obligations of NT$8,823&nbsp;million, increases in common stock issued of NT$5,566
million, and increases in short-term debt and short-term notes of NT$377&nbsp;million. The net cash
flows from financing activities in 2003 were NT$2,199. The net cash flows from financing activities
primarily in 2003 included increases in common stock issued of NT$3,823&nbsp;million, increases in
short-term debt and short-term debt and capitals lease obligations of NT$2,366&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2005, our primary sources of liquidity were NT$11,134&nbsp;million (US$339.4
million) of cash and cash equivalents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2005, we had total short-term debt of NT$1,894&nbsp;million (US$57.7&nbsp;million).
All of our short-term loans in 2005 were letter of credit loans due within 180&nbsp;days or working
capital loans at variable interest rates, ranged from 1.70% to 5.87%. The unused lines of credit
due within 180&nbsp;days, including the unused letters of credit were NT$5,179&nbsp;million (US$157.9
million) as of December&nbsp;31, 2005. See note 12 and Note 13 to the consolidated financial statements
for the years ended December&nbsp;31, 2003, 2004 and 2005 included in this annual report.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2005, we did not have any outstanding balance of short-term notes. The
unused short-term lines of credit for short-term notes were NT$180&nbsp;million (US$5.5&nbsp;million) as of
December&nbsp;31, 2005. See notes 13 to the consolidated financial statements for the years ended
December&nbsp;31, 2003, 2004 and 2005 included in this annual report.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Capital Resources and Capital Expenditures</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2005, the long-term liabilities consisted primarily included long-term debt
of NT$5,778&nbsp;million (US$176.2&nbsp;million). As of December&nbsp;31, 2005, the long-term loans from banks
carry variable interest rates ranged between 1.75% and 3.47% per annum with maturity between 2005
and 2016 and require payments of principal and interest on either a quarterly or monthly basis
throughout the remainder of their terms. See note 15 to our consolidated financial statements for
the years ended December&nbsp;31, 2003, 2004 and 2005 included in this annual report.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2005, the maturity schedule of our existing long-term debt is as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Period</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>NT$ in millions</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">January&nbsp;1, 2006 &#151; December&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,635</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">January&nbsp;1, 2007 &#151; December&nbsp;31, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,340</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">January&nbsp;1, 2008 &#151; December&nbsp;31, 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,525</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">January&nbsp;1, 2009 &#151; December&nbsp;31, 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,480</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">January&nbsp;1, 2010 &#151; December&nbsp;31, 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">After December&nbsp;31, 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">365</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,413</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2003, primarily as a result of net losses of NT$8,198&nbsp;million, partially offset by stock
issued for cash of NT$3,823&nbsp;million, conversion of convertible debentures of NT$2,454&nbsp;million and
unrealized gains on long-term investments of NT$977&nbsp;million, shareholders&#146; equity declined by 3.2%
in 2003. In 2004, primarily as a result of issuance of global depositary shares of NT$5,566&nbsp;million
and conversion of convertible debentures of NT$759&nbsp;million,
partially offset by unrealized losses on long-term investments of NT$1,350&nbsp;million, shareholders&#146; equity increased by 17.4% in 2004 to NT$34,345&nbsp;million as of December&nbsp;31, 2004. In 2005, primarily as a result of the increase in accumulated deficits,
shareholders&#146; equity decreased by 16.8% in 2005 to NT$28,558&nbsp;million (US$871&nbsp;million) as of
December&nbsp;31, 2005.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our long-term loans and facilities contain various financial and other covenants that could
trigger a requirement for early payment. Among other things, these covenants require the
maintenance of certain financial ratios, such as current ratio and debt to equity ratio. We may be
unable to meet the specified debt to equity ratios unless we are able to raise additional equity
funding. In November&nbsp;2003, we sold 475,000,000 new common shares for cash pursuant to a share
offering in Taiwan, and in April&nbsp;2004, we issued 13,125,000 GDS representing 525,000,000 new common
shares. If we had not raised that additional equity in the share and GDS offerings, we may not have
been able to meet the financial ratios in our loan agreements as of December&nbsp;31, 2003, 2004 and
December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may need to issue additional shares in the future to further increase shareholders&#146; equity,
and we cannot assure you that we will be successful in selling all or any of such common shares. If
we continue to have losses and are unable to raise additional equity funding or renegotiate the
terms of our loan agreements, we may be in default of financial covenants in the future. Such a
default or defaults would seriously impair our ability to secure debt financing, and could require
us to delay or cancel capital expansion plans, dispose of assets or take other steps to meet the
financial ratios.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;31, 2004, we announced a proposed increase in our issued share capital for the issue
of up to 1,300,000,000 common shares. From time to time, we may offer and issue rights or overseas
depositary receipts. The size and the price range of any proposed issue will be determined by our
board of directors upon approval by the R.O.C. SFC. On November&nbsp;16, 2005, our shareholders approved
to cancel 2,079,474,542 shares at the amount of NT$20,795&nbsp;million of capital.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, covenants in the agreements governing our existing debt and debt we may incur in
the future may materially restrict our operations, including our ability to incur debt, pay
dividends, make certain investments and payments and encumber or dispose of assets. A default under
one debt instrument may also trigger cross-defaults under our other debt instruments. An event of
default under any debt instrument, if not cured or waived, could have a material adverse effect on
our liquidity, as well as our financial condition and operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2005, all of our convertible bonds had been redeemed. Among our long-term
debts, there are secured corporate bonds and syndicated loans listed as follows in accordance with
their terms:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In April&nbsp;2004, we sold 13,125,000 GDSs, representing 525,000,000 new common shares, for net
proceeds of approximately US$173.25&nbsp;million, to fund bond redemptions and for our capital
expenditures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February&nbsp;17, 2006, we issued 100,000 new shares in a private placement at NT$8.07 per
share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We issued approximately NT$3.0&nbsp;billion principal amount of secured corporate bonds in Taiwan
in the months of October and November&nbsp;2001 due in October&nbsp;2006 to fund the construction of Fab III,
as well as the purchase of machinery and equipment and other capital expenditures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;25, 2001, we entered into a syndicated loan for an amount of up to NT$12.0
billion and we have drawn down NT$6,610&nbsp;million (US$194.5&nbsp;million) of the syndicated loan as of May
31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Among our total long-term debt as of December&nbsp;31, 2004 of 12,509&nbsp;million (US$394&nbsp;million), a
total of NT$10,536&nbsp;million (US$310.0&nbsp;million) was secured by our assets, principally property,
plant and equipment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the third quarter of 2001, we entered into a capital equipment lease agreement with
Nintendo for the use of certain manufacturing equipment in the amount of US$75&nbsp;million, payable in
36&nbsp;monthly installments between July&nbsp;31, 2002 to June&nbsp;30, 2005. As of December&nbsp;31, 2004, we had
aggregate lease obligations of US$9.6&nbsp;million (NT$303&nbsp;million) under the Nintendo lease. The lease
term is from July&nbsp;31, 2001 to June&nbsp;30, 2005, and title to the leased equipment will be transferred
to us at the end of the lease term.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We operate our own fabrication facilities and therefore require significant amounts of capital
to build, expand, modernize and maintain our facilities and equipment. Our total capital
expenditures were NT$1,606 in 2003, and NT$2,554&nbsp;million in 2004 and NT$1,595 (US$48.6&nbsp;million) in
2005. The following table sets forth our principal capital expenditures incurred in 2003, 2004 and
2005:
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>Year ended December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>(NT$ million)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>(NT$ million)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>(NT$ million)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fab I</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">358</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">134</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fab II</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">228</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">875</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fab III</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">834</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,652</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">456</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">452</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">586</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,606</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,554</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,595</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These amounts include the expansion and upgrade of Fab I and Fab II, the construction of Fab
III and the development of trainee and/or employee facilities and other areas. In 2003, our capital
expenditures consisted mainly of residual payments following the completion of the construction of
Fab III and our upgrade of Fab II. In 2004, our capital expenditures consisted primarily of
residual payments following the completion of the construction of the shell of Fab III and
investments to expand the SLC capacity of Fab I under our
&#147;Evergreen plan&#148; for <BR>Fab I.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have budgeted capital expenditures of approximately NT$3,348&nbsp;million for 2006, primarily to
purchase machinery and equipment to change our product mix for producing more Flash products, as
well as for ongoing upgrades of our facilities. We may adjust the amount of our capital
expenditure upward or downward based on cash flow from operations, the progress of our expansion
plans and market conditions. We cannot assure you that we will be able to raise additional capital
should it become necessary, on satisfactory terms or at all.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that our existing cash and cash equivalents, short-term investments, expected cash
flow from operations and existing credit lines under our short-term and long-term loan facilities
will be sufficient to meet our capital expenditures, working capital, payment obligations under our
existing debt and lease arrangements, and other requirements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will require funding for our capital expenditures for equipment and maintenance from cash
from operations.
</DIV>

<P align="center" style="font-size: 10pt">56
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Contractual Obligations</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth information on our material contractual obligated payments for
the periods indicated as at December&nbsp;31, 2005:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19" style="border-bottom: 1px solid #000000"><B>Payments Due by Period</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>January 1,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>January 1,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>January 1,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006 to</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2007 to</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2010 to</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>January 1,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2012 and</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Total</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2011</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>thereafter</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19"><B>(in millions of NT$)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">137</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">296</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital lease obligations (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating lease obligations (2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">130</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">199</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Letters of credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Construction and equipment
purchase obligations (3)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">License fees (3) (4)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other long-term liabilities (4)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">642</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">642</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,209</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,265</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,540</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">267</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,137</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Capital lease obligations represent our commitments for leases of equipment.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Operating lease obligations represent our commitments for leases relating to property and
research and development software. See note 24c and 24d to our consolidated financial
statements.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>We cannot forecast the time of cash-out of our construction and equipment purchase
obligations and license fees become due.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>License fees above reflect the fixed amount of royalty payments. See note 24e to 24h to our
consolidated financial statements.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>Other long-term liabilities include accrued pension cost and other liabilities &#151; refundable
deposits.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Commitments and Contingencies</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See &#147;Item&nbsp;8. Financial Information &#151; A. Consolidated Statements and Other Financial
Information &#151; Legal Proceedings&#148; for a description of the outstanding and pending legal proceedings
to which we are a party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Off-balance Sheet Arrangements</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are no significant off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial condition,
revenues, or expenses, results of operations, liquidity, capital expenditures or capital resources
that is material to investors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Research and Development</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that research and development is critical to our future success. We incurred
expenses of NT$2,738&nbsp;million in 2003, NT$2,577&nbsp;million in 2004 and NT$3,110&nbsp;million (US$94.8
million) in 2005 on research and development, or 15.5%, 11.0% and 16.4% of net sales revenue in
those periods, respectively. On an R.O.C. GAAP basis, royalty payments are included in research and
development expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our reorganization in 2003 enabled us to consolidate our research and development efforts and
reduce the total number of projects by approximately two-thirds, to focus on those with strategic
significance to us. As a result, we have, beginning in 2003, reduced our level of research and
development expenditures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December&nbsp;31, 2005, we had 444&nbsp;employees engaged in research and new product development
activities. We review our new product development plans at quarterly strategic meetings, utilizing
the knowledge gained from close relationships with our key customers to determine future product
requirements of the semiconductor industry. We also engage research firms that follow the
</DIV>

<P align="center" style="font-size: 10pt">57
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">semiconductor industry and publish data on the size of the markets and their historical and
projected growth rates. These firms also generally publish a competition and market share profile
for each market. By combining these sources of product development information, we endeavor to
position our next generation of products competitively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Through our research and development efforts, we have developed core design technologies in
the following five areas: memory, system logic, communications, audio and video. Our research
efforts in the memory area presently include the development of 0.13 micron process technology for
NOR Flash products based on mainstream ETOX (EPROM tunnel oxide) technology, 0.13 micron and 0.09
micron process technology based on NBit based technology, as well as four bit per cell technology.
We have also entered into a joint research initiative with IBM and Infineon Technologies to explore
a new form of computer memory called phase-change memory, which stores data by changing the state
of a special material from an amorphous to a crystalline structure.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to our know-how in each of these core design technologies, we believe that one of
our strengths is our ability to integrate these various core technologies, enabling us to develop
and manufacture integrated circuit products for use in products with multimedia applications.
Examples of products with these multimedia applications include video conferencing and voice
input/synthesis equipment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>New Product Development</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Examples of new products under development or recently developed are as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Mask ROM</I></B>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>new 64/128/256Mb product designs for Game Boy Advance;</TD>
</TR>

<TR>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>introduce cost-effective two-bit per cell manufacturing technology;</TD>
</TR>

<TR>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a new low pin-count design for 64Mb products;</TD>
</TR>

<TR>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>2Mb to 64Mb ROM multimedia card;</TD>
</TR>

<TR>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>16/32/64Mb one-time programmable multimedia card;</TD>
</TR>

<TR>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>64/128/256Mb SD ROM card; and</TD>
</TR>

<TR>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>64/128/256Mb memory stick ROM card.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Flash</I></B>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a 256Mb data storage/code storage Flash product;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a 1.8 volt low voltage, synchronous, read-while-write product for portable devices and
mobile internet appliance applications;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a monochip design which combines Flash and multiple time programmable devices that optimizes
data storage and code storage by using two-bit per cell technology;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>extend the capacity of SPI products by using two-bit per cell technology;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a 0.13 micron cost-effective two-bit per cell manufacturing technology; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a 0.13 micron high endurance ETOX cost-effective manufacturing technology.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>SLC</I></B>

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a 64-voice polyphonic sound generator for cellular phone ring tones;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an audio control chip featuring long-time recording;</TD>
</TR>


</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">58
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>custom-made control chips for educational devices and language learning machines;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a custom-made broadband bridge chip, wireless game controller, frequency generator, and high
definition television display controller for video game platforms;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a new architecture for the provision of data storage for SOC devices;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>provide intellectual property libraries and design services on single voltage embedded Flash
compilers, embedded mix signal devices, logic devices and SRAM/ROM memory devices for SOC
development of audio compact disc, general positioning system, internet appliance, LCD monitor and
educational and learning systems applications;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>develop embedded EEPROM intellectual property for smart card applications;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>introduce low-end derivative processes for consumer products; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>develop a GSM base band chipset and module, which is a digital signal processor and
controller, for wireless communication applications.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Intellectual Property</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A number of elements of our products and technological processes are proprietary in nature and
are owned by us or utilized under license from others. We own patents for a number of processes
relating to our Mask ROM, Flash, EPROM and SLC products in various countries, including the United
States and Taiwan. As of December&nbsp;31, 2005, we had owned the total of 763 patents in U.S.A., 950
patents in R.O.C., 150 patents in Chinese, 21 patents in Japan and 44 patents in European for
products and technology developed through our own efforts or joint research and development efforts
with other companies. As of December&nbsp;31, 2005, we had over 2,000 patent applications pending in
various jurisdictions, including the United States, Taiwan, China, Japan and Europe. We intend to
continue to seek patent protection on significant new inventions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have applied 28 types of trademarks registrations including &#147;MXIC&#148;, &#147;Macronix&#148;, &#147;MX&#148; and
&#147;MTP EPROM&#148;. As of December&nbsp;31, 2005, we had 154 trademark registered and granted and 35
applications pending in various jurisdictions including Australia, China, the European Union,
India, Japan, Korea, Singapore, Taiwan and the United States.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As is the case with many companies in the semiconductor industry, we have from time to time
experienced incidents of infringement of our intellectual property rights and illegal copies of our
products, including some incorporating our trademarks. None of these, however, have had any
material adverse effect upon our results of operations. To decrease the risk of infringing patented
technologies of others, we have procedures to evaluate related patents as part of our product
development process. In addition, we have retained various patent counsels to review and document
our own patent monitoring and enforcement process. In spite of our efforts to decrease the risk of
infringement, we are the subject of several patent infringement claims. See &#147;Item&nbsp;8. Financial
Information &#151; A. Consolidated Statements and Other Financial Information &#151; Legal Proceedings&#148;.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have also entered into an agreement with Saifun that provides us with a non-exclusive,
non-transferable, worldwide license to develop and manufacture products based on its 2 bit per cell
N-ROM technology. In 2004, pursuant to an addendum, Saifun extended the license to include 4 bit
per cell N-ROM technology. The license is effective for the duration of the Saifun patents and
thereafter shall continue on a year-to-year basis unless either party provides 12&nbsp;months notice of
its intent not to renew. Under the license agreement, we are required to pay specified fixed
license fees as well as running royalties based on specified percentages of net sales from products
relying on the licensed technology. We are also required to make available to Saifun a portion of
our manufacturing capacity. Under our agreement with Saifun, we were required to reach
qualification of certain products and achieve certain net sales for those products between 2002 and
2004, failing which Saifun would be entitled to terminate the license agreement. Although we failed
to reach certain targets in 2002, 2003 and 2004, Saifun has not indicated its intention to exercise
its right to terminate the agreement.
</DIV>


<P align="center" style="font-size: 10pt">59
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We license the manufacturing technology underlying a variety of our memory products, including
Mask ROM devices, to third parties. We earned in royalties approximately NT$20&nbsp;million in 2003,
NT$28&nbsp;million in 2004 and NT$14&nbsp;million (US$0.4&nbsp;million) in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Industry Trend</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>General</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Semiconductor integrated circuits, or ICs, are critical components used in a wide and growing
array of electronic systems. In recent years, semiconductor performance has improved markedly and
the size and cost of ICs have decreased. As a result, ICs have expanded from their original primary
application in computers to other applications, including consumer electronics, telecommunications
systems, automation and control systems and security systems. As a result of increasing
applications for semiconductor ICs as well as the increasing value of semiconductors used in
electronic systems, the semiconductor market has grown at a faster rate than the electronic system
industry.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The semiconductor industry has been cyclical, with periods of growth being followed by
downturns due to global economic growth trends, inventory adjustments as well as periodic
mismatches between semiconductor demand and manufacturing capacity. The semiconductor industry
commenced a recovery in 1999, after a down cycle in the late 1990s, and recorded a 37% year on year
growth in 2000. Since the beginning of 2001, however, as demand from the computing and
communications sectors declined, the industry experienced excess capacity, overproduction,
significant inventory buildup and consequent decreases in average selling prices. In 2002, while
unit volume shipments grew in the first half, in part due to inventory replenishment, IC unit
volume growth was weaker in the second half of the year. Beginning in mid-2003, the industry saw
the initial signs of recovery, with increased IC demand and, for certain products, a slowdown and
even a reversal of the decline in average selling prices. The recovery was carried through to the
first half of 2004. Beginning in the second half of 2004, the semiconductor industry experienced
another downturn which continued into 2005, with average selling prices, particularly Flash
products, declining. Prices stabilized have stabilized during the first half of 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Historically, semiconductor ICs were principally used in the computing industry. However,
future growth of the semiconductor industry is expected to be driven by increasing semiconductor
content in consumer electronic applications as well as in the communications industry. These
applications could include wireless or handheld devices, DVD players, flat panel digital
televisions, digital cameras, MP3 digital audio players, video game consoles for internet games,
electronic dictionaries and electronic books. These new applications typically require
semiconductors of increasing power and decreasing size, which is expected to drive innovation and
product volume growth. For example, next generation cellular phone handsets increasingly have
features that support more data processing applications, multimedia applications and internet
applications, and these applications are likely to drive the consumption of high performance logic
and memory products, such as high-density Mask ROM and Flash products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Semiconductor Products</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Semiconductors may be classified based on the type of technology used: analog, digital or
mixed signal. Analog semiconductors collect, monitor, condition and transform analog signals into
electrical current, and vice versa. Digital semiconductors store information from digital signals
or process data. Mixed signal semiconductors combine analog and digital devices to process both
analog signals and digital data.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Digital semiconductors that store information are referred to as memory products and tend to
be more standardized products that are differentiated by cost, performance, capacity, size, power
consumption and speed. Digital semiconductors that process data are referred to as logic devices
and require greater intellectual property and more sophisticated design.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Memory Products. </I>Memory products are classified as either volatile memories, which lose their
data content when power supplies are switched off, or nonvolatile memories, which retain their data
content without the need for constant power supply.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nonvolatile memories are typically used to store program instructions that control the
operation of microprocessors and electronic systems. There are four major types of nonvolatile
memories: ROM, EPROM, EEPROM and Flash.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ROM: The earliest and most basic type of nonvolatile memory is the read-only memory (&#147;ROM&#148;),
which is permanently encoded when produced and cannot be reprogrammed after it is fabricated.
Measured by cost per Mb, Mask ROM is the least expensive and the most cost-effective nonvolatile
memory currently produced. Mask ROM is widely applied in the video game and printer applications
given its non-erasable nature and inexpensive unit cost. Long-term proliferation of new consumer
electronic products, such as electronic
</DIV>


<P align="center" style="font-size: 10pt">60
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">books, electronic dictionaries and multimedia cards for third generation phone applications,
is expected to increase the consumption of Mask ROM.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;EPROM and EEPROM: EPROM can be reprogrammed by removing the device from the system, erasing
the data through exposure to ultraviolet light and reprogramming and reinstalling the device in the
system. Despite this costly and time-consuming erasure procedure, EPROM has achieved market
acceptance in a wide variety of applications.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;EEPROM, or electronically erasable programmable ROM, devices, can be electronically altered
while remaining in the system. This allows system manufacturers to reprogram efficiently in the
system to achieve several important advantages in terms of cost, speed, customization and data
storage functions. However, EEPROM has remained considerably more expensive than EPROM for a given
amount of storage capacity, commonly referred to as density. As a result, its market acceptance has
been limited, and the overall EEPROM market still remains substantially smaller than the EPROM
market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Flash: Flash products bridge a distinct product gap between EPROMs and EEPROMs. Like EEPROM,
Flash can be erased and reprogrammed without being removed from the system in which the chip is
installed. However, the cost of Flash products is substantially less than that of EEPROMs. With
Flash ICs, the user is able to erase selected blocks of data on a chip &#147;in a Flash&#148;, instead of
byte by byte, while the device remains in the system. As Flash products continue to improve in
performance and decrease in cost, the applications for Flash products are expected to expand
rapidly. Flash demand has increased significantly in recent years, driven by growing usage in
cellular phones, VCD/DVD players, digital television recorders, digital still cameras and
networking devices. The market is expanding in both the number of key applications and memory usage
per system.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Logic Products. </I>Logic devices process digital data to control the operation of electronic
systems. The largest segment of the logic market, standard logic devices, includes microprocessors,
microcontrollers and digital signal processors (&#147;DSPs&#148;). Standard devices are intended to be used
by a large group of systems designers for a broad range of applications. Consequently, standard
devices usually contain more functions than are actually required and, therefore, may not be
cost-effective for some applications.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Many electronic system makers therefore prefer to incorporate application specific integrated
circuits, or ASICs, which are custom-designed semiconductors, into their products. These devices
include a broad range of full-custom, semi-custom and application-specific standard product logic
devices, which have been developed specifically for direct use into a wide variety of applications.
Compared to memory products, logic devices are much more differentiated and dependent upon
intellectual property and advanced product design skills.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>System-on-a-chip. </I>SOC refers to a process of combining the functions of several integrated
circuits on a single chip. SOC products are generally faster, smaller and use less power than a
device employing independent ICs. SOC products differ from ASIC devices in that ASICs generally
adapt a particular chip function to a specific product without integrating other chip functions
onto the silicon.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The growing shift in semiconductor use from personal computers to communications and consumer
electronics, such as cellular phones and personal digital assistants, which require low power
consumption and smaller size, has given rise to increasing demands for SOC solutions. Furthermore,
convergence of cellular phones and personal digital assistants will further increase the complexity
and functionality of semiconductors, which is expected to continue to drive the demands for SOC
solutions.
</DIV>
<DIV align="left">
<A name="109"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;6.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>Directors, Senior Management and Employees</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>A. Directors and Senior Management</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the name of each director, supervisor and executive officer,
his position with us, the date of his initial appointment and his age as of May&nbsp;30, 2006. We do not
have any executive officers other than the directors, supervisors and executive officers listed
below.
</DIV>

<P align="center" style="font-size: 10pt">61
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="17%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="43%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="28%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Position with Our Company</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Date of Initial Appointment</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Age</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap><DIV style="margin-left:15px; text-indent:-15px">Miin Wu (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">President,</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">September 1, 1989,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Director and Chairman</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">November 25, 1989 and March 7, 2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap>Ding-Hua Hu (1)(2)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Director</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">November 25, 1989</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="left" valign="top" nowrap>H. C. Chen (3)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>Executive Director</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">July 18, 1992</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Y.S.Chuang(4)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">June 18, 2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Takata Akira (5)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">May 12, 2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dang-Hsing Yiu</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director and Senior Vice President of Integrated </TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">June 5, 1995</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Solution Group</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">March 14, 2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">C.Y. Lu</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director and Senior Vice President of Microelectronics</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">April 18, 2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">and Memory Solution Group</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">March 14, 2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Yaou-Dong Wang</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director and Vice President</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">June 18, 2004 and February 1, 2001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">J.P. Peng (6)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director and Vice President</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">June 18, 2004 and February 1, 2001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="top">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Raymond S. Mak</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director and Vice President</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>June 29, 1998 and September 18, 1995</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">C.L. Liu</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Independent Director</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">June 27, 2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Simon M. Sze</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Independent Director</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">June 27, 2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cheng Yi Fang</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Independent Director</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">April 19, 2001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Roger Chu(4)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Supervisor</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">July 18, 1992</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ping Tien Wu</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Supervisor</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">November 27, 1993</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">J.D. Lee (5)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Supervisor</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">June 18, 2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Paul Yeh</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Associate Vice President of Finance Center</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">July 1, 2001</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Mr.&nbsp;Wu succeeded Dr.&nbsp;Hu as the chairman, and Dr.&nbsp;Hu resigned from the chairmanship, effective
March&nbsp;7, 2005.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Nominee of Champion Investment Corporation</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Nominee of Hung Chih Investment Corporation</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Nominee of Delta Electronics Ltd.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>Nominee of Shun Ying Investment</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD>Nominee of Hui Ying Investment, Ltd.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Miin Wu </I>succeeded Dr.&nbsp;Hu as our chairman on March&nbsp;7, 2005. He is also our president. Mr.&nbsp;Wu
has been one of our executive officers since our inception in 1989. He is also the chairman of
Magic Pixel Inc. and MaxNova Inc., spin-offs of our company. He had over 20&nbsp;years of experience in
the semiconductor industry. Mr.&nbsp;Wu received both a B.S. degree and an M.S. degree in electrical
engineering from National Cheng-Kung University in Taiwan as well as a M.S. degree in material
science and engineering from Stanford University.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Ding-Hua Hu </I>is an executive director and has been our director since our inception in 1989,
and our chairman since our inception in 1989 until March&nbsp;7, 2005. Dr.&nbsp;Hu has additionally served as
the chairman of AVID Electronics Corporation as well as a director of ZYXEL Communication
Corporation, United Integrated Services Co., Ltd. and Applied Vacuum Coating Technologies Co., Ltd.
He received a B.S. degree in electrical engineering from National Taiwan University, an M.S. degree
in electronic engineering from the National Chiao Tung University in Taiwan, an M.S. degree in
Management from Stanford University and a Ph.D. in electrical engineering from the University of
Missouri.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>H.C. Chen </I>has been a director since 1992. He has also been the president of Chin Ho Fa Steel &#038;
Iron Consent Order, Ltd. for over six years. He received a B.S. degree in economics from Soochow
University in Taiwan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Y.S. Chuang has been a director since 2004. He was previously also the president of Nanyang
Technology Corporation. He received a M.S. degree in electronic engineering from the University of
Texas.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Takata Akira </I>has been a director since 2005. He has been an employee of MegaChips Corporation
since 1990 and is currently an officer in its China business division. He received a B.S. degree in
electronics engineering from Osaka University, Japan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Dang-Hsing Yiu </I>has been a director since 1995 and our senior vice president of our Integrated
Solution Group since 2003. Mr.&nbsp;Yiu has been an executive officer of our company since 1990 and was
previously our chief operating officer. He has also worked in the semiconductor and technology
related industries since 1979. Mr.&nbsp;Yiu received a B.S. degree in electrical engineering from
National Taiwan University and an M.S. degree in electronic engineering from the University of
California, Berkeley.
</DIV>

<P align="center" style="font-size: 10pt">62
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>C.Y. Lu </I>has been a director since 2003 and our senior vice president of our Microelectronics
and Memory Solution Group since 2003. He was previously our chief technology officer. Mr.&nbsp;Lu is
also the chairman of Ardentec Corporation. He has over 20&nbsp;years experience in the semiconductor and
technology related industries. Mr.&nbsp;Lu received a Ph.D. in physics from Columbia University.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Yaou-Dong Wang </I>has been a vice president since 1991 and a director since 2004. He received a
Ph.D. in chemical engineering from Columbia University.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>J.P. Peng </I>has been a vice president since 1991 and a director since 2004. He received a M.S.
degree in electrical engineering from the University of Iowa.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Raymond S. Mak </I>has been a director since 1998 and a vice president since 1995. He has also
served as chairman of Macronix America, our United States subsidiary, since 1995. Before that, he
was an executive officer of Macronix America from 1987 to 1995. Mr.&nbsp;Mak was the engineering manager
of VLSI Technology Inc. in the United States from 1982 to 1987. He received a B.S. degree in
electrical engineering from San Francisco State University.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>C.L. Liu </I>has been a director since 2003. He has been the president and professor of computer
science at National Tsing Hua University in Taiwan since 1998. He also has been the associate
provost of the University of Illinois at Urbana-Champaign since 1995. Mr.&nbsp;Liu received a Ph.D. in
electrical engineering from the Massachusetts Institute of Technology.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Simon M. Sze </I>has been a director since 2003. He worked with Bell Laboratory from 1963 to 1989.
Currently, he is a professor of NCTU and president of National Nano Device Laboratory. Mr.&nbsp;Sze
received a Ph.D. in electrical engineering from Stanford University.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Cheng Yi Fang </I>has been a director since 2004. Mr.&nbsp;Fang is a director of Mercuries &#038; Associates
Ltd. and president of Avnet Mercuries Company. He received a B.A. degree from the business
administration department of National Taiwan University.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Roger Chu </I>has been a supervisor since 1992. He is also the financial controller of Delta
Electronics, Ltd. and has been with that company since 1986. He received a B.S. degree in economics
from the Chinese Cultural University in Taiwan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Ping Tien Wu </I>has been a supervisor since 1993. Mr.&nbsp;Wu is also president of Trace Storage
Technology Corporation, and before that, was president of Asia Chemical Corporation. He received a
Ph.D. in physics from the University of Iowa.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;J.D. Lee has been supervisor since 2004. He is also president of Chien Kung Venture Capital,
Chien Cheng Venture Capital and Hon Pang Venture Capital. He received a B.S. degree in industrial
management from the National Taiwan Institute of Technology.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Paul Yeh </I>has been the associate vice president in charge of our finance center since July
2001. Prior to that, he was the senior director of our finance center from 1995 to June&nbsp;2001. He
received an M.B.A. degree from National Chengchi University in Taiwan and a B.S. degree in
management science from National Chiao Tung University in Taiwan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The business address for all of our directors and senior management is our principal executive
offices at No.&nbsp;16 Li <U>-</U>Hsin Road, Science Park, Hsinchu, Taiwan, Republic of China, except
that the business address for Raymond Mak is Macronix America, Inc., 1338 Ridder Park Drive, San
Jose, California 95131.
</DIV>

<P align="center" style="font-size: 10pt">63
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>B. Compensation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth cash remuneration paid to our current directors, supervisors
and executive officers in 2005:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="17%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="74%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Total</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Position with our Company in 2004</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Compensation</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>(thousands of NT$)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Miin Wu (2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Director, Chairman and President</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,669</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dang-Hsing Yiu (3)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director and Senior Vice President of Integrated Solution Group</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,125</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Raymond S. Mak (3)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director and Vice President</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap><DIV style="margin-left:15px; text-indent:-15px"><I>Yaou-Dong Wang </I>(3)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director and Vice President</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">J.P. Peng (3)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director and Vice President</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">C.Y. Lu (3)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director and Senior Vice President of Microelectronics and Memory Solution Group</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ding-Hua Hu (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Director</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">H.C. Chen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Director</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Akira Takata</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">C.L. Liu</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Independent Director</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">700</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Simon M. Sze</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Independent Director</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">700</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cheng Yi Fang (4)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Independent Director</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">700</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ping Tien Wu</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Independent Supervisor</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">700</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">J. D. Lee</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Supervisor</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Resigned from the chairmanship, effective March&nbsp;7, 2005</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Succeeded to the chairmanship, effective March&nbsp;7, 2005</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Total compensation for Dang-Hsing Yiu, Raymond S. Mak, Yaou-Dong Wang, J.P. Peng, and C.Y. Lu</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Resigned as supervisor and re-elected as independent director, effective June&nbsp;18, 2004</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;According to our Articles, we may distribute 2.0% of distributable earnings to our directors
and supervisors as compensation. In the event that a director or supervisor serves as a
representative of a legal entity, such compensation is paid to the legal entity. We pay our
executive officers monthly salaries, including our Chairman, in addition to employee bonuses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December&nbsp;31, 2005, 85,792,690&nbsp;shares were held by directors, supervisors and executive
officers. In addition, the president, vice-president, executive directors, and the associate vice
president of the finance center combined, held options to purchase up to 27,467,599 shares of the
company. There have been no loans or advances made by us or any of our subsidiaries to, or
guarantees given by us or any of our subsidiaries in relation to loans or advances received by, the
directors, supervisors and executive officers. We are not involved in any unusual transactions
(such as purchases outside normal activities, acquisitions or disposals of assets) with any of our
directors, supervisors or executive officers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All material transactions between the company and its directors, supervisors and executive
officers are described in &#147;Item&nbsp;7. Major Shareholders and Related Party Transactions &#151; B. Related
Party Transactions&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>C. Board Practices</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
shareholders elect the members of our board of directors. Our board
of directors is composed of 12 directors, three of whom are members of our executive director
committee and three of whom are independent directors. The chairman of our board of directors is
elected from among our executive directors. The chairman of our board of directors presides at
meetings of our shareholders, meetings of our board of directors and meetings of the executive
director committee, and also represents us in connection with external matters. Between meetings of
our board of directors, the executive director committee regularly exercises power and authority on
behalf of our board of directors in accordance with applicable law, our articles of incorporation
and resolutions adopted at shareholders&#146; meetings and meetings of the board of directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All of our directors were elected or re-elected on June&nbsp;18, 2004 for a three-year term. Our
board of directors appoints our executive officers. In accordance with the R.O.C. Company Law, our
supervisors cannot concurrently serve as our directors, executive officers or other staff members.
We currently have three supervisors, each of whom were elected in 2004 and serves a three-year
term. Our supervisors&#146; duties and powers include, but are not limited to, investigation of our
condition, inspection of corporate records, verification of statements by our board of directors at
shareholders&#146; meetings, calling of shareholders&#146; meetings, representation of us in negotiations
with our directors and giving notification, when appropriate, to our board of directors to cease
acting in contravention of applicable law or regulation or our articles of incorporation or
resolution adopted at our shareholders&#146; meeting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Certain of our directors and supervisors serve in their capacity as representatives of the
corporate entities who hold the board or supervisor seats and do not serve in their individual
capacity. Consequently, if any of these individuals withdraws, dies or otherwise becomes unable to
serve, the corporate entity he or she represents has the ability to replace that person with a
different representative of its choice. Hui Ying Investment, Ltd. was previously appointed as a
director on April&nbsp;19, 2001 and re-elected as a director on June&nbsp;18, 2004. Hui Ying Investment, Ltd.
appointed J.P. Peng as a representative on May&nbsp;12, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently have three independent directors, namely, Mr.&nbsp;Liu, Mr.&nbsp;Sze and Mr.&nbsp;Fang.
</DIV>

<P align="center" style="font-size: 10pt">64
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Audit Committee</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We established an Audit Committee on October&nbsp;27, 2004. We currently have three members in our
audit committee who are independent directors, namely, Mr.&nbsp;Cheng Yi Fang, Mr.&nbsp;C.L. Liu and Mr.
Simon M. Sze. As of December&nbsp;31, 2005, R.O.C. law does not require us to have an audit committee.
As R.O.C. law requires our Board of Directors to be responsible for the appointment, termination,
compensation and oversight of our auditors, our audit committee is responsible for, among other
matters, recommending to our Board of Directors with respect to such matters and evaluating and
nominating suitable auditors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We established a compensation committee on August&nbsp;27, 2005. We currently have three members in our
compensation committee who are independent directors, Mr.&nbsp;C. L. Liu and Mr.&nbsp;Cheng Yi Fang, and our
executive director, Mr.&nbsp;H. C. Chen.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Difference between NASDAQ Requirements and Home Country Practices</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In general, corporate governance principles for Taiwanese companies are set forth in the
Company Act of the Republic of China, or R.O.C. Company Act, the R.O.C. Securities and Exchange Act
and, to the extent they are listed on the Taiwan Stock Exchange, listing rules of the Taiwan Stock
Exchange. Corporate governance principles under provisions of R.O.C. law may differ in significant
ways to corporate governance standards for U.S. NASDAQ-listed companies. Under NASD Marketplace
Rule&nbsp;4350(a)(1), foreign private issuers are permitted to follow certain home country corporate
governance practices in lieu of the requirements of Rule&nbsp;4350. The following are the requirements
of Rule&nbsp;4350 we do not follow and the home country practices we follow.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Rule&nbsp;4350(c)(1), beginning from July&nbsp;31, 2005, a majority of the board of directors
must comprise of independent directors. We currently have three independent directors out of a
total of 13 directors on our board, and have no plans to have a majority of independent directors
as we are not required to do so under R.O.C. requirements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Rule&nbsp;4350(c)(3) requires that, beginning from July&nbsp;31, 2005, the compensation of the chief
executive officer of a company must be determined, or recommended to the board, either by a
majority of the independent director or an independent compensation committee. We currently follow
the practice under R.O.C. Company Act, which requires that the compensation of directors be
approved by shareholders. In addition, we also follow Article&nbsp;29 of the R.O.C. Company Act, which
provides that the compensation of executive officers of the company shall be decided by resolutions
adopted by the majority of the board at a meeting satisfying a quorum of more than one-half of the
directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Rule&nbsp;4350(c)(4), beginning from July&nbsp;31, 2005, director nominees must either be
selected, or recommended for the Board&#146;s selection, either by a majority of the independent
directors or an independent nominations committee. The R.O.C. Company Act expressly grants the
power of nomination to the shareholders, as well as to the board of directors. Under the R.O.C.
Company Act and the interpretations thereof, candidates to serve as directors are nominated either
by the board of directors prior to the shareholders&#146; meeting or by the shareholders during the
election of the director. In addition, the Legislative Yuan of the R.O.C. has approved an amendment
to the R.O.C. Company Act specially granting director nomination powers to holders of at least one
percent of the total issued and outstanding shares of the company. Therefore, the requirement of a
nominations committee is in conflict with the R.O.C. Company Act. We currently follow the home
country practice.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under Rule&nbsp;4350(i)(1)(A), each issuer shall require shareholder approval when a stock option
or purchase plan is to be established or materially amended or other equity compensation
arrangement made or materially amended, pursuant to which stock may be acquired by officers,
directors, employees, or consultants. Under the corresponding domestic requirements in the R.O.C.
Company Act and the R.O.C. Securities and Exchange Act, shareholders&#146; approval is required for the
distribution of employee bonuses in the form of stock, while the board of director has authority,
subject to the approval of the R.O.C. SFB, to approve employee stock option plans and to grant
options to employees pursuant to such plans. We follow the home country practice. R.O.C. law
provides for specific safeguards on employee stock option grants. Options granted under the plans
are subject to certain statutory volume limitations. Under the R.O.C. Company Act, the directors of
a company may not receive stock options because they are not considered &#147;employees&#148; of the company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>D. Employees</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2005, we employed 3,529 full-time employees, of whom 589 were executive
officers and administrators, 1,531 were engineers and technicians and 1,409 were operators of
machinery and equipment. Of all our operators, we employed 231 persons from outside Taiwan that are
based in Taiwan. Approximately 52.7% of our employees as of that date had undergraduate or college
</DIV>

<P align="center" style="font-size: 10pt">65
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">degrees, 1.2% who possessed doctoral degrees and approximately 19.1% who held master&#146;s
degrees. As of December&nbsp;31, 2005, the average age of our employees was 32.0&nbsp;years old.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth, as of the dates indicated, the number of our full-time
employees serving in the capacity indicated:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Year ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Position</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Executive and Senior Managers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">278</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">313</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">325</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Supporting Staff and Administrators</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">173</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">277</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">264</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Engineers and Technicians</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,503</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,562</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,531</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Local</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,299</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,223</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,178</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Overseas</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">181</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">218</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">231</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,434</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,593</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,529</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our future success will depend, in part, on our ability to continue to attract and retain
highly qualified technical, marketing, engineering and management personnel. The competition in
Taiwan for qualified engineers and managers with experience in the semiconductor industry is
particularly intense. We have had considerable success in attracting engineers and managers of
R.O.C. origin working in the United States to emigrate back to Taiwan but this success may not
continue. In 2003, 2004 and 2005 we also recruited a number of design engineers in Korea and our
subsidiary in the United States recruited a number design engineers in the United States, to
partially replace a number of engineers who had left. We have not experienced any strikes or
significant work stoppages and believe that our relations with our employees are good.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that our management policies and comprehensive benefits to employees have
contributed to good employee relations and employee retention. Our employee benefits include
subsidized meals and housing, health insurance, life insurance and education/training subsidies, as
well as employee bonuses. We have an employee pension plan (&#147;old plan&#148;) under which we contribute
an amount equal to 2% of each employee&#146;s annual salary to a pension fund deposited with the Central
Trust of China. We also adopted the Labor Pension Act (&#147;new plan&#148;) effective in Taiwan on July&nbsp;1,
2005. The new act prescribed that the Company shall make monthly contributions to the employees&#146;
pension accounts and the rate of the contribution from the Company shall be not less than 6% of the
employees&#146; monthly wages. We have a 15-member pension fund committee consisting of five management
representatives and 10 employee representatives to manage and administer the fund. We completed
construction of modern athletic and recreational facilities for use by our employees in the fourth
quarter of 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have also established an employee benefit committee for implementing a variety of employee
programs including, among others, recreational activities, special group travel programs, emergency
assistance programs, maternity assistance programs and holiday gift certificate programs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>E. Share Ownership</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the personal share ownership of our directors, supervisors and
executive officers and their immediate families as of May&nbsp;31, 2006:
</DIV>

<P align="center" style="font-size: 10pt">66
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Shares owned by</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Spouses and minor</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Share Ownership</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>children</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Title</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>of Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Percentage</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Percentage</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Executive Director, Chairman and
President</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Miin Wu (1)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,055,841</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.62</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Executive Director</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>Ding-Hua Hu (2)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,334,854</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.08</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Executive Director</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">H. C. Chen (3)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">603,647</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.02</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Director and Senior Vice President of
Integrated Solution Group</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Dang-Hsing Yiu</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,090,724</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.35</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,335,263</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.08</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Director and Senior Vice President of
Microelectronics and Memory Solution
Group</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">C.Y. Lu</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">1,357,264</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"  valign="top">0.05</TD>
    <TD nowrap  valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"  valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"  valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Director and Vice President</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>Raymond S. Mak</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,045,506</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.14</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="top" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Director and Vice President</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>Yaou Dong Wang</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,288,788</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.11</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">712,829</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.03</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Director and Vice President</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">J.P. Peng (4)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,515,795</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.12</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Director</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Akira Takata (5)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,074,805</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.40</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Independent Director</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">C.L. Liu</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Independent Director</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Simon M. Sze</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Independent Director</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Cheng Yi Fang</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">634,344</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.02</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">210,659</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.01</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Independent Supervisor</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Ping Tien Wu</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115,860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">&#060;0.01</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Supervisor</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">J.D. Lee (5)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,074,805</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2.40</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Associate Vice President, Finance Center</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Paul Yeh</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,517,418</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0.15</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,134</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">&#060;0.01</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Succeeded to the chairmanship, effective March&nbsp;7, 2005.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Nominee of Champion Investment Corporation. Resigned from the chairmanship, effective March
7, 2005.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Nominee of Hung Chih Investment Corporation.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Nominee of Hui Yin Investment Corporation.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>Nominee of Shun Yin Investment Co., Ltd.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">67
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">






<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>F. Stock Plans</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Stock Performance-Based Employee Bonus Plan</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In April&nbsp;1999, our board approved a program similar to a stock appreciation rights plan under
which our employees who are eligible to participate would receive cash bonuses based on increases
in the market price of our common shares. Our board has authorized our chairman to use his
discretion to alter the terms of this plan, including the vesting period and the amount of the
bonus allocated to our employees. We initially allocated 61,179,500 shares upon the establishment
of the plan. Rights to receive cash bonuses under the plan were scheduled to vest with respect to
25% of the common shares allocated to the plan on August 1 of each year, starting August&nbsp;1, 2000,
another 25% on August&nbsp;1, 2001 and the remaining 50% on August&nbsp;1, 2002. In April&nbsp;2002, our board of
directors approved an amendment to the plan, changing the vesting date for the final 25% to August
1, 2002 from March&nbsp;31, 2003. These rights to receive cash bonuses were forfeited for employees who
discontinued their employment before the scheduled vesting dates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Between the establishment of the plan and December&nbsp;31, 2002, rights to receive cash bonuses
with respect to a total of 6,197,600 shares have been forfeited, and rights to receive cash bonuses
with respect to a net additional 17,227,048 shares were allocated under the plan as a result of
stock dividends made on the shares allocated to the plan, exercise of rights under the plan and
allocation of additional rights. As of December&nbsp;31, 2002, rights to receive cash bonuses with
respect to 72,208,948 shares were outstanding under the plan, of which all were vested. In April
2003, all remaining rights to receive cash bonuses under the plan, with respect to 72,208,948
shares, expired and were cancelled.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;U.S. GAAP requires us to account for this plan in accordance with Accounting Principles Board
Opinion No.&nbsp;25 (&#147;APB No.&nbsp;25&#148;), &#147;Accounting for Stock Issued to Employees&#148;. Under APB No.&nbsp;25, we
recognize compensation expense for the plan based on the amount by which the quoted market value of
our shares covered by the grant exceeds the exercise price of the rights. Compensation determined
in accordance with the preceding sentence will be accrued as a charge to expense over the vesting
period during which the employee performs the related services. As a result, the compensation
expense adjustment under U.S. GAAP for this plan in 1999 was NT$245&nbsp;million of additional expense.
Due to the reversal of compensation expense accrued on an R.O.C. GAAP basis, we recorded an
increase in income adjustment of NT$598&nbsp;million in 2000, NT$496&nbsp;million in 2001, NT$93&nbsp;million in
2002, nil for 2003, 2004 and 2005 for this plan under U.S. GAAP. Unlike U.S. GAAP, R.O.C. GAAP has
no specific accounting provisions for stock appreciation rights plans. For R.O.C. GAAP reporting
purposes, we do not recognize compensation expense until the year in which these appreciation
rights vest. In 1999, no rights vested and, as a result, we did not recognize any compensation
expense. When the rights vest, we recognize compensation expense that is calculated based on the
difference between (i)&nbsp;the fair market value of our shares plus additional costs related to the
rights vested and (ii)&nbsp;the aggregate exercise price of the rights having vested in the period. We
have entered into a number of equity derivative contracts to cover the rights under the plan. We
recognized a reversal of compensation expense for the stock appreciation rights under R.O.C. GAAP
of nil in 2003, 2004 and 2005. See &#147;Item&nbsp;5. Operating and Financial Review and Prospects &#151;
Operating Results &#151; U.S. GAAP Reconciliation &#151; Stock Performance-Based Employee Bonus Plan&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Share Option Plans</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors approved five share option plan on November&nbsp;29, 2001, April&nbsp;24, 2002,
April&nbsp;7, 2003, March&nbsp;11, 2004, March&nbsp;7, 2005, which were approved by the R.O.C. SFC on December&nbsp;20,
2001, May&nbsp;23, 2002, April&nbsp;24, 2003, March&nbsp;30, 2004, March&nbsp;7, 2005 respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These share option plans provide that our officers and employees and those of our subsidiaries
may, at the discretion of our board of directors, be granted options to purchase our common shares
at an exercise price of or not less than the reported closing price of our common shares traded on
the Taiwan Stock Exchange on the date the options are granted. According to the share option plan,
upon expiry of the second anniversary of the date the options are granted, up to 50% of the granted
options may be vested, and another 25% of the granted options may be vested upon the expiry of each
of the third anniversary and fourth anniversary of the date the options are granted. Each vested
option can be exercised within a period of six years from the relevant date the options are
granted. There are no special senior management options. The options held by our directors,
supervisors and executive officers bear the same conditions as the ones received by our employees.
In addition, only directors and executive officers who are also hired as employees can be granted
options pursuant to the share option plans. Our board of directors will have complete discretion to
determine which eligible individuals are to receive option grants and the number of shares subject
to each grant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the share option plan of November&nbsp;29, 2001, we granted 71,768,500, 560,000, 1,507,000
and 6,164,500 share options at initial exercise prices of NT$25.1, NT$24.5, NT$11.5 and NT$11.7 on
January&nbsp;16, 2002, May&nbsp;6, 2002, October&nbsp;1, 2002 and December&nbsp;16,
</DIV>

<P align="center" style="font-size: 10pt">68
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">2002, respectively. As of December&nbsp;31, 2005, we had 112,000 and 217,000 outstanding share
options at exercise prices of NT$11.1 and NT$11.3, respectively, under the share option plan of
November&nbsp;29, 2001.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under share option plan of April&nbsp;24, 2002, we granted 150,000,000, 10,284,500 and 2,753,500
share options at initial exercise prices of NT$11.5, NT$11.7 and NT$9.35 on October&nbsp;1, 2002,
December&nbsp;16, 2002 and April&nbsp;7, 2003, respectively. As of December&nbsp;31, 2005 we had 87,286,500,
4,149,000 and 1,802,500 outstanding share options at exercise prices of NT$11.1, NT$11.3 and
NT$9.2, respectively, under the share option plan of April&nbsp;24, 2002.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the share option plan of April&nbsp;7, 2003, we granted 193,212,000, 829,000, 685,000,
785,000 and 749,000 share options at initial exercise prices of NT$7.75, NT$9.1, NT$13.15, NT$12.3
and NT$14.1 on June&nbsp;13, 2003, November&nbsp;4, 2003, March&nbsp;11, 2004, March&nbsp;30, 2004 and April&nbsp;27, 2004,
respectively. As of December&nbsp;31, 2005, we had 138,906,453, 496,000, 314,000, 553,000 and 749,000
outstanding share options at exercise prices of NT$7.75, NT$9.0, NT$12.9, NT$12.2 and NT$14.1,
respectively, under the share option plan of April&nbsp;7, 2003.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the share option plan of March&nbsp;11, 2004, we granted 176,972,000, 4,919,000, 2,176,000,
5,015,500, 4,466,000, 4,428,500 and 1,172,000 share options at initial exercise prices of NT$14.55,
NT$14.1, NT$11.0, NT$9.25, NT$7.05, NT$7.05 and NT$6.88 on April&nbsp;9, 2004, April&nbsp;27, 2004, June&nbsp;2,
2004, August&nbsp;11, 2004, October&nbsp;27, 2004, January&nbsp;28, 2005 and March&nbsp;7, 2005, respectively. As of
December&nbsp;31, 2005, we had 151,214,500, 2,626,000, 1,780,000, 4,054,500, 3,393,000, 3,988,500 and
888,000 outstanding share options at exercise prices of NT$14.55, NT$14.1, NT$11.0, NT$9.25,
NT$7.05, NT$7.05 and NT$6.88, respectively, under the share option plan of March&nbsp;11, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the share option plan of March&nbsp;7, 2005, we granted 188,958,500,
7,978,500 and 2,372,000&nbsp;share options at initial exercise prices of NT$5.84, NT$5.83 and NT$5.81 on August&nbsp;8, 2005, August
29, 2005, and October&nbsp;25, 2005, respectively. As of December&nbsp;31, 2005, we had 186,129,500,
7,530,500 and 2,372,000 outstanding share options at exercise prices of NT$5.84, NT$5.83, and
NT$5.81, respectively, under the share option plan of March&nbsp;7, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Articles of Incorporation set out the total number of authorized shares reserved for
grants for employee share options. In June&nbsp;2003, a two-thirds supermajority of our stockholders
approved an increase of total number of authorized shares reserved for grants for employee share
options from 450&nbsp;million common shares to 650&nbsp;million common shares. On June&nbsp;18, 2004, a two-thirds
supermajority of our stockholders approved a further increase of the total number of authorized
shares reserved for grants for employee share options to 800&nbsp;million shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The R.O.C. SFC regulates the terms of our stock options and each of our stock option plans
must be approved by the R.O.C. SFC. Current R.O.C. SFC regulations require, among other things, the
exercise price to be not less than the reported closing price of our common shares traded on the
Taiwan Stock Exchange on the date the options are granted, the options to be exercisable beginning
two years after the options are granted in accordance with the plan, and the options to be valid
for a maximum period of 10&nbsp;years. Therefore the terms of our stock option plans are largely
determined by prevailing R.O.C. SFC regulations, and our board of directors approve each stock
option plan before it is submitted to the R.O.C. SFC for approval.
</DIV>
<DIV align="left">
<A name="110"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;7.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>Major Shareholders and Related Party Transactions</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>A. Major Shareholders</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth certain information, as of May&nbsp;2, 2006, with respect to the
common shares of our company owned of record by our top five shareholders and all directors,
supervisors and executive officers as a group. To our knowledge, as of May&nbsp;2, 2006, no shareholder
beneficially owned 5% or more of our common shares.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percentage of total</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>outstanding</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Name of Shareholder</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>common shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>common shares</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shun Ying Investment Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,074,805</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.40</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">National Stabilization Fund</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,395,004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.31</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Kuo Hua Life Insurance Co., Ltd.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,333,345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.21</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ABP Pension Fund</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,966,767</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.71</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Miin Wu</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,055,841</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.61</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">69
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>B. Related Party Transactions</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Members of our board of directors and our executive officers also serve or have served as
directors of companies with which we do business. These individuals include Mr.&nbsp;Miin Wu, who serves
as a director of Tower Semiconductor, Mr.&nbsp;C.Y. Lu, who serves as the chairman of Ardentec
Corporation (&#147;Ardentec&#148;). We believe that the transactions we conduct with these parties are on an
arms-length commercial basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We subcontract a portion of our assembly and testing requirements to Powertech Co., Ltd. and
Ardentec. For services performed by Powertech, we incurred manufacturing processing charges of
NT$211&nbsp;million in 2003, nil in 2004 and nil in 2005. Powertech Co., Ltd. was no longer our related
party after June&nbsp;18, 2004 since we resigned the supervisor position from Powertech Co., Ltd. For
services performed by Ardentec, we incurred manufacturing processing charges of NT$130&nbsp;million in
2003, NT$260&nbsp;million in 2004 and NT$218&nbsp;million (US$6.7&nbsp;million) in 2005. We purchase industrial
gases from United Industry Gas. We incurred NT$100&nbsp;million in 2003 and NT$100&nbsp;million in 2004, in
charges for industrial gases provided by United Industry Gas. After June&nbsp;28, 2004, United Industry
Gas was no longer our related party since we no longer represented the director in United Industry
Gas.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In August&nbsp;2000, we entered into a five-year manufacturing and technology cooperation agreement
with Tower Semiconductor, an Israeli company, whereby Tower Semiconductor will provide silicon
wafer manufacturing processing services that can employ Tower Semiconductor&#146;s microFLASH
technology. This technology is based on proprietary technology licensed from Saifun, an Israeli
integrated circuit design company. We also have entered into a separate agreement with Saifun that
provides us with rights to develop and manufacture certain products related to the microFLASH
process technology. Under the agreement with Tower Semiconductor, Tower Semiconductor will be
obligated to manufacture for us up to an agreed number of six-inch wafers per month upon receiving
our orders. Due to the market conditions in 2001 and 2002, we have placed orders for less than the
numbers of wafers that we could have required Tower Semiconductor to manufacture for us in those
periods. Wafer purchases from Tower Semiconductor was NT$37&nbsp;million in 2003, NT$20&nbsp;million in 2004
and NT$189&nbsp;million (US$5.8&nbsp;million) in 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2000, we entered into a share purchase agreement and related additional purchase
obligation agreements to invest a total of US$75&nbsp;million in Tower Semiconductor, together with a
foundry agreement. Under the agreements, we are entitled to appoint one member of Tower
Semiconductor&#146;s board of directors and to a guaranteed portion of the wafer manufacturing capacity
of Tower Semiconductor&#146;s new eight-inch fabrication facility, which is now in the start-up stage.
Under the agreements, we agreed to purchase approximately 2.7&nbsp;million Tower Semiconductor ordinary
shares, of which 866,551 shares were purchased at the initial closing in January&nbsp;2000, and the
remainder were to be purchased in five equal installments at subsequent closings upon achievement
of certain milestones by Tower Semiconductor. The purchase price at each closing was to be based on
the fair market value of the shares at the time, subject to a minimum of US$12.50 and a maximum of
US$30 per share. Our payment obligations were US$20&nbsp;million for the initial closing and US$11
million at each subsequent closing. Under the share purchase agreement, the excess of our payment
obligations over the total share purchase consideration is credited to a prepaid credit account.
Amounts in the credit account may be applied to future purchases of wafers, purchases of Tower
Semiconductor&#146;s shares (not including purchases under the original purchase commitments) or royalty
payments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In September&nbsp;2001, following the first two subsequent closings at which we acquired a further
733,380 shares, Tower Semiconductor underwent a financial restructuring under which, among other
things, it issued additional shares. We purchased 1,255,848 shares at a price per share of
US$12.75, and funded the purchase from our prepaid credit account. Pursuant to the third and fourth
subsequent closings in April and October&nbsp;2002, we purchased a total of 2,416,326 shares at prices
per share adjusted to take account of dilution. In October&nbsp;2002 we purchased a further 660,000
shares pursuant to a rights offering for US$5.00 per share, and received warrants for the purchase
of a further 297,000 shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In March&nbsp;2003, we and other Tower Semiconductor investors reached an agreement with Tower
Semiconductor to amend our obligations in relation to the fifth and final subsequent closing
purchase obligation. Pursuant to the amended agreement, in May&nbsp;2003, we paid US$3.6&nbsp;million for the
purchase of 1,206,839 shares. In August&nbsp;2003, we paid a further US$0.7&nbsp;million to for the purchase
of a further 228,646 shares at US$2.98 per share. In November&nbsp;2003, under a further amendment,
among other things, we waived all terms of Tower Semiconductor&#146;s milestones, agreed to advance the
remaining portion of the fifth and final purchase obligation, agreed not to use wafer credits until
January&nbsp;1, 2007 except with respect to purchase orders issued before the date of the amendment and
obtained an option to convert credits we would otherwise have been able to utilize into shares of
Tower Semiconductor. Under the November&nbsp;2003 amendment, the unconverted wafer credits accrue
interest at an agreed rate through December&nbsp;31, 2007 and the aggregate principal amount of the
unconverted credits will be repaid in one lump sum on December&nbsp;31, 2007. We also agreed not to sell
our shares in Tower
</DIV>

<P align="center" style="font-size: 10pt">70
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Semiconductor until January&nbsp;29, 2006, except that we may sell 30% of the Tower Semiconductor
shares we held as of January&nbsp;29, 2004. In December&nbsp;2003, we paid a further US$2.3&nbsp;million for the
purchase of a further 777,295 shares at US$2.98 per share. We paid the balance of the fifth and
final purchase obligation of US$4.4&nbsp;million in December&nbsp;2003 for the purchase of 628,611 shares at
US$7.0 per share which we received in January&nbsp;2004.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our payments to Tower Semiconductor, as of December&nbsp;10, 2003 when the balance of the fifth and
final purchase obligation was paid, totaled US$78.3&nbsp;million, and of this the total share purchase
consideration is US$64.2&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At December&nbsp;31, 2004, our credit account balance was US$14.1&nbsp;million, and we owned 8,773,395,
or approximately 13.35%, of Tower Semiconductor&#146;s outstanding shares. As of December&nbsp;2003 and 2004,
we provided an allowance of US$9.7&nbsp;million for such prepaid credit account after assessing an
impairment. Our average purchase price per share as of December&nbsp;31, 2004 was US$7.31, which is
somewhat higher than the fair market values due to the minimum per share price in the original
agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Until the establishment of our audit committee, our board of directors as well as our
supervisors historically reviewed and approved related party transactions, consistent with R.O.C.
laws and practices. Since its establishment on February&nbsp;24, 2005, our audit committee approves all
related party transactions.
</DIV>
<DIV align="left">
<A name="111"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;8.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>Financial Information</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>A. Consolidated Statements and Other Financial Information</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The selected income statement data for the years ended December&nbsp;31, 2003, 2004 and 2005, and
the selected balance sheet data as of December&nbsp;31, 2004 and 2005 presented below are derived from
our audited financial statements included in this annual report, which were prepared on a
consolidated basis. The selected income statement data for the years ended December&nbsp;31, 2001 and
2002 and the selected balance sheet data as of December&nbsp;31, 2001, 2002 and 2003 presented below are
derived from our audited financial statements not included in this annual report, which were also
prepared on a consolidated basis. Certain accounts in the selected balance sheet data as of
December&nbsp;31, 2001, 2002, 2003 and 2004 have been reclassified to conform with the presentation of
the current period as of December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We publish our financial statements in New Taiwan dollars, the lawful currency of Taiwan. All
references in this annual report to &#147;United States dollars&#148;, &#147;U.S. dollars&#148; and &#147;US$&#148; are to United
States dollars and references to &#147;New Taiwan dollars&#148;, &#147;N.T. dollars&#148; and &#147;NT$&#148; are to New Taiwan
dollars. All translations from New Taiwan dollars to United States dollars were made, unless
otherwise indicated, on the basis of the noon buying rate in The City of New York for cable
transfers in N.T. dollars per U.S. dollar as certified for customs purposes by the Federal Reserve
Bank of New York on December&nbsp;31, 2005 of NT$32.80 = US$1.00. On June&nbsp;20, 2006, the noon buying rate
between New Taiwan dollars and United States dollars was NT$32.56 = US$1.00.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The financial data set forth below should be read in conjunction with, and are qualified in
their entirety by reference to, our financial statements and the related notes included in this
annual report, and &#147;Item&nbsp;5. Operating and Financial Review and Prospects&#148;. Our financial statements
are prepared and presented in accordance with R.O.C. GAAP and R.O.C. reporting practices. For a
discussion of certain differences between R.O.C. GAAP and U.S. GAAP, see note 28 to our
consolidated financial statements for the years ended December&nbsp;31, 2003, 2004 and 2005 included in
this annual report and &#147;Item&nbsp;5. Operating and Financial Review and Prospects &#151; A. Operating Results
&#151; U.S. GAAP Reconciliation&#148;.
</DIV>

<P align="center" style="font-size: 10pt">71
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom" style="font-size: 1px">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="22" style="border-bottom: 1px solid #000000"><B>Year ended, and as of, December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="22" style="border-bottom: 1px solid #000000"><B>(in millions except per share and ADS data)</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2001</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2002<BR>
(Notes)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003<BR>
(Notes)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004<BR>
(Notes)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>(NT$)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>(NT$)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>(NT$)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>(NT$)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>(NT$)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>(US$)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap><DIV style="margin-left:15px; text-indent:-15px"><B>Consolidated Income Statement Data:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>R.O.C. GAAP</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net sales revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,747</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,492</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,712</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,380</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,908</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">576.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Cost of goods sold</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,674</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(17,105</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20,657</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18,990</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18,666</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(569.1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Less: Unrealized profit as of December 31</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Realized gross profit (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,073</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(615</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,942</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,388</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">242</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,557</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,212</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,742</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,737</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,116</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(156.0</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Operating income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,516</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,827</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,684</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(349</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,875</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(148.6</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,356</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">466</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,877</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,197</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total other expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,795</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,976</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,370</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,023</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,205</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(97.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Income (loss)&nbsp;before taxes and minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,337</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,177</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">247</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,882</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(210.0</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Income tax benefit (expense )</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(943</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(21</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(35</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(215</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6.6</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Income (loss)&nbsp;before minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(866</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,357</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,198</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">212</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,098</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(216.4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Minority interest loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net Income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(866</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,357</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,198</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">218</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,027</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(214.2</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net income (loss)&nbsp;per share &#151; basic (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.40</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5.32</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3.65</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.41</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.07</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net income (loss)&nbsp;per share &#151; diluted (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.40</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5.32</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3.65</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.41</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.07</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>U.S. GAAP</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Gross profit (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,598</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,018</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,576</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,052</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Operating income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,263</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,186</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,614</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">335</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,356</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(132.8</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Net income (loss)&nbsp;before cumulative effect
of change in accounting principle in
accordance with U.S. GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,842</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,674</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,027</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(469</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,636</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(141.3</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Basic net income (loss)&nbsp;per share before
cumulative effect of change in accounting
principle in accordance with U.S. GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.79</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6.39</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3.53</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.17</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.59</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.05</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Diluted net income (loss)&nbsp;per share before
cumulative effect of change in accounting
principle in accordance with U.S. GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.79</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6.39</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3.53</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.17</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.59</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.05</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Net income (loss) (2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,463</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,674</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,027</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(469</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,636</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(141.3</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Net income
(loss)&nbsp;per share&#151;basic (1) (3)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.07</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6.39</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3.53</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.17</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.59</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.05</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Net income (loss)&nbsp;per share &#151;diluted (1)(3)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.07</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6.39</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3.53</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.17</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1.59</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.05</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance Sheet Data:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>R.O.C. GAAP</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,358</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,301</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,706</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,027</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">610.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Net property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,562</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,029</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,993</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,202</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">494.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,693</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67,450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,919</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,396</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,604</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,390.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,016</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,687</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,717</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,449</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,664</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">325.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Long -term liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,533</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,549</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,954</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">188.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,549</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,236</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,671</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,844</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">513.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,248</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,344</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,558</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">870.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>U.S. GAAP</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,646</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,037</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,398</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,716</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,832</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">604.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72,979</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,509</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,807</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,220</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,409.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,152</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,986</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,445</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,699</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">326.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,679</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,991</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,052</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,877</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">514.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,518</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,149</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,755</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,264</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">892.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Other Data:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><B>R.O.C. GAAP</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Capital expenditures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,078</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,975</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,606</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,554</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,595</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,742</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,287</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,562</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">221.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Net cash provided by operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,209</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">217</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,484</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,987</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,397</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">134.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Net income (loss)&nbsp;per ADS &#151; basic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(53.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(36.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(24.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.70</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Net income (loss)&nbsp;per ADS &#151; diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(53.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(36.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(24.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(0.70</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Number of common shares outstanding
(weighted, as adjusted ) (4)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,157</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,822</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,912</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,912</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Stock dividend per common share (5)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">30</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">10</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="left" style="font-size: 10pt">Note: 2002, 2003 and 2004
U.S.&nbsp;GAAP data were restated.


<P align="center" style="font-size: 10pt">72
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Retroactively adjusted for our capital reduction in 2006 and all subsequent stock dividends
and employee bonuses declared.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>The difference between net income under R.O.C. GAAP and U.S. GAAP was largely derived from
different treatments under these two accounting principles with respect to employee bonus
shares, derivative contracts, plant capacity loss, other-than-temporary decline in value on
marketable securities, and convertible debt securities with beneficial conversion features.
The difference in accounting treatment with respect to employee bonus shares under the two
accounting principles resulted in an additional expense of NT$4,273&nbsp;million in 2001, no
additional expense or income in 2002 and 2003, 2004 and 2005. The differences of accounting
treatment with respect to derivative contracts under the two accounting principles resulted in
additional income of NT$228&nbsp;million in 2001, additional income
of NT$616&nbsp;million in 2002,
additional expense of NT$379&nbsp;million in 2003, additional income
of NT$34&nbsp;million in 2004 and additional expense of
NT$32&nbsp;million (US$1.0&nbsp;million) in 2005. The
difference in accounting treatment with respect to plant capacity loss under the two
accounting principles resulted in an additional income of NT$528&nbsp;million in 2001, an
additional expense of NT$528&nbsp;million in 2002, additional income of NT$269&nbsp;million in 2003,
an additional expense of NT$258&nbsp;million in 2004 and an
additional income of NT$0.4&nbsp;million (US$0.01&nbsp;million) in 2005.
The difference in accounting treatment with respect to other-than-temporary decline in value
on marketable securities under the two accounting principles resulted in an additional expense
of NT$646&nbsp;million in 2001, an additional expense of NT$538&nbsp;million in 2002, no additional
expense or income in 2003, an additional expense of
NT$448&nbsp;million in 2004 and additional income of NT$1,326&nbsp;million
(US$40.4&nbsp;million) in 2005.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Retroactively adjusted for our capital reduction in 2006, all subsequent stock dividends and
employee bonuses declared. See note 22 to our consolidated financial statements for the years
ended December&nbsp;31, 2003, 2004 and 2005 included in this annual report and &#147;Item&nbsp;5. Operating
and Financial Review and Prospects &#151; A. Operating Results &#151; U.S. GAAP Reconciliation&#148;.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Common shares outstanding weighted, as adjusted for our capital reduction in 2006, any
employee share bonus and any subsequent stock dividends declared.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>The percentage of our stock dividend is determined by the number of common shares we
distributed to existing shareholders divided by the common shares outstanding immediately
prior to the share issuance. We did not distribute any cash dividends in any of the periods
presented.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Export Sales</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
export sales accounted for 68%, 66% and 70% of total net sales for the years ended
December&nbsp;31, 2003, 2004 and 2005, respectively. See note 26 to our consolidated financial
statements for the years ended December&nbsp;31, 2003, 2004 and 2005 included in this annual report.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Export sales from the R.O.C. are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000"><B>For the year ended December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2003</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000"><B>NT$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000"><B>NT$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000"><B>NT$</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000"><B>US$</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14"><B>(in thousands)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Japan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,269,548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,363,806</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,706,521</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">234,955</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Singapore and Hong Kong</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,487,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,119,396</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,076,395</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">124,280</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">United States</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">823,145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">980,911</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">629,235</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,184</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Europe</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">453,641</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,077,416</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">888,867</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,094</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,033,584</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,541,521</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,300,838</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">405,513</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Dividend Policy</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We generally are not permitted under R.O.C. Company Law and our articles of incorporation to
distribute dividends or make other distributions to shareholders for any year in which we have no
current or retained earnings (excluding reserves). R.O.C. Company Law
</DIV>

<P align="center" style="font-size: 10pt">73
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">also requires that 10% of annual net income, less prior years&#146; losses, if any, and applicable
income taxes be set aside as a legal reserve until our accumulated legal reserve equals our paid-in
capital. In addition, we may set aside a special reserve in accordance with applicable laws and
regulations. Our articles of incorporation further provide that, after we pay our income taxes,
deduct any losses incurred in prior years and deduct the legal and/or special reserve from our net
income, the remaining portion of our net income may be appropriated or distributed in the
proportions specified in our articles of incorporation. We may pay these distributions in stock or
cash or a combination of stock and cash, except that any employee bonuses and shareholder dividends
will normally be distributed in stock unless we determine otherwise, and provided that not more
than 20% of our distributable net income may be distributed in the form of cash. All or part of the
dividends to shareholders may be reserved at the relevant annual shareholders&#146; meeting as retained
earnings for distribution in later years. See &#147;Item&nbsp;10 &#151; Additional Information &#151; B. Memorandum and
Articles of Association &#151; Description of Our Common Shares &#151; Dividends and Distributions&#148;.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our shareholders on a dividend record date will be entitled to the full dividend declared
without regard to any prior or subsequent transfer of these common shares. The record date for the
annual shareholders&#146; meeting was determined by the board of directors at a meeting that was held on
March&nbsp;7, 2005. No annual dividend was declared at our annual general meeting of shareholders held
on May&nbsp;25, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For information relating to R.O.C. withholding taxes payable on dividends, see &#147;Item&nbsp;10.
Additional Information &#151; E. Taxation &#151; R.O.C. Taxation&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Legal Proceedings</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As is the case with many companies in the semiconductor industry, we from time to time receive
communications from third parties asserting certain patents to our products. We have entered into
discussions with some of these third parties as to their respective positions and the terms of any
possible licenses. We could incur significant costs with respect to the defense of the claims that
could have a material adverse effect on our results of operations or financial condition. For
royalty payments under the existing license agreements or the potential new patent license
agreements, we have estimated the royalty budgets based on historical experiences and specific
arrangements. The royalty accrual was NT$198&nbsp;million in 2003, NT$140&nbsp;million in 2004 and NT$218
million (US$6.6&nbsp;million) in 2005. As of December&nbsp;31, 2005, the outstanding balance of this reserve
was NT$612&nbsp;million (US$18.7&nbsp;million).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July&nbsp;9, 2003 we learned from Tower Semiconductor that a shareholders class action was filed
on behalf of a class consisting of the ordinary shareholders of Tower Semiconductor at the close of
business in the United States on April&nbsp;1, 2002. This case was filed in the United States District
Court for the Southern District of New York against Tower Semiconductor and its major corporate
shareholders, including, us, and against directors of Tower Semiconductor, including Miin Wu, our
president and CEO. The lawsuit alleges violation of section 14(a) and 20(a) of the Securities
Exchange Act of 1934, as amended, and Rule&nbsp;14a-9 promulgated thereunder. The lawsuit alleges that
Tower Semiconductor and its directors made false and misleading statements and omissions in a proxy
</DIV>

<P align="center" style="font-size: 10pt">74
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">solicitation to Tower Semiconductor&#146;s shareholders regarding a proposed amendment to a
contract between Tower Semiconductor and its major shareholders, including us. The plaintiffs are
seeking unspecified damages and attorneys&#146; and experts&#146; fee and expenses. On January&nbsp;30, 2004, the
defendants filed with the court a motion to dismiss the action. On April&nbsp;20, 2004, the plaintiffs
filed a memorandum in opposition to defendants&#146; motion to dismiss. On May&nbsp;24, 2004, the defendants
filed a reply memorandum to further support defendants&#146; motion to dismiss the plaintiffs&#146;
complaint. On August&nbsp;19, 2004, the court granted the motion to dismiss and on June&nbsp;6, 2006, the United States Court of Appeals for the Second Circuit affirmed
this decision.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;7, 2006, Spansion, Inc. filed an action against us and Macronix America Inc. in the U.S.
District Court for the Northern District of California. The original complaint asserted causes of
action for false advertising, trademark dilution and unfair competition. The complaint further
sought $100&nbsp;million in enhanced damages, attorneys&#146; fees, and injunctive relief. On May&nbsp;19, 2006,
Spansion filed an amended complaint alleging an additional claim for copyright infringement. All
claims asserted by Spansion arise out of the comparative advertising and marketing of the Macronix
NBit<FONT style="font-family: Symbol">&#212;</FONT> flash memory chips. On June&nbsp;5, 2006, we and Macronix America filed answers to the
amended complaint denying the allegations and asserting a number of affirmative defenses. A case
management conference was held on June&nbsp;13, 2006, and the trial date was set on April&nbsp;16, 2007. The
parties are currently in the beginning stages of discovery. We and Macronix America deny any
liability to Spansion and intend to vigorously defend the action.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except as described above, we are currently not involved in any material legal proceedings,
although we may become involved in other litigation in the future. &#147;Item&nbsp;5. Operating and Financial
Review and Prospects &#151; E. Research and Development, Patents and Licenses, etc. &#151; Intellectual
Property&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>B. Significant Changes</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except as otherwise noted, no significant changes have occurred since December&nbsp;31, 2005. See
&#147;Item&nbsp;4. Information on the Company &#151; History and Development of the Company &#151; Recent Developments&#148;
and note 17c of our consolidated financial statements for the years ended December&nbsp;31, 2003, 2004
and 2005 included in this annual report.
</DIV>
<DIV align="left">
<A name="112"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;9.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>The Offer and Listing</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>A. Offer and Listing Details</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each ADS represents ten of our common shares. Our ADSs have been listed on the Nasdaq National
Market since May&nbsp;9, 1996. The table below presents, for the periods indicated, the high and low
closing prices on the Nasdaq National Market for our outstanding ADSs.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average daily trading</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>volume (in thousands</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Nasdaq Composite</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Closing Price Per ADS(1)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>of ADSs)(1)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Index</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>High</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Low</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>High</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Low</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(US$)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(US$)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21.76</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37.796</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,859.15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,423.19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.64</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31.127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,059.38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,114.11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.467</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,009.88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,271.47</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">First Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.360</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,460.99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,271.47</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Second Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29.994</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,677.14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,348.30</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Third Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.679</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,909.55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,640.13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Fourth Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.777</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,976.37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,832.25</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.79</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.868</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,178.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,752.49</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">First Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.09</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.480</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,153.83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,901.80</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Second Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.79</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.066</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,079.12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,876.64</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Third Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.594</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,015.55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,752.49</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Fourth Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.541</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,178.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,903.02</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.175</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,273.37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,904.18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">First Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.881</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,152.15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,973.88</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Second Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.653</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,097.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,904.18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Third Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.186</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,218.15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,045.20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Fourth Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.614</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,273.37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,037.47</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">December</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.97</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.889</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,273.37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,205.32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">January</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.444</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,231.36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,243.74</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">February</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.767</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,310.56</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,239.81</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">March</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.623</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,340.82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,249.72</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">April</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18.484</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,370.88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,310.35</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">May</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.865</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,344.99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,158.76</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">June (through June&nbsp;20)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.434</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,219.86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,072.47</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD colspan="3"><I>Source: Bloomberg L.P.</I></TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">75
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV style="margin-top: 3pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As adjusted retroactively by Bloomberg L.P. to give effect to stock dividends paid in the
periods indicated.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each GDS represents 40 of our common shares. Our GDSs have been listed on the Luxembourg Stock
Exchange since April&nbsp;5, 2004. The table below presents, for the periods indicated, the high and low
closing prices on the Luxembourg Stock Exchange for our outstanding GDSs.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average daily</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>trading volume</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(in thousands of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Luxembourg Stock</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Closing Price Per GDS(1)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>GDSs)(1 )</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Exchange Index</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>High</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Low</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>High</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Low</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(US$)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(US$)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Second Quarter (from April 5)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,097.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">992.73</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Third Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,104.12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,019.37</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Fourth Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,294.63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,112.89</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">December</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,294.63</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,223.83</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,639.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,281.26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">First Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,396.69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,281.26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Second Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,380.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,295.92</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Third Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,491.42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,358.45</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Fourth Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,639.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,440.26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">December</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,639.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,553.65</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">January</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,850.35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,646.31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">February</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,920.35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,855.48</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">March</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,896.57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,832.20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">April</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.37</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,902.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,843.42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">May</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,949.33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,767.01</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">June (through June&nbsp;20)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">N/A</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,778.72</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,667.50</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">

    <TD colspan="3"><I>Source: Bloomberg L.P.</I></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Average includes only days in which GDSs were traded.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common shares have been listed on the Taiwan Stock Exchange since March&nbsp;15, 1995. The
table below presents, for the periods indicated, the high and low closing prices and the average
daily volume of trading activity on the Taiwan Stock Exchange for our common shares and the highest
and lowest of the daily closing values of the Taiwan Stock Exchange Index.
</DIV>

<P align="center" style="font-size: 10pt">76
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average daily</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>trading volume</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(in thousands of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Taiwan Stock</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Closing Price Per Share (1)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>shares)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Exchange Index</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>High</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Low</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>High</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Low</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(NT$)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(NT$)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68.89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24.92</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,104.24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,446.26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50.93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.76</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,149</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,462.36</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,850.04</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21.84</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,556</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,142.32</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,139.50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28.78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,877</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,034.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,316.87</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">First Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13.71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,034.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,041.56</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Second Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28.78</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,880.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,482.96</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Third Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,516</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,970.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,316.87</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Fourth Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,589</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,139.69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,650.97</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">December</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,857</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,139.69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,798.62</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,258</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,575.53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,632.97</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">First Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,094</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,259.69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,771.48</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Second Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.55</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,373.86</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,693.01</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Third Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.69</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,588</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,455.57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,925.54</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Fourth Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,725</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,575.53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,632.97</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">December</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,507</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,575.53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,179.82</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">January</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,624</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,742.39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,381.97</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">February</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.87</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,770</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,720.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,474.69</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">March</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,509</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,642.96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,364.60</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">April</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.89</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,422</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,171.77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,660.76</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">May</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.43</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,048</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,474.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,843.98</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">June (through June&nbsp;20)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.07</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,819</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,959.64</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,299.59</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">

    <TD colspan="3"><I>Source: Bloomberg L.P.</I></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>As adjusted retroactively by Bloomberg L.P. to give effect to stock dividends paid in the
periods indicated.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Taiwan Stock Exchange has experienced substantial fluctuations in the prices of listed
securities and there are currently limits on the range of daily price movements, as set forth in
Article&nbsp;63 of the operating rules of the Taiwan Stock Exchange Corporation. See &#147;Cautionary
Statement&#148; for purposes of the safe harbor provisions of the Private Securities Litigation Reform
Act of 1995&#148;, &#147;Item&nbsp;3. Key Information &#151; D. Risk Factors &#151; Political and Economic Risks &#151; The
trading price of our common shares may be adversely affected by the general activities of the
Taiwan Stock Exchange and the economic performance of Taiwan&#148;, &#147; &#151; The Taiwan Stock Exchange&#148; and &#147;
&#151; Taiwan Stock Exchange Index&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of May&nbsp;31, 2006, a total of 2,915,921,786 of our common shares were outstanding. Holders of
common shares that are not R.O.C. persons are required to hold these common shares through a
brokerage or custodial account in the R.O.C.. The entities in which these accounts are maintained
are the registered holders of the shares and thus all of the registered holders of our common
shares are R.O.C. persons. As of May&nbsp;31, 2006, 13,585,957 common shares were registered in the name
of nominees of The Bank of New York, the depositary under the ADS deposit agreement. The Bank of
New York has advised us that, as of May&nbsp;31, 2006, 1,358,595.7 ADSs, representing 13,585,957 common
shares, were held of record by Cede &#038; Co. and seven other U.S. persons. We have no further
information as to common shares of our company held, or beneficially owned, by U.S. persons. As of
May&nbsp;31, 2006, 1,109,055 common shares were registered in the name of a nominee of Citibank, N.A.,
the depositary under the GDS deposit agreement. Citibank, N.A. has advised us that, as of May&nbsp;31,
2006, 27,726 GDSs, representing 1,109,055 common shares, were held of record by Cede &#038; Co.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>The Taiwan Stock Exchange</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 1961, the Securities and Futures Commission, working together with private interests,
established the Taiwan Stock Exchange to provide a marketplace for securities trading. The Taiwan
Stock Exchange is a corporation owned by government-controlled and private banks and enterprises.
The Taiwan Stock Exchange is independent of entities transacting business through it, each of which
pays a user&#146;s fee. Generally, all transactions in listed securities by brokers, traders and
integrated securities firms must be made through the Taiwan Stock Exchange.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Taiwan Stock Exchange commenced operations in 1962. During the early 1980s, the Securities
and Futures Commission actively encouraged new listings on the Taiwan Stock Exchange and the number
of listed companies grew from 119 in 1983 to 691 as of
</DIV>

<P align="center" style="font-size: 10pt">77
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">December&nbsp;31, 2005. As of December&nbsp;31, 2005, the market capitalization of companies listed on
the Taiwan Stock Exchange was NT$15,633&nbsp;billion.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Historically, Taiwan companies have listed only shares and bonds on the Taiwan Stock Exchange.
However, the Securities and Futures Commission has encouraged companies to list other types of
securities. In 1988, the Securities and Futures Commission permitted the issuance of the Taiwan&#146;s
first convertible bonds. Since 1989, there have been offerings of domestic convertible bonds and
convertible preferred shares. In addition, beneficiary units evidencing beneficiary interests in
closed-end investment funds and Dragon Bonds issued by Asian Development Bank are also listed on
the Taiwan Stock Exchange or traded on the GreTai Securities Market of Taiwan. The Securities and
Futures Commission also has regulations which permit foreign issuers to list their equity
securities directly on the Taiwan Stock Exchange or through the use of depositary receipts. To
date, five foreign issuers have listed their equity securities on the Taiwan Stock Exchange through
the use of depositary receipts in accordance with these regulations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Taiwan Stock Exchange requirements for listing are based on the following company
attributes:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>shareholder diversification;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>length of time in business;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>amount of paid-in capital; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>profitability.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;However, special listing criteria apply to technology companies, key businesses engaging in
national economic development and private enterprises participating in major national public
construction project under the encouragement of the government.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>The GreTai Securities Market</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To complement the Taiwan Stock Exchange, the GreTai Securities Market (formerly known as the
Over-the-Counter Securities Exchange) was established in September&nbsp;1982 on the initiative of the
Securities and Futures Commission to encourage the trading of securities of companies who do not
qualify for listing on the Taiwan Stock Exchange. As of December&nbsp;31, 2005, 503 companies had listed
equity securities on the GreTai Securities Market and the total market capitalization of those
companies was approximately NT$6,431&nbsp;billion. In addition, the Emerging Stock Board of the GreTai
Securities Market was established on January&nbsp;1, 2002 at the initiative of the Securities and
Futures Commission to encourage trading of securities of companies that are public companies but
not qualified for listing on the Taiwan Stock Exchange or the GreTai Securities Market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Taiwan Stock Exchange Index</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Taiwan Stock Exchange Index is calculated on the basis of a wide selection of listed
shares weighted according to the number of shares outstanding. This weighted average method is also
used for the Standard and Poor&#146;s Index in the United States and the Nikkei Stock Average in Japan.
The Taiwan Stock Exchange Index is compiled by dividing the market value by the base day&#146;s total
market value for the index shares. The Taiwan Stock Exchange Index is the oldest and most widely
quoted market index in Taiwan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The weighting of the shares in the Taiwan Stock Exchange Index is fixed as long as the number
of shares outstanding remains constant. When the total number of shares outstanding changes, the
weight of each stock is adjusted. Stock splits and stock dividends are adjusted automatically. Cash
dividends are not included in the calculation.
</DIV>

<P align="center" style="font-size: 10pt">78
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table shows for the periods indicated information relating to the Taiwan Stock
Exchange Index.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of listed</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Index at</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>companies at</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Index</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Index</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>period</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Period ended December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>the period end</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>high</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>low</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>end</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1990</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">199</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,560</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,530</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1991</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">221</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,305</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,316</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,601</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1992</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">256</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,392</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,328</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,377</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1993</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">285</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,071</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,071</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1994</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">313</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,184</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,125</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1995</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,503</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,174</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1996</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">375</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,983</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,690</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,934</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1997</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">404</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,117</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,820</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,187</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1998</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">437</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,277</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,251</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,418</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1999</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">462</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,475</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,449</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">474</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,202</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,843</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">584</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,551</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,647</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,551</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">638</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,462</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,452</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">669</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,142</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,891</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">697</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,034</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,317</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,140</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">691</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,575</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,632</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,548</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD colspan="3"><I>Sources: Status of Securities Listed on Taiwan Stock Exchange.</I></TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As indicated above, the performance of the Taiwan Stock Exchange has in recent years been
characterized by extreme price volatility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>B. Plan of distribution</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>C. Markets</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The principal trading market for our common shares is the Taiwan Stock Exchange. The ADSs have
been issued by The Bank of New York as depositary and are quoted on the Nasdaq National Market
under the symbol &#147;MXICY&#148;. Prior to the initial public offering and subsequent listings on the
Taiwan Stock Exchange on March&nbsp;15, 1995 and May&nbsp;9, 1996, respectively, there was no market for the
common shares or the ADSs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>D. Selling Shareholders</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>E. Dilution</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>F. Expenses of the Issue</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>
<DIV align="left">
<A name="113"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;10.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>Additional Information</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>A. Share Capital</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>B. Memorandum and Articles of Association</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Description of Our Common Shares</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An English translation of our Articles of Incorporation is filed herewith as Exhibit&nbsp;3.1.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set forth below is a description of our common shares, including summaries of the material
relevant provisions of our articles of incorporation, the R.O.C. Company Law, the R.O.C. Securities
and Exchange Law and the rules and regulations under these laws. Unless otherwise indicated in this
annual report, holders of our ADSs generally have the same rights as holders of our common shares.
See &#147;Item&nbsp;3. Key Information &#151; D. Risk Factors &#151; Risks Relating to our Common Shares and our ADSs&#148;
for a description of certain differences and &#147; &#151;Voting Rights of ADS Holders&#148;.
</DIV>

<P align="center" style="font-size: 10pt">79
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>General</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our authorized capital is NT$65.5&nbsp;billion, divided into 6.5&nbsp;billion shares, including up to
650&nbsp;million shares reserved for the exercise of employee stock options as of June&nbsp;20, 2006. As of
May&nbsp;31, 2006, 2,915,821,786 of our common shares had been fully paid-in and were outstanding. All
of our common shares are in registered form.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of May&nbsp;31, 2006, 13,585,957 common shares underlying ADSs were held in the name of nominees
of The Bank of New York, as depositary for our ADS facility. The Bank of New York has advised us
that, as of May&nbsp;31, 2006, 1,358,595.7 ADSs, representing 13,585,957 common shares, were held of
record by Cede &#038; Co. and seven registered holders. We have no further information as to our common
shares held, or beneficially owned, by U.S. persons.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of May&nbsp;31, 2006, 1,109,055 common shares underlying GDSs were registered in the name of a
nominee of Citibank, N.A., the depositary under the GDS deposit agreement. Citibank, N.A. has
advised us that, as of May&nbsp;31, 2006, 27,726 GDSs, representing 1,109,055 common shares, were held
of record by Cede &#038; Co.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The R.O.C. Company Law, the R.O.C. Statute for Establishment and Administration of Science
Park and the R.O.C. Securities and Exchange Law provide that any change in the issued share capital
of a publicly-listed company, such as our company, requires various approvals. These include:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the approval of the board of directors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an amendment to the articles of incorporation (which requires shareholder approval) if
the original paid-in share capital plus the number of the shares to be converted from the
convertible bonds or exercised from bonds with warrants, or to be exercised from employee
options, or the number of any new shares issued, exceeds the number of shares specified in
the articles of incorporation; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the approval of the R.O.C. Securities and Futures Commission and the R.O.C. Ministry of
Economic Affairs or the Hsinchu Science Park Administration, as applicable.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Increase in Capital; Delivery of Certificates</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are required under R.O.C. law to file an amendment to our corporate registration within 15
days after the capital increase record date. Under the R.O.C. Securities and Exchange Law and
applicable regulations, we are required to deliver common share certificates to the relevant
purchasers within 30&nbsp;days after receiving approval from the Hsinchu Science Park Administration of
our amendment to our corporate registration.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An amendment to the R.O.C. Company Law was passed by the R.O.C. Legislative Yuan on October
25, 2001 and became effective on November&nbsp;14, 2001. Under the amended R.O.C. Company Law, when a
public company, such as our company, issues new shares, it could:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>issue multiple share certificates and deliver them to shareholders;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>issue a single share certificate representing the total number of new shares and deposit
the certificate with the Taiwan Securities Central Depositary Co., Ltd. (the &#147;Central
Depositary&#148;); or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>register the new hares with the Central Depositary in lieu of issuing share certificates.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Dividends and Distributions</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except in limited circumstances, we are not permitted under the R.O.C. Company Law and our
articles of incorporation to distribute dividends or make other distributions to shareholders for
any year in which we did not have current or retained earnings (excluding reserves). The R.O.C.
Company Law also requires that 10% of our annual net income, less prior years&#146; losses, if any, and
applicable income taxes be set aside as a legal reserve until the accumulated legal reserve equals
our paid-in capital. In addition, we may set aside a
</DIV>

<P align="center" style="font-size: 10pt">80
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">special reserve in accordance with applicable laws and regulations. Our articles of
incorporation further provide that, after we pay our income taxes, deduct losses incurred in prior
years and deduct the legal reserve and any special reserve, the remaining portion of our net income
for any year may be appropriated or distributed by our board of directors, subject to the approval
of our shareholders, as described in the following paragraph, in the following sequence:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>83% as a dividend to shareholders;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>15% for bonuses to employees; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>2% for remuneration to directors and supervisors.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may pay these distributions in shares or cash or a combination of shares and cash, except
that any employee bonuses and shareholder dividends will normally be distributed in shares unless
we determine otherwise, and provided that not more than 20% of our distributable net income may be
distributed in the form of cash. All or part of the dividends to shareholders as described above
may be reserved at the relevant annual shareholders&#146; meeting as retained earnings for distribution
in subsequent years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our articles of incorporation also provide that employee bonuses will be distributed in the
same form as the distribution of dividends to shareholders. In addition, distribution of shares as
bonuses to employees is applicable to the employees of our affiliated companies that satisfy the
requirements set by our board of directors. In 2003, 2004 and 2005, we did not distribute any
employee bonuses. The number of common shares issued as a bonus is obtained by dividing the total
nominal N.T. dollar amount of the bonus by the par value of our common shares, or NT$10 per share.
Subject to compliance with the above requirements, we may pay dividends or make other distributions
from our earnings and reserves as permitted by R.O.C. Company Law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At our annual ordinary meeting of shareholders, our board of directors submits for shareholder
approval our consolidated financial statements for the preceding year and the proposal of the board
of directors for the distribution of dividends and bonuses from our net income, subject to
compliance with the requirements described above, for the preceding year. All of our common shares
outstanding and fully paid as of the relevant record date are entitled to share equally in any
approved dividend or other distribution.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to permitting dividends to be paid out of net income if we do not have losses, the
R.O.C. Company Law permits us to make distributions of additional common shares to our shareholders
by capitalizing reserves, including the legal reserve and capital surplus of premium from issuing
shares and earnings from gifts received. However, the capitalized portion payable out of our legal
reserve is limited to 50% of the total accumulated legal reserve, and only if and to the extent the
accumulated legal reserve exceeds 50% of our paid-in-capital.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For information as to R.O.C. taxes on dividends and distributions, see &#147;Item&nbsp;10 Additional
Information &#151; E. Taxation &#151; R.O.C. Taxation.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Preemptive Rights and Issues of Additional Common Shares</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;According to the R.O.C. Company Law, when a company issues new common shares for cash, 10% to
15% of the issue must be offered to its employees. In addition, the R.O.C. Securities and Exchange
Law and the relevant securities regulations require that, if a company listed on the Taiwan Stock
Exchange or whose shares are traded on the GreTai Securities Market intends to offer new shares for
cash, at least 10% of the issue must be offered to the public, except under certain circumstances
or when exempted by the R.O.C. Securities and Futures Commission. This percentage can be increased
by a resolution passed at a shareholders&#146; meeting, thereby reducing the number of new shares
subject to the preemptive rights of existing shareholders. Unless the percentage of shares to be
offered to the public is increased by the shareholders, existing shareholders who are listed on the
shareholders&#146; register as of the record date have a preemptive right to acquire the remaining 75%
to 80% of the issue. The shares not subscribed for by the employees and shareholders at the
expiration of the period for the exercise of their rights should be sold to the public or specified
persons at the direction of our board of directors. According to the amended R.O.C. Securities and
Exchange Law, which became effective on February&nbsp;8, 2002, the preemptive rights provisions will not
apply to offerings of new shares through a private placement approved at a shareholders&#146; meeting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Authorized but un-issued shares of any class may be issued, subject to the above-mentioned
provisions of the R.O.C. Company Law, the R.O.C. Statute for Establishment and Administration of
Science Park and the R.O.C. Securities and Exchange Law, upon the terms as our board of directors
may determine.
</DIV>

<P align="center" style="font-size: 10pt">81
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Meetings of Shareholders</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Meetings of our shareholders may be ordinary or extraordinary. Ordinary meetings of our
shareholders generally are held in Hsinchu, Taiwan, within six months after the end of our fiscal
year. Extraordinary meetings of our shareholders may be convened by resolution of our board of
directors whenever it deems necessary, or under certain circumstances, by shareholders or our
supervisors. Notice in writing of meetings of our shareholders, stating the place, time and purpose
of the meeting, must be sent to each shareholder at least 30&nbsp;days, in the case of ordinary
meetings, and 15&nbsp;days, in the case of extraordinary meetings, before the date set for each such
meeting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We had previously, since we were listed on Nasdaq in 1996, obtained an exemption from Nasdaq
from its requirement to solicit proxies and to provide proxy statements for all meetings of
shareholders. We comply with the applicable R.O.C. laws and regulations with regard our shareholder
meetings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Voting Rights</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the R.O.C. Company Law, a shareholder has one vote for each common share. Except as
otherwise provided by law, a resolution may be adopted by the holders of a simple majority of the
common shares represented at the shareholders&#146; meeting. At least a majority of the holders of the
total issued and outstanding common shares must be present at the meeting for the resolution to be
binding. The election of directors and supervisors at a shareholders&#146; meeting is by means of
cumulative voting unless the articles of incorporation provide otherwise. Ballots for the election
of directors are cast separately from those for the election of supervisors. Candidates for the
offices of director and supervisor may be nominated at the shareholders&#146; meeting at which ballots
for the election are cast.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The R.O.C. Company Law also provides that shareholder approval is required for major corporate
actions, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any amendment to the articles of incorporation, which is required, among other things,
for any increase in authorized share capital;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>entering into, modification or termination of any contracts regarding leasing of all
business, outsourcing of operations or joint operations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the dissolution, amalgamation or spin-off of a company;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the removing of directors or supervisors;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the transfer of the whole or an important part of a company&#146;s business or properties;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the taking over of the whole of the business or properties of any other company which
would have a significant impact on the acquiring company&#146;s operations; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the distribution of any share dividend.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To obtain this approval, a shareholders&#146; meeting must be convened. The holders of at least
two-thirds of all of the issued and outstanding common shares must be present at this meeting.
Then, the holders of at least a majority of the common shares represented at the meeting must vote
in favor of the action. However, in the case of a publicly-listed company such as our company, the
resolution may be adopted by the holders of at least two-thirds of the common shares represented at
a meeting of shareholders at which holders of at least a majority of the issued and outstanding
common shares are present. However, if a controlling company holds not less than 90% of its
subordinate company&#146;s outstanding shares, the controlling company&#146;s merger with the subordinate
company can be approved by board resolution adopted by majority consent at a meeting with
two-thirds of directors present. A shareholder may be represented at a shareholders&#146; meeting by
proxy. A valid proxy must be delivered to us at least five days before the commencement of the
meeting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Holders of ADSs will not have the right to exercise voting rights with respect to the common shares
represented thereby, except as described in &#147;&#151;Voting Rights of ADS Holders&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Other Rights of Shareholders</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the R.O.C. Company Law, dissenting shareholders of our company are entitled to appraisal
rights in the event of amalgamation, spin-off and various other major corporate actions within 20
days of the resolution enacting the event. A dissenting shareholder may request that we redeem all
of the shares owned by the shareholder at a fair price to be determined by mutual agreement.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If an agreement cannot be reached, the valuation will be determined by a court order. For
amalgamations or spin-offs, a dissenting shareholder may exercise its appraisal right by serving
written notice on us before or during the related shareholders&#146; meeting or by raising and
registering its objection at the shareholders&#146; meeting. For other major corporate actions, a
dissenting shareholder may exercise its appraisal right by serving written notice on us before the
related shareholders&#146; meeting and by raising and registering its objection at the shareholders&#146;
meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to appraisal rights, within 30&nbsp;days after the date of the shareholders&#146; meeting,
any shareholder has the right to sue for the annulment of any resolution adopted at a shareholders&#146;
meeting where the procedures or the method of resolution were legally defective. However, if a
court is of the opinion that such violation is not material and does not affect the result of the
resolution, the court may reject or dismiss the shareholder&#146;s lawsuit. One or more shareholders who
have held more than 3% of our issued and outstanding shares for over a year may require a
supervisor to bring a derivative action on behalf of the company against a director for losses
suffered by the company as a result of the director&#146;s unlawful actions or failure to act by sending
a written request to a supervisor. In addition, one or more shareholders who have held more than 3%
of our issued and outstanding shares for over a year may require our board of directors to convene
an extraordinary shareholders&#146; meeting by sending a written request to the board of directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Register of Shareholders and Record Dates</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We maintain our shareholder register at our office in Taipei, Taiwan, and enter transfers of
our common shares in the register upon presentation of, among other documents, the certificates for
the common shares transferred. Under the R.O.C. Company Law, the transfer of common shares is
effected by endorsement and delivery of the related share certificates. In order, however, to
assert shareholders&#146; rights against us, the transferee must have his name and address registered on
the shareholder register. Shareholders are required to file their respective specimen seals with
us. The settlement of trading in our common shares is normally carried out on the book-entry system
maintained by the Central Depositary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The R.O.C. Company Law permits us to set a record date and close our shareholder register for
a specified period in order for us to determine the shareholders or pledgees that are entitled to
certain rights pertaining to our common shares by giving advance public notice.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the amended R.O.C. Company Law, a public company&#146;s shareholder register, such as ours,
is closed for a period of 60&nbsp;days before each ordinary shareholders&#146; meeting, 30&nbsp;days before each
extraordinary shareholders&#146; meeting and a period of five days before each record date for
distribution of dividends, bonuses or other benefits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Annual Financial Statements</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the R.O.C. Company Law, ten days before the ordinary meeting of shareholders, our annual
financial statements must be available at our principal office in Hsinchu for shareholder
inspection.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Acquisition of Common Shares by our Company</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With minor exceptions, we may not acquire our common shares under the R.O.C. Company Law and
any common shares we acquire must be sold at the current market price within six months after our
acquisition of the shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the R.O.C. Securities and Exchange Law, we may, in accordance with R.O.C. Securities and
Futures Commission procedures and a resolution adopted by a majority of our board of directors at a
meeting attended by more than two-thirds of the directors, purchase our shares on the Taiwan Stock
Exchange or the GreTai Securities Market or by a tender offer for the following purposes:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>for share transfer to our employees;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>for the delivery of shares following the conversion or exercise of bonds with warrants,
preferred shares with warrants, convertible bonds, convertible preferred shares or
certificates of warrants issued by us; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>for maintaining our credit and our shareholders&#146; equity, except that the shares so
purchased shall be cancelled thereafter.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The total shares purchased by us may not exceed 10% of our total issued and outstanding
shares. In addition, the total cost of the purchased shares may not exceed the aggregate amount of
our retained earnings, any premium from share issuances and the realized portion of our capital
reserve. The shares purchased by us pursuant to the first two items above will be transferred to
the intended
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">transferees within three years after the purchase; otherwise the shares will be cancelled. For
the shares to be cancelled under the third item above, we are required to complete an amendment
registration for the cancellation within six months after the purchase. The shares purchased by us
may not be pledged or hypothecated. In addition, we may not exercise any shareholders&#146; rights
attaching to these shares. Our affiliates (as defined in Article&nbsp;369-1 of the R.O.C. Company Law),
directors, supervisors, managers and their respective spouses and minor children and/or nominees
are prohibited from selling our shares during the period we purchase our shares.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Liquidation Rights</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the event of the liquidation of our company, the assets remaining after payment of all
debts, liquidation expenses, taxes and distributions to holders of preferred shares, if any, will
be distributed pro rata to the shareholders in accordance with the R.O.C. Company Law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Transfer Restrictions</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The R.O.C. Securities and Exchange Law requires each director, supervisor, manager or
shareholder who, together with such shareholder&#146;s spouse, minor children or nominees, holds more
than 10% of our shares, to report the amount of such person&#146;s holding to us and limits the number
of shares that can be sold or transferred on the Taiwan Stock Exchange or on the GreTai Securities
Market by such person per day (unless the number of shares transferred does not exceed 10,000).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Voting Rights of ADS Holders</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ADS holders may direct the exercise of voting rights with respect to the Common Shares
represented by ADSs only in accordance with the provisions of the deposit agreement and applicable
R.O.C. law. See &#145;&#145;Item&nbsp;3. Key Information &#150; D. Risk Factors &#151; Risks Related to our Common Shares,
ADSs and GDSs &#151; ADS and GDS holders do not have the same voting rights as our common shareholders,
which may affect the value of the ADSs and GDSs&#146;&#146;. If an ADS holder wishes to withdraw its Common
Shares, the ADS holder must appoint a local agent and open a securities trading account with a
local brokerage firm. Even if the ADS holder does all this, however, the ADS holder might not know
about the meeting early enough in advance to withdraw the shares or the ADS holder may not have
enough time to register the Common Shares for voting purposes before the shareholder register is
closed. See &#145;&#145;Item&nbsp;10. Additional Information &#151; B. Memorandum and Articles of Association &#151;
Description of Our Common Shares &#151; Meetings of Shareholders&#146;&#146; and &#145;&#145;&#151; Register of Shareholders and
Record Dates&#146;&#146;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except as described below, ADS holders will not be able to exercise voting rights attaching to
the Common Shares represented by the ADSs on an individual basis. According to the R.O.C. Company
Law, a shareholder&#146;s voting rights attaching to shareholdings in a R.O.C. company must, as to all
matters subject to a vote of shareholders (other than the election of directors and supervisors),
be exercised as to all shares held by the shareholder in the same manner. Accordingly, the voting
rights attaching to the Common Shares represented by ADSs must be exercised as to all matters
subject to a vote of shareholders by the depositary or its nominee, who represents all holders of
ADSs, collectively in the same manner, except in the case of an election of directors and
supervisors. Directors and supervisors are elected by cumulative voting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the deposit agreement, ADS holders appointed the depositary as their representative to
exercise the voting rights with respect to the Common Shares represented by their ADSs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will provide the depositary with copies (including English translations) of notices of
meetings of our shareholders and the agenda of these meetings. These materials will contain an
indication of the number of directors or supervisors to be elected if an election of directors or
supervisors is to be held at the meeting. The depositary will also mail to ADS holders a voting
instruction form. In order to be valid, the holder of ADSs must complete, sign and return to the
depositary the voting instruction form by a date specified by the depositary. The number of
directors or supervisors to be elected may change after the depositary has mailed the voting
instruction form to ADS holders. If a change were to occur, the depositary would be unable to
follow each ADS holder&#146;s exact voting instructions and may calculate such ADS holder&#146;s votes
according to procedures not inconsistent with the provisions of the deposit agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We cannot assure ADS holders that they will receive the materials in time to ensure that they
can instruct the depositary to vote the Common Shares represented by their ADSs. In addition, the
depositary and its agents are not responsible for failing to carry out voting instructions or for
the manner of carrying out voting instructions if such act or failure to act is in good faith. This
means that ADS holders may not be able to exercise their right to vote and there may be nothing ADS
holders can do if the Common Shares represented by their ADSs are not voted as they requested.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to the provisions described in the second succeeding paragraph, which will apply to
the election of directors and supervisors, if persons together holding at least 51% of the ADSs
outstanding at the relevant record date instruct the depositary to vote in the same manner in
respect of one or more resolutions to be proposed at the meeting (other than the election of
directors or supervisors), the depositary will notify the instructions to our president, or if he
is no longer an officer or director of our company, then the Chairman of our board of directors
(the &#145;&#145;designated representative&#146;&#146;), or such person as he may designate. The depositary will
appoint the president or his designated person to serve as the ADS holders&#146; designated
representative and that of the depositary&#146;s or its nominee. The designated representative will
attend the meeting and vote all the Common Shares represented by ADSs in the manner so instructed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If, for any reason, the depositary has not by the date specified by it received instructions
from persons together holding at least 51% of all the ADSs outstanding at the relevant record date
to vote in the same manner in respect of any resolution specified in the agenda for a meeting
(other than the election of directors or supervisors), then ADS holders will be deemed to have
instructed the depositary or its nominee to authorize and appoint the designated representative as
the ADS holders&#146; representative and that of the depositary&#146;s or its nominee to attend the meeting
and vote all the Common Shares represented by all ADSs as the designated representative deems
appropriate with respect to the resolution or resolutions, which may not be in the best interests
of ADS holders. However, no authorization will be given with respect to any matter as to which the
designated representative informs the depositary that he does not wish to be so authorized, in
which event the depositary will not vote at the relevant meeting. The depositary will, however,
take such action as is necessary to cause all the Common Shares represented by ADSs to be counted
for the purpose of satisfying applicable quorum requirements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The depositary will notify the designated representative of the instructions for the election
of directors and supervisors received from ADS holders and appoint the designated representative as
the ADS holders&#146; representative and that of the depositary&#146;s or its nominee to attend any meeting
and vote the Common Shares represented by ADSs as to which the depositary has received instructions
from ADS holders for the election of directors and supervisors, subject to any restrictions imposed
by R.O.C. law and our articles of incorporation. If, by the date specified by the depositary, ADS
holders have not delivered instructions to the depositary, ADS holders will be deemed to have
instructed the depositary to authorize and appoint the designated representative as the ADS
holders&#146; representative and that of the depositary&#146;s or its nominee to attend the meeting and vote,
at his sole discretion, all the Common Shares represented by ADSs as to which the depositary has
not received instructions from ADS holders for the election of directors and supervisors as the
designated representative deems appropriate, which may not be in the best interests of ADS holders.
However, no authorization will be given with respect to any election of directors or supervisors as
to which the designated representative informs the depositary that he does not wish to be so
authorized, in which event the depositary will attend such meeting and will vote those Common
Shares represented by the ADSs as to which it has received instructions from ADS holders for the
election of directors and supervisors in the manner so instructed. The depositary will not vote at
the relevant meeting any Common Shares represented by ADSs, as to which the depositary has not
received instructions from ADS holders for the election of directors any supervisors but will take
such action as is necessary to cause all the Common Shares represented by ADSs to be counted for
the purpose of satisfying applicable quorum requirements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By continuing to hold ADSs or any interest in the ADSs, ADS holders will be deemed to have
agreed to the voting provisions set forth in the deposit agreement, as these provisions maybe
amended from time to time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>C. Material Contracts</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except for the contracts stated below we have not been a party to any material contracts that
were entered into beyond our ordinary course of business during the preceding two year period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Indenture for Zero Coupon Convertible Bonds Due February&nbsp;10, 2008</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February&nbsp;10, 2003 and March&nbsp;4, 2003, we issued zero coupon convertible bonds totaling US$90
million pursuant to an international bond offering. The bonds will mature on February&nbsp;10, 2008 at a
redemption price equal to their principal amount, together with redemption premium. The bonds do
not bear interest. Unless previously redeemed or repurchased and cancelled, the bonds, at the
option of the holders of the bonds, are convertible at anytime, except during a closed period, on
or after March&nbsp;12, 2003 and on or before January&nbsp;11, 2008, into common shares, par value NT$10.00
per share. The initial conversion price will be NT$12.06 per common share, subject to adjustment in
certain events. As of December&nbsp;31, 2005, all the zero coupon convertible bonds due February&nbsp;10,
2008 had been converted or redeemed. The bonds are evidenced by the indenture included as Exhibit
14.2 hereto.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>GDS Deposit Agreement Dated April&nbsp;5, 2004</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In April&nbsp;2004, we sold 13,125,000 GDSs, representing 525,000,000 new common shares. The
offering price for the GDSs was US$13.20 per GDS and net proceeds were approximately US$173.25
million. The GDSs are listed on the Luxembourg Stock Exchange plc. Our GDSs are not fungible with
our ADSs, and each GDS represents 40 of our common shares. As of June&nbsp;21, 2004, GDSs holders
representing over 95% of the GDSs issued in April&nbsp;2004 have withdrawn from our GDSs program and
converted their GDSs to common shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The GDSs are subject to the terms and conditions set forth in the deposit agreement dated
April&nbsp;5, 2004 entered into between us and Citibank, N.A., in its capacity as depositary, which is
included as Exhibit&nbsp;14.9 hereto.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have undertaken in the deposit agreement to use our best endeavors to maintain, so long as
any GDS is outstanding, a listing for the GDSs on the Luxembourg Stock Exchange. In the event that
the listing on the Luxembourg Stock Exchange is not maintained, we have undertaken in the deposit
agreement to use our best endeavors with the reasonable assistance of the depositary (provided at
our expense) to obtain and maintain a listing of the GDSs on any other internationally recognized
stock exchange in Europe.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The deposit agreement and the GDSs are governed by, and shall be construed in accordance with,
English law except that the certifications set forth in Schedule&nbsp;3 to the deposit agreement and any
provisions relating thereto shall be governed by and construed in accordance with the laws of the
State of New York and any United States Federal Court sitting in the Borough of Manhattan, New York
City. The rights and obligations attaching to the Deposited Shares (as defined in the deposit
agreement) and Certificates of Payment (as defined in the deposit agreement) will be governed by
R.O.C. law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders of GDSs are not party to the deposit agreement and thus, under English Law, have no
contractual rights against, or obligations to, us or the depositary. However, the Deed Poll
executed by us in favor of the holders provides that, if we fail to perform the obligations imposed
on us by certain specified provisions of the deposit agreement, any holder may enforce the relevant
provisions of the deposit agreement as if it were a party to the deposit agreement and was the
&#147;Depositary&#148; in respect of that number of Deposited Shares to which the GDSs of which he is the
holder relate. The depositary is under no duty to enforce any of the provisions of the deposit
agreement on behalf of any holder of a GDS or any other person.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set forth below is a summary of certain provisions of the deposit agreement relating to rights
of GDS holders, which are subject to the detailed provisions of the deposit agreement. Terms used
in this summary and not defined herein but which are defined in the deposit agreement have the
meanings ascribed to them in the deposit agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Rights Issues</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If and whenever we announce our intention to distribute rights to the holders of our common
shares to subscribe for or to acquire our common shares, securities or other assets, the depositary
will give notice to GDS holders of such offer or invitation, specifying the manner by which and
time during which holders may request the depositary to exercise such rights as provided below or,
if such be the case, specifying details of how the depositary proposes to distribute the rights or
the proceeds of any sale thereof. The depositary will deal with such rights in the manner described
below:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>if and to the extent that the depositary shall, at its discretion, deem it to be lawful
and reasonably practicable, the depositary shall make arrangements whereby the GDS holders
may, upon payment of the subscription price together with such fees, taxes, duties, charges,
costs and expenses as may be required under the deposit agreement and completion of such
undertakings, declarations, certifications and other documents as the depositary may
reasonably require, request the depositary to exercise such rights on their behalf with
respect to the deposited common shares and to distribute the common shares, securities or
other assets so subscribed or acquired to the holders entitled thereto by an increase in the
numbers of GDSs corresponding to the Master GDS</TD>
</TR>

</TABLE>
</DIV>
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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>(as defined in the deposit agreement) or an issue of certificates in definitive registered
form in respect of GDSs, according to the manner in which the holders hold their GDSs; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>if and to the extent that the depositary shall at its discretion, deem it to be lawful
and reasonably practicable, the depositary will distribute such rights to the holders
entitled thereto in such manner as the depositary may at its discretion determine; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>if and to the extent that the depositary deems any such arrangement and distribution as
is referred to in paragraphs (1)&nbsp;and (2)&nbsp;above to all or any holders not to be lawful and
reasonably practicable (including, without limitation, due to the fractions which would
otherwise result or to any requirement that we, the Custodian (as defined in the deposit
agreement) or the depositary withhold an amount on account of taxes or other governmental
charges) or to be unlawful, the depositary will, provided that holders have not taken up
rights through the depositary as provided in (1)&nbsp;above, sell such rights (either by public
or private sale and otherwise at its discretion subject to all applicable laws and
regulations) and distribute the net proceeds of such sale as a cash distribution pursuant to
the deposit agreement to the holders entitled thereto. If the depositary is unable to sell
such rights, it will allow such rights to lapse.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have agreed in the deposit agreement that we will, unless prohibited by applicable law or
regulation, give our consent to, and if requested use all reasonable endeavors (subject to the next
paragraph) to facilitate, any such distribution, sale or subscription by the depositary or the
holders, as the case may be, pursuant to certain provisions of the deposit agreement (including the
obtaining of legal opinions from counsel reasonably satisfactory to the Depositary concerning such
matters as the Depositary may reasonably specify).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we notify the depositary that registration is required in any jurisdiction under any
applicable law of the rights, securities or other property to be distributed under certain
provisions of the deposit agreement or the securities to which such rights relate in order for us
to offer such rights or distribute such securities or other property to the GDS holders or owners
of GDSs and to sell the securities corresponding to such rights, the depositary will not offer such
rights or distribute such securities or other property to the GDS holders or sell such securities
unless and until we procure the receipt by the depositary of an opinion from counsel reasonably
satisfactory to the depositary and us that a registration statement is in effect or that the
offering and sale of such rights or securities to such GDS holders or owners of GDSs are exempt
from registration under the provisions of such law. Neither we nor the depositary shall be liable
to register such rights, securities or other property or the securities to which such rights relate
and they shall not be liable for any losses, damages or expenses resulting from any failure to do
so.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If at the time of the offering of any rights, at its discretion, the depositary shall be
satisfied that it is not lawful or reasonably practicable (for reasons outside its control) to
dispose of the rights in any manner provided in paragraphs (1), (2)&nbsp;and (3)&nbsp;above, the depositary
shall permit the rights to lapse. The depositary will not be responsible for any failure to
determine that it may be lawful or feasible to make such rights available to GDS holders or owners
of GDSs in general or to any GDS holder or owner of a GDS or GDS holders or owners of GDSs in
particular.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See &#145;&#145;Item&nbsp;3. Key Information &#150; D. Risk Factors &#151; Risks Related to our Common Shares, ADSs and
GDSs &#151; The rights of holders of our ADSs and GDSs to participate in our rights offerings may be
limited, which may cause dilution to their holdings&#146;&#146;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Voting Rights of GDS Holders</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;GDS holders may direct the exercise of voting rights with respect to the our common shares
represented by GDSs only in accordance with the provisions of the deposit agreement and applicable
R.O.C. law. See &#145;&#145;Item&nbsp;3. Key Information &#151; D. Risk Factors &#151; Risks Related to our Common Shares,
ADSs and GDSs &#151; ADS and GDS holders do not have the same voting rights as our common shareholders,
which may affect the value of the ADSs and GDSs&#146;&#146;. If a GDS holder wishes to withdraw its common
shares, the GDS holder must appoint a local agent and open a securities trading account with a
local brokerage firm. Even if the GDS holder does all this, however, the GDS holder might not know
about the meeting early enough in advance to withdraw the shares or the GDS holder may not have
enough time to register the common shares for voting purposes before the shareholder register is
closed. See &#145;&#145;Item&nbsp;10. Additional Information &#151; B. Memorandum and Articles of Association &#151;
Description of Our Common Shares &#151; Meetings of Shareholders&#146;&#146; and &#145;&#145;&#151; Register of Shareholders and
Record Dates&#146;&#146;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except as described below, GDS holders will not be able to exercise voting rights attaching to
our common shares represented by the GDSs on an individual basis. According to the R.O.C. Company
Law, a shareholder&#146;s voting rights attaching to shareholdings in a R.O.C. company must, as to all
matters subject to a vote of shareholders (other than the election of directors and supervisors),
be exercised as to all shares held by the shareholder in the same manner. Accordingly, the voting
rights attaching to the common shares represented by GDSs must be exercised as to all matters
subject to a vote of shareholders by the depositary or its nominee, who
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">represents all holders of GDSs, collectively in the same manner, except in the case of an
election of directors and supervisors. Directors and supervisors are elected by cumulative voting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the deposit agreement, GDS holders appointed the depositary as their representative to
exercise the voting rights with respect to the common shares represented by their GDSs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will provide the depositary with copies (including English translations) of notices of
meetings of our shareholders and the agenda of these meetings. These materials will contain an
indication of the number of directors or supervisors to be elected if an election of directors or
supervisors is to be held at the meeting. The depositary will also mail to GDS holders a voting
instruction form. In order to be valid, the holder of GDSs must complete, sign and return to the
depositary the voting instruction form by a date specified by the depositary. The number of
directors or supervisors to be elected may change after the depositary has mailed the voting
instruction form to GDS holders. If a change were to occur, the depositary would be unable to
follow each GDS holder&#146;s exact voting instructions and may calculate such GDS holder&#146;s votes
according to procedures not inconsistent with the provisions of the deposit agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We cannot assure GDS holders that they will receive the materials in time to ensure that they
can instruct the depositary to vote the common shares represented by their GDSs. In addition, the
depositary and its agents are not responsible for failing to carry out voting instructions or for
the manner of carrying out voting instructions if such act or failure to act is in good faith. This
means that GDS holders may not be able to exercise their right to vote and there may be nothing GDS
holders can do if the common shares represented by their GDSs are not voted as they requested.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to the provisions described in the second succeeding paragraph, which will apply to
the election of directors and supervisors, if persons together holding at least 51% of the GDSs
outstanding at the relevant record date instruct the depositary to vote in the same manner in
respect of one or more resolutions to be proposed at the meeting (other than the election of
directors or supervisors), the depositary will notify the instructions to our president, or if he
is no longer an officer or director of our company, then the Chairman of our board of directors
(the &#145;&#145;designated representative&#146;&#146;), or such person as he may designate. The depositary will
appoint the president or his designated person to serve as the GDS holders&#146; designated
representative and that of the depositary&#146;s or its nominee. The designated representative will
attend the meeting and vote all the common shares represented by GDSs in the manner so instructed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If, for any reason (other than failure by us to supply the notice of the shareholders&#146; meeting
to the depositary within the requisite time period provided in the deposit agreement), the
depositary has not by the date specified by it received instructions from persons together holding
at least 51% of all the GDSs outstanding at the relevant record date to vote in the same manner in
respect of any resolution specified in the agenda for a meeting (other than the election of
directors or supervisors), then GDS holders will be deemed to have instructed the depositary or its
nominee to authorize and appoint the designated representative as the GDS holders&#146; representative
and that of the depositary&#146;s or its nominee to attend the meeting and vote, at his sole discretion,
all the common shares represented by all GDSs as the designated representative deems appropriate
with respect to the resolution or resolutions, which may not be in the best interests of GDS
holders. However, no authorization will be given with respect to any matter as to which the
designated representative informs the depositary that he does not wish to be so authorized, in
which event the depositary will not vote at the relevant meeting. The depositary will, however,
take such action as is necessary to cause all the common shares represented by GDSs to be counted
for the purpose of satisfying applicable quorum requirements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The depositary will notify the designated representative of the instructions for the election
of directors and supervisors received from GDS holders and appoint the designated representative as
the GDS holders&#146; representative and that of the depositary&#146;s or its nominee to attend any meeting
and vote the common shares represented by GDSs as to which the depositary has received instructions
from GDS holders for the election of directors and supervisors, subject to any restrictions imposed
by R.O.C. law and our articles of incorporation. If, by the date specified by the depositary, GDS
holders have not delivered instructions to the depositary, GDS holders will be deemed to have
instructed the depositary to authorize and appoint the designated representative as the GDS
holders&#146; representative and that of the depositary&#146;s or its nominee to attend the meeting and vote,
at his sole discretion, all the common shares represented by GDSs as to which the depositary has
not received instructions from GDS holders for the election of directors and supervisors, which may
not be in the best interests of GDS holders. However, no authorization will be given with respect
to any election of directors or supervisors as to which the designated representative informs the
depositary that he does not wish to be so authorized, in which event the depositary will attend
such meeting and will vote those common shares represented by the GDSs as to which it has received
instructions from GDS holders for the election of directors and supervisors in the manner so
instructed. The depositary will not vote at the relevant meeting any common shares represented by
GDSs, as to which the depositary has not received instructions from GDS holders for the election of
directors any supervisors but will take such action as is necessary to cause all the common shares
represented by GDSs to be counted for the purpose of satisfying applicable quorum requirements.
</DIV>

<P align="center" style="font-size: 10pt">88
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By continuing to hold GDSs, GDS holders will be deemed to have agreed to the voting provisions
set forth in the deposit agreement, as these provisions maybe amended from time to time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>D. Exchange Controls</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Foreign Exchange</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set forth below are the period-end noon buying rates in effect between the N.T. dollar and the
U.S. dollar, expressed in N.T. dollars per U.S. dollar, for the periods indicated.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Period-End</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>NT$ per US$1.00</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1999</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31.39</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33.17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34.70</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2003:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">First Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34.72</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Second Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34.61</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Third Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33.78</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Fourth Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33.99</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2004:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">First Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Second Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33.66</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Third Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33.99</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Fourth Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31.74</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">First Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31.46</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Second Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31.64</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Third Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33.18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Fourth Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32.80</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2006:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">January</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31.97</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">February</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32.40</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">March</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32.42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">April</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31.90</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">May</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31.99</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">June (through June&nbsp;20)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32.56</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left"><I>Source: </I></TD>
    <TD>&nbsp;</TD>
    <TD><I>The noon buying rate in New York for cable transfers payable in foreign currencies as
certified for customs purposes by the Federal Reserve Bank of New York.</I></TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Taiwan&#146;s Foreign Exchange Control Statute and regulations provide that all foreign exchange
transactions must be executed by banks designated by the Ministry of Finance and by the Central
Bank of China to handle foreign exchange transactions. Current regulations favor trade-related
foreign exchange transactions. Consequently, foreign currency earned from exports of merchandise
and services may now be retained and used freely by exporters. All foreign currency needed for the
importation of merchandise and services may be purchased freely from the designated foreign
exchange banks.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Aside from trade-related foreign exchange transactions, a Taiwan company and a resident
individual may, without foreign exchange approval, remit to and from Taiwan foreign currencies of
up to US$50&nbsp;million, or its equivalent, and US$5&nbsp;million, or its equivalent, each calendar year.
Furthermore, any remittance of foreign currency into Taiwan by a Taiwan company or a resident
individual in a year will be offset by the amount remitted out of Taiwan by such company or
individual (as applicable) within its annual quota and will not use up its annual inward remittance
quota to the extent of such offset. These limits apply to remittances involving a conversion
between New Taiwan dollars and U.S. dollars or other foreign currencies. In addition, all private
enterprises are required to register all medium and long-term foreign debt with the Central Bank of
China.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, a foreign person may, subject to certain requirements but without foreign
exchange approval, remit to and from Taiwan foreign currencies of up to US$100,000 per remittance
if the required documentation is provided to the Taiwan authorities. This limit applies only to
remittances involving a conversion between New Taiwan dollars and U.S. dollars or other foreign
currencies.
</DIV>

<P align="center" style="font-size: 10pt">89
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>E. Taxation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>R.O.C. Taxation</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>General</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following summary addresses the principal R.O.C. tax consequences of the ownership and
disposition of common shares, ADSs or GDSs to a nonresident individual or non-resident entity that
holds such common shares or ADSs (a &#147;Non-R.O.C. Holder&#148;). As used in the preceding sentence, a
&#147;non-resident individual&#148; (a &#147;Non-R.O.C. Individual&#148;) is a foreign national individual who is not
physically present in the R.O.C. for 183&nbsp;days or more during any calendar year in which he or she
owns common shares, ADSs or GDSs and a &#147;non-resident entity&#148; (a &#147;Non-R.O.C. Entity&#148;) is a
corporation or a non-corporate body that is organized under the laws of a jurisdiction other than
the R.O.C. for profit-making purposes and does not have a fixed place of business or other
permanent establishment in the R.O.C..
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ADS and GDS HOLDERS AND COMMON SHARE HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISERS CONCERNING
THE TAX CONSEQUENCES OF OWNING THE ADSs, GDSs OR COMMON SHARES IN TAIWAN AND ANY OTHER RELEVANT
TAXING JURISDICTION TO WHICH THEY ARE SUBJECT.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>ADSs and GDSs</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Dividends. </I>Dividends, whether in cash or stock declared by us out of retained earnings and
distributed to a Non- R.O.C. Holder in respect of our shares represented by ADSs and GDSs are
subject to R.O.C. withholding tax, currently at a rate of 20% on the amount of the distribution, in
the case of cash dividends, or on the par value of the distributed shares, in the case of stock
dividends. The Depositary may dispose of a portion of the dividends to pay such tax. Distributions
of stock dividends out of capital reserves are not subject to R.O.C. withholding tax.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Sale </I>. Transfers of ADSs and GDSs are not subject to R.O.C. securities transaction tax. Gains
on sale of ADSs and GDSs are not subject to R.O.C. income tax.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Common Shares</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Dividends. </I>Dividends (whether in cash or stock) declared by us out of retained earnings and
distributed to a Non-R.O.C. Holder in respect of common shares are subject to R.O.C. withholding
tax, currently at the rate of 20%, on the amount of the distribution (in the case of cash
dividends) or on the par value of the common shares (in the case of stock dividends).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Distributions of stock dividends declared by us out of capital reserves are not subject to
R.O.C. withholding tax.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Sale. </I>Security transaction tax will be withheld at the rate of 0.3% of the transaction price
upon a sale of common shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Capital gains on transactions in securities issued by R.O.C. companies are exempt from income
tax. This exemption applies to capital gains derived from the sale of common shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Preemptive Rights. </I>Distributions of statutory subscription rights for the common shares in
compliance with the R.O.C. Company Law are not subject to R.O.C. tax. Proceeds derived from sales
of statutory subscription rights evidenced by securities are currently exempted from income tax but
are subject to securities transaction tax, currently at the rate of 0.3% of the gross sales amount.
Proceeds derived from sales of statutory subscription rights which are not evidenced by securities
are subject to capital gains tax at the rate of (i)&nbsp;25% of the gains realized by Non-R.O.C. Entity
Holders and (ii)&nbsp;35% of gains realized by Non-R.O.C. Individual Holders. Subject to compliance with
R.O.C. law, we have the sole discretion to determine whether statutory subscription rights shall be
evidenced by the issuance of securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Inheritance Tax and Gift Tax</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;R.O.C. inheritance tax is payable on any property situated within the R.O.C. of a deceased
Non-R.O.C. Individual, and R.O.C. gift tax is payable on any property situated within the R.O.C.
donated by such person. Inheritance tax is payable at rates ranging from 2% of the first NT$600,000
to 50% of amounts over NT$100,000,000. Gift tax is payable at rates ranging from 4% of the first
NT$600,000 to 50% of amounts over NT$45,000,000. Under R.O.C. inheritance and gift tax law, bonds
and shares issued by R.O.C. companies are
</DIV>

<P align="center" style="font-size: 10pt">90
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">deemed situated within the R.O.C. irrespective of the location of the owner. It is unclear
whether a holder of ADSs or GDSs will be considered to own common shares for this purpose.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Tax Treaties</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The United States does not have an income tax treaty with the R.O.C.. At present, the R.O.C. has
income tax treaties with Australia, Gambia, Indonesia, Malaysia, Macedonia, the Netherlands, New
Zealand, Singapore, South Africa, Swaziland, United Kingdom and Vietnam which limit the rate of
withholding tax on dividends or interest paid with respect to shares or bonds in R.O.C. companies
to residents of these countries. It is unclear whether a Non-R.O.C. Holder will be considered to
own common shares for the purposes of such income tax treaties. Accordingly, holders of common
shares who are otherwise entitled to the benefits of the relevant income tax treaty should consult
their own tax advisors concerning their eligibility for benefits under the treaty with respect to
the common shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An amendment to the R.O.C. Income Tax Law (the &#147;Amendment&#148;) was enacted on January&nbsp;1, 1998, to
integrate the corporate income tax and the shareholder dividend tax with the aim of eliminating the
double taxation effect for resident shareholders of Taiwanese corporations. In accordance with the
Amendment, a 10% retained earnings tax will be imposed on a company for its after-tax earnings
generated after January&nbsp;1, 1998 that are not distributed in the following year. The retained
earnings tax so paid will further reduce the retained earnings available for future distribution.
When the company declares dividends out of those retained earnings, the retained earnings tax can
be credited against the 20% withholding tax imposed on the Non-R.O.C. Holders up to 10% of the
declared dividends.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>United States Federal Income Taxation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>General</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following discussion addresses the principal United States federal income tax consequences
to United States Holders, as defined below, of purchasing, owning and disposing of ADSs, GDSs or
common shares, but it does not purport to be a comprehensive description of all of the United
States federal income tax considerations that may be relevant to a decision to purchase, own, or
dispose of the ADSs, GDSs or common shares, and it does not address the tax treatment under
applicable state or local tax laws or the laws of any jurisdiction other than the United States.
This discussion is of a general nature only and is not intended to be, and should not be construed
to be, legal or tax advice to any prospective investor and no representation with respect to the
tax consequences to any particular investor is made.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In particular, this discussion does not address special United States federal income tax
situations, such as the consequences applicable to persons who are subject to special treatment
because they are:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>dealers in securities or currencies;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>traders in securities who elect to use a mark-to-market method of accounting for their securities holdings;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>banks;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>financial institutions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>insurance companies;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>regulated investment companies;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>real estate investment trusts;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>persons who actually and constructively own less than 10% of our voting stock.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>tax-exempt organizations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>persons liable for the alternative minimum tax;</TD>
</TR>


</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">91
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>persons who hold ADSs, GDSs or common shares as part of a hedging, integrated or
conversion transaction, constructive sale or straddle;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>persons who are citizens or residents of a possession or territory of the United States;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>persons who hold ADSs, GDSs or common shares pursuant to certain retirement plans;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>persons who receive ADSs, GDSs or common shares as compensation for services;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>persons whose &#147;functional currency&#148; is not the U.S. dollar; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>partners in a partnership that holds ADSs, GDSs or common shares.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following discussion of United States federal income tax matters is based:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>on the federal income tax laws of the United States as in effect on the date of this
annual report, including the Internal Revenue Code of 1986, as amended (the &#147;Code&#148;),
judicial decisions, administrative pronouncements and Treasury regulations, changes to any
of which after the date of this annual report could apply on a retroactive basis and affect
the tax consequences described in this annual report; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>in part, on representations by the depositary, and assumes that each obligation under the
applicable deposit agreement and any related agreements will be performed in accordance with
their terms.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As used in this discussion, the term &#147;United States Holder&#148; means a beneficial owner of ADSs,
GDSs or common shares that holds the ADSs, GDSs or common shares as capital assets and that is:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an individual who is a citizen or resident of the United States;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a corporation (or other entity treated as a corporation) organized under the laws of the
United States or any State or the District of Columbia (a &#147;U.S. Corporation&#148;);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an estate the income of which is subject to United States federal income taxation
regardless of its source;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a trust if a court within the United States is able to exercise primary supervision over
the administration of the trust and one or more United States persons have the authority to
control all substantial decisions of the trust; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a trust that has a valid election in effect under applicable United States Treasury
regulations to be treated as a United States person.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If a partnership holds our ADSs, GDSs or common shares, the tax treatment of a partner in such
partnership will generally depend upon the status of the partner and the activities of the
partnership. We encourage any such partners to consult their own tax advisor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A &#147;Non-United States Holder&#148; is any beneficial owner of ADSs, GDSs or common shares that is
not a United States Holder as defined above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;HOLDERS OF ADSs, GDSs OR COMMON SHARES ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF ADSs,
GDSs OR COMMON SHARES, INCLUDING PARTICULARLY THE POSSIBLE IMPLICATIONS OF THE PASSIVE FOREIGN
INVESTMENT COMPANY RULES DISCUSSED BELOW AS WELL AS THE EFFECT OF ANY STATE OR LOCAL TAX LAWS OR
THE LAWS OF ANY JURISDICTION OTHER THAN THE UNITED STATES.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>ADSs, GDSs and Common Shares</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For United States federal income tax purposes, a United States Holder will be treated as the
beneficial owner of the common shares underlying its ADSs and GDSs. Exchanges of common shares for
ADSs or GDSs, and ADSs and GDSs for common shares, will not be subject to United States federal
income tax, and a holder&#146;s tax basis and holding period in the ADSs, GDSs or common shares received
in the exchange will be the same as its basis and holding period in the ADSs, GDSs or common
shares, as the case may be, given up in the exchange.
</DIV>

<P align="center" style="font-size: 10pt">92
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Taxation of Dividends</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to the discussion under &#147;&#151;Passive Foreign Investment Company Status&#148; below,
distributions in respect of ADSs, GDSs and common shares to United States Holders, including the
amount of any R.O.C. tax withheld, will constitute foreign source dividend income for
United States federal income tax purposes to the extent these distributions are made from our
current or accumulated earnings and profits, as determined in accordance with United States federal
income tax principles. These dividends will not be eligible for the dividends received deduction
otherwise allowed to U.S. Corporations. Such dividend income will be includable in the gross income
of a United States Holder as ordinary income on the day it is actually or constructively received
by the United States Holder, in the case of common shares, or by the depositary, in the case of
ADSs and GDSs. A non-corporate United States Holder of ADSs and GDSs will generally be eligible for
reduced rates of tax (i.e., the rates applicable to net long-term capital gain, which are 5% and
15%) with respect to dividends on ADSs and GDSs under section 1(h) of the Code if the United States
Holder has held the ADSs or GDSs for more than 60&nbsp;days during the 120-day period that begins on the
date that is 60&nbsp;days before the ex-dividend date. For the purpose of determining the holding
period, no account is taken of days on which the holder&#146;s risk of loss with respect to the ADSs or
GDSs is diminished by virtue of various hedging strategies described in section 246(c) of the Code.
To the extent, if any, that the amount of the distribution exceeds our current and accumulated
earnings and profits as so computed, it will be treated first as a tax-free return of the United
States Holder&#146;s tax basis in its ADSs and GDSs and common shares, and then, to the extent that such
excess exceeds the United States Holder&#146;s tax basis, as capital gain. Any such distributions in
excess of our current and accumulated earnings and profits will not give rise to foreign source
income, and a United States Holder will not be able to use the foreign tax credit arising from any
R.O.C. withholding tax imposed on such distribution unless such credit can be applied
(subject to applicable limitations) against United States federal income tax due on other foreign
source income in the appropriate category for foreign tax credit purposes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The amount of any cash distribution paid in NT dollars will generally equal the U.S. dollar
value of the NT dollar distribution, including the amount of any
R.O.C. tax withheld,
calculated by reference to the exchange rate in effect on the date the dividend is actually or
constructively received by the United States Holder, in the case of common shares, or by the
depositary, in the case of ADSs and GDSs, regardless of whether the payment is in fact converted
into U.S. dollars on that date. If the NT dollars received are not converted into U.S. dollars on
the date of receipt, a United States Holder will have a basis in the NT dollars equal to their U.S.
dollar value on the date of receipt. Generally, gain or loss, if any, realized on a subsequent
conversion or other disposition of the NT dollars will be ordinary income or loss. This gain or
loss will generally be treated as United States source income for United States foreign tax credit
limitation purposes. The amount of any distribution of property other than cash will be the fair
market value of the property on the date of distribution.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject
to specified limitations, including holding period requirements,
R.O.C.
taxes withheld from dividend distributions maybe eligible for credit against the United States
Holder&#146;s United States federal income taxes or, at the United States Holder&#146;s option, for deduction
from United States taxable income. Under the Code, the limitation on foreign taxes eligible for
credit is calculated separately with respect to specific classes of income. For this purpose,
dividends paid by us will generally be &#147;passive&#148; income or, in the case of certain United States
Holders, &#147;financial services&#148; income. Due to the complexity of the rules governing foreign tax
credits, we encourage United States Holders of ADSs, GDSs and common shares to consult their own
tax advisors concerning the availability of foreign tax credits under their particular
circumstances.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Taxation of Sales or Other Dispositions</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to the discussion under &#147;&#151; Passive Foreign Investment Company Status&#148; below, a United
States Holder will recognize capital gain or loss for United States federal income tax purposes on
a sale or other disposition of ADSs, GDSs or common shares in an amount equal to the difference
between the United States Holder&#146;s adjusted basis in the ADSs, GDSs or common shares and the amount
realized on the disposition. This capital gain or loss will be long-term capital gain or loss if
the United States Holder has held the ADSs, GDSs or common shares for more than one year at the
time of the sale or exchange. The holding period of the ADSs, GDSs or common shares will include
the holding period of bonds converted into such ADSs, GDSs or common shares and, if they were
received in an exchange, the holding period of the ADSs, GDSs or common shares for which they were
exchanged. Long-term capital gain of a non-corporate United States Holder is generally subject to a
maximum rate of 15% in respect of property held for more than one year. For corporate United States
Holders, a capital gain is currently taxed at the same rate as ordinary income. The deductibility
of capital losses is subject to limitations for both corporate and non-corporate United States
Holders. Any gain or loss recognized by a United States Holder will generally be treated as United
States source gain or loss. United States Holders should note that any ROC securities transaction
taxes imposed on a sale may not be eligible for credit and may not be eligible for deduction
against the United States Holder&#146;s United States federal income taxes. In the event that any
<U>R.O.C.</U> securities taxes are not eligible for deduction, however the amount of any such
taxes will reduce the amount realized by the United States Holder upon the disposition of the
common shares, ADSs or GDSs.
</DIV>

<P align="center" style="font-size: 10pt">93
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Passive Foreign Investment Company Status</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain adverse United States federal income tax rules apply to United States persons who are
holders of equity interests in a corporation classified as a &#147;passive foreign investment company&#148;
(&#147;PFIC&#148;). Based on current and projected financial data, we believe that we should not currently be
treated as a PFIC for United States federal income tax purposes, but this conclusion is a factual
determination made annually and thus may be subject to change based on future operations and the
composition and valuation of our assets. In general, we will be a PFIC with respect to a United
States Holder if, for any taxable year in which the United States Holder holds ADSs, GDSs or common
shares, after the application of certain &#147;look through&#148; rules to the assets and income of 25% or
greater owned subsidiaries, either:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>at least 75% of our gross income for the taxable year is passive income; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>at least 50% of the average percentage by value of our assets during the taxable year is
attributable to assets that produce or are held for the production of passive income.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the Company is or becomes a PFIC, a United States Holder would be treated as realizing gain
from the sale or disposition of the Shares and certain &#147;excess distributions&#148; ratably over such
holder&#146;s holding period for the Shares and would be taxed at the highest tax rate in effect for
each such year to which the gain or excess distribution was allocated, together with an interest
charge on the tax attributable to each such year. An election may be available to avoid these
adverse tax consequences but only if (i)&nbsp;the United States Holder may and does elect to annually
mark-to-market the Shares or (ii)&nbsp;the United States Holder elects to include in income annually its
share of the income and gain of the Company and we satisfy certain reporting requirements. We have
not determined whether we will undertake the necessary measures to be able to satisfy the
requirements for the election in clause (ii), in the event we are treated as a PFIC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Should the Company ever be classified as a PFIC, United States Holders are advised to consult
their tax advisors concerning the United States federal income tax consequences of holding the
Shares and of making the mark-to-market election. A United States Holder who owns Shares during any
year that the Company is a PFIC must file with the IRS Form&nbsp;8621.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>United States Federal Income Taxation of Non-United States Holders</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to the discussion of United States backup withholding tax below, a Non-United States
Holder of ADSs, GDSs or common shares will not be subject to United States federal income or
withholding tax on distributions on a common share, ADS or GDS or gains realized on the sale of
ADSs, GDSs or common shares, provided that (i)&nbsp;such income items are not effectively connected with
the conduct by the Non-United States Holder of a trade or business within the United States (or, in
the case where a Non-United States Holder is eligible for the benefits of an income tax treaty with
the United States, the Non-United States Holder does not have a permanent establishment or fixed
place of business in the United States to which such income is attributable), (ii)&nbsp;there has not
been a present or former connection between the Non-United States Holder and the United States,
including, without limitation, such Non-United States Holder&#146;s status as a citizen or former
citizen, or resident or former resident, of the United States, and (iii)&nbsp;in case of a gain from the
sale or disposition of ADSs, GDSs or common shares by an individual, the Non-United States Holder
is not present in the United States for 183&nbsp;days or more during the taxable year of the sale. A
Non-United States Holder that is also a corporation for United States federal income tax purposes
may also be subject to an additional &#147;branch profits tax&#148; of 30% (or such lower rate as maybe
specified by a tax treaty for whose benefits the Non-United States Holder corporation is eligible)
with respect to income that is subject to United States federal income taxation on a net basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>United States Backup Withholding Tax and Information Reporting</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Payments made by a paying agent within the United States to the United States Holders other
than corporations and other exempt recipients in respect of the ADSs, GDSs or common shares maybe
subject to information reporting to the United States Internal Revenue Service. A backup
withholding tax at a rate of 28% on amounts received will apply to those payments if a non-exempt
United States Holder fails to provide certain identifying information, such as the holder&#146;s
taxpayer identification number, and to comply with certain other requirements concerning backup
withholding. Non-United States Holders maybe required to comply with applicable certification
procedures to establish that they are not United States Holders in order to avoid the application
of such information reporting requirements and backup withholding tax.
</DIV>

<P align="center" style="font-size: 10pt">94
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any amounts withheld under the backup withholding tax rules from a payment to a holder
generally will be allowed as a refund or a credit against such holder&#146;s United States federal
income tax, provided that the required information is furnished to the Internal Revenue Service.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>F. Dividends and Paying Agents</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>G. Statement by Experts</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>H. Documents on Display</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are required to file reports and other information with the SEC under the provisions of the
U.S. Securities Exchange Act of 1934 which apply to foreign private issuers. We are required to
file annual reports on Form 20-F and submit reports on Form 6-K and other information with the SEC.
We do not intend to file any other reports, including interim reports on Form 10-Q. These reports
and other information filed, submitted or to be submitted by us can be inspected and copied at the
public reference facilities maintained by the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Room
1024, Washington, D. C. 20549.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The SEC maintains a website at www.sec.gov that contains reports, proxy and information
statements, and other information regarding registrants that make electronic filings with the SEC
using its EDGAR system. As a foreign private issuer, we are required to make our SEC filings as
electronic filings using the EDGAR system, commencing with this annual report on Form 20-F. This
annual report and our future filings will be available at the website referred to above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our periodic reports and other information may also be inspected at the offices of the Nasdaq
National Market, Reports Section, 1735 K Street, N.W., Washington, D. C. 20006. As a foreign
private issuer, we are exempt from the rules under the U.S. Securities Exchange Act of 1934 which
require the furnishing and govern the content of proxy statements, and our executive officers,
directors, supervisors, and principal shareholders are exempt from the reporting and short-swing
profit recovery provisions contained in Section&nbsp;16 of the Exchange Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>I. Subsidiary Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>
<DIV align="left">
<A name="114"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;11.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>Quantitative and Qualitative Disclosure About Market Risk</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the purposes of compiling the respective tables, the following rates have been used:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">




<TD colspan="4">&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The exchange rates for Japanese yen as at December&nbsp;31, 2005 is
based on the official exchange rate as determined by the Bank of
Taiwan, being NT$0.2796 = JPY1.00.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">



    <TD colspan="4">&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The exchange rates for U.S. dollars as at December&nbsp;31, 2005 is
based on the official exchange rate as determined by the Bank of
Taiwan being NT$32.85 = US$1.00.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Interest rates are derived from the prevailing interest rate swap
market in the respective currencies as at December&nbsp;31, 2005.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Interest Rates</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our exposure to interest rate risk relates primarily to our long-term debt, which is normally
entered into to fund our corporate activities, primarily for capital expenditures. Other interest
rate sensitive short-term assets and liabilities include mainly cash in banks and bank loans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The table below presents the period-end principal amounts outstanding and the contractual
rate, where applicable, or the related weighted-average implied forward interest rate by year of
maturity, of our debt obligations.
</DIV>

<P align="center" style="font-size: 10pt">95
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Principal (notional)&nbsp;amount by expected maturity for non-trading purposes</I></B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="19" style="border-bottom: 1px solid #000000"><B>Expected Maturity</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>January 1,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>January 1,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>January 1,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>January 1,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>January 1,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006 to</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2007 to</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2008 to</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2009 to</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2010 to</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Fair value</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2010</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Total</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31, 2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>NT$ in million</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Rate sensitive assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Variable rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,249</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,252</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,252</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Average
interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.59</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Fixed rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,885</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,882</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,882</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Average
interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.29</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Restricted deposit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,929</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,929</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,929</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Fixed rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.77</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap><DIV style="margin-left:15px; text-indent:-15px"><B>Rate sensitive liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD nowrap><DIV style="margin-left:15px; text-indent:-15px"><B>Short term debt (US$
million)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,894</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,894</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,894</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Variable rate</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.48</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">NT$ debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fixed rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,039</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Average interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Variable rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,384</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,480</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,480</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,048</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,048</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Average interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.73</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.39</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.70</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.70</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.47</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Foreign Currencies</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A significant portion of our revenues is denominated in currencies other than the N.T. dollar.
As of December&nbsp;31, 2005, most of our accounts payable and payables for purchases of capital goods
were denominated in currencies other than the N.T. dollar, primarily in U.S. dollars and Japanese
yen. As of December&nbsp;31, 2005, part of our short-term debts is in U.S. dollars. To protect against
reductions in value and volatility of future cash flows caused by changes in foreign exchange
rates, we utilize derivative financial instruments to hedge our currency exposure. These hedging
transactions are designed to reduce, but do not eliminate, the impact of foreign currency exchange
rate movements. Our policy is to account for these contracts on a hedge accounting basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Most of our sales are denominated in U.S. dollars and Japanese yen and part of our debts are
in U.S. dollars. An appreciation of the Japanese yen against the N.T. dollar would result in a
foreign exchange gain to us from our underlying sales. However, a depreciation of the Japanese yen
against the N.T. dollar would result in a foreign exchange loss to us. Conversely, an appreciation
of the U.S. dollar against the N.T. dollar would result in a foreign exchange loss to us, while a
depreciation of the U.S. dollar against the N.T. dollar would result in a foreign exchange gain to
us. To reduce the foreign exchange loss from a depreciation of Japanese yen, we entered into
forward contracts and dual currency deposit contracts (Japanese yen against U.S. dollar, the DCD
contracts).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the Japanese yen appreciates, it is highly likely that the counter-parties would exercise the
DCD contracts. However, we would be compensated from the gain from our underlying Japanese yen
sales and use the U.S. dollars received to pay down the U.S. dollar debts. If the Japanese yen
depreciates, it is highly likely the counter-parties would not exercise the option, and the
premiums received would provide us additional cash flow against the foreign exchange loss from our
sales as a result of the weak Japanese yen.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2005, we had no outstanding forward contract or DCD contract.
</DIV>

<P align="center" style="font-size: 10pt">96
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Market Price Sensitivity Analysis</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Equity Contract</I></B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;5, 1998, we issued zero coupon convertible debentures amounting to US$150&nbsp;million,
which were privately placed with a financial institution. One of our wholly owned subsidiaries
subsequently entered into a call option contract with the financial institution, with the
underlying reference being the convertible debentures. The terms of the contract provided that the
notional amount of US$150&nbsp;million is divided into fifteen options and our subsidiary is entitled to
exercise the options separately, at the discretion of the subsidiary during the life of the
contract, but at a minimum number of two. We simultaneously entered into currency swaps, based on
the notional amount of the debt, converting Japanese Yen into New Taiwan dollars and New Taiwan
dollars into United States dollars. Subsequently, the option contract and the currency swaps were
combined into one contract. The subsidiary exercised two options and five options on January&nbsp;22,
2000 and June&nbsp;26, 2000, respectively. As of December&nbsp;31, 2002, the outstanding portion of this
compound derivative contract had a negative fair value of US$14.5&nbsp;million, and the carrying amount
had a negative fair value of US$10.3&nbsp;million. In May&nbsp;2003, we settled the contract with respect to
the remaining eight options by paying US$13.1&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In June&nbsp;2000, we entered into a contract with a financial institution for the settlement of
five options relating to our zero coupon convertible debenture due 2003 and in connection with our
stock appreciation rights plan, with the underlying reference being 47,727,535 of our common
shares. The contract, as amended, expired on May&nbsp;5, 2005. Under the contract, if the share price
was less than the predetermined contract price, we would pay the differences between the two
amounts to the financial institution. The contract rate at which the contract was settled and based
on U.S. dollars, and our share price were converted into U.S. dollars using prevailing N.T. dollars
to U.S. dollars exchange rates in order to determine the settlement amount. The predetermined
contract price was US$1.37 per share. Between March&nbsp;17, 2005 and April&nbsp;28, 2005, we reduced the
number of common shares that formed the underlying reference securities for the contract to nil,
and we settled the contract on May&nbsp;5, 2005. Our additional loss under the contract in 2005 up to
the date of settlement of the contract was US$4.4&nbsp;million (NT$140&nbsp;million). See &#147;Item.<U>5.</U> Operating and Financial Review and Prospects &#151; Operating Results &#151; Equity Derivative
Contracts&#148; and note 25 to our consolidated financial statements for the years ended December&nbsp;31,
2003, 2004 and 2005 included in this annual report.
</DIV>
<DIV align="left">
<A name="115"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;12. Description of Securities Other than Equity Securities</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>
<DIV align="left">
<A name="116"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>PART II</B></U>
</DIV>

<DIV align="left">
<A name="117"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;13.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>Default, Dividend Arrearages and Delinquencies</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2005, we were not in default in the payment of principal or interest to any
of our lenders.
</DIV>
<DIV align="left">
<A name="118"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;14.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>Material Modifications to the Rights of Security Holders and Use of
Proceeds</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>
<DIV align="left">
<A name="119"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;15.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>Controls and Procedures</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subsequent to the filing of our consolidated financial statements on
Form 20-F for the year ended December&nbsp;31, 2004 and through the process
of addressing financial statement comments raised by the SEC, we
determined that our controls over the processes and procedures related
to the recording and review of convertible bonds and embedded
derivatives were not adequate to ensure that such accounts were
completely and accurately recorded, due primarily to inadequate U.S.
GAAP experience in relation to such accounting matters. As a result of
this control material weakness, we restated our consolidated financial
statements for the years ended December&nbsp;31, 2003, and 2004 with
respect to certain U.S. GAAP financial information disclosed in note 28
and elsewhere in our consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the restatement, we evaluated our disclosure controls and procedures. We
identified several internal control deficiencies that we believe are material weaknesses,
including, among other items, insufficient U.S. GAAP expertise and insufficient documentation
procedures. Our management has concluded that our disclosure controls and procedures were not
sufficiently effective as of December&nbsp;31, 2005 and as of the date of this annual report.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;However, we have taken corrective actions and allocated additional resources to improve the
disclosure controls and procedures. For example, we have retained external consultants to assist us
with issues that arise during the course of the reconciliation of our financial statements under US
GAAP.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In preparation for certain internal control reporting requirements set
forth in Section&nbsp;404 of the Sarbanes-Oxley Act of 2002, we have
continued to perform the necessary system and process evaluation and
testing required (and any necessary remediation) to comply with such
section by the effective date for compliance. Our efforts to implement
standardized internal control procedures and develop internal tests
necessary to verify the proper application of the internal control
procedures are a key area of focus for our board of directors and our senior management.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except as disclosed herein, there has been no change in our internal
control over financial reporting that occurred during the period
covered by this annual report that has materially affected, or is
reasonably likely to materially affect, our internal control over
financial reporting.
</DIV>


<P align="center" style="font-size: 10pt">97
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="120"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;16A.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>Audit Committee Financial Expert</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Board of Directors has determined that one of our audit committee members, Mr.&nbsp;Cheng Yi
Fang qualifies as an Audit Committee financial expert defined under SEC Rule&nbsp;4350 (d)(2).
</DIV>
<DIV align="left">
<A name="121"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;16B.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>Code of Ethics</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On June&nbsp;2, 2004, we adopted a Code of Business Conduct and Ethics for our employees, including
our chief executive officer, associate vice president of finance center who acts as our chief
accounting officer and other persons performing similar functions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will provide to any person without charge, upon request, a copy of our Code of Business
Conduct and Ethics. Any request should be made to our Investor Relations Department at No.&nbsp;16
Li-Hsin Road, Science Park, Hsinchu, Taiwan, Republic of China.
</DIV>
<DIV align="left">
<A name="122"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;16C.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>Principal Accountant Fees and Services</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The table below summarizes the fees that we were billed for services provided by Diwan, Ernst
&#038; Young and its affiliates for the years ended December&nbsp;31, 2004 and 2005:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2004</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>(in thousands of NT$)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Audit fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,511</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,202</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Audit-related fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">571</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,989</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">555</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,910</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,209</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,672</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Audit-related Fees</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Services provided consist of assurance and related services that are reasonably related to the
performance of the audit or review of our financial statements and are not included under &#147;Audit
fees.&#148; The services for the fees disclosed under this category include royalty audits and review of
certain regulatory filings with the R.O.C. Securities and Futures Commission and other reviews in
connection with ADS, GDS, convertible bond and Form&nbsp;20F filings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Tax Fees</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This category consists of professional services for tax compliance and tax advice. The
services for the fees disclosed under this category include tax return preparation and technical
tax advice.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Others</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This category consists primarily of fees for non-audit and non-tax fees, such as annual report
filing fees and business certification service fees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Pre-Approval of Services</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to forming an audit committee, our board of directors is responsible for the oversight
of our independent accountants&#146; work. The policy of our board of directors is to pre-approve all
audit and non-audit services provided by Diwan, Ernst &#038; Young, including
</DIV>

<P align="center" style="font-size: 10pt">98
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">audit services, audit-related services, tax services and other services, as described above.
</DIV>

<DIV align="left">
<A name="123"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;16D. Exemptions from the Listing Standards for Audit Committees</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>
<DIV align="left">
<A name="124"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>
<DIV align="left">
<A name="125"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>PART III</B></U>
</DIV>

<DIV align="left">
<A name="126"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;17.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>Financial Statements</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have elected to provide the financial statements and related information specified in Item
18 in lieu of Item&nbsp;17.
</DIV>
<DIV align="left">
<A name="127"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;18.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>Financial Statements</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reference is made to pages F-1 to F-88 for year-end financial statements.
</DIV>
<DIV align="left">
<A name="128"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><FONT style="font-variant: SMALL-CAPS"><B>Item&nbsp;19.</B></FONT> <FONT style="font-variant: SMALL-CAPS"><B>Exhibits</B></FONT>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="12%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="83%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Description</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">2b.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The Company hereby agrees to furnish to the Securities and
Exchange Commission, upon request, copies of instruments defining
the rights of holders of long-term debt of the Company and its
subsidiaries.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Articles of Incorporation of the Company (English translation).*</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">8.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">List of subsidiaries of the Company.*</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">12.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certifications of our President pursuant to Section&nbsp;302 of the
Sarbanes-Oxley Act of 2002.*</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">12.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certifications of our Associate Vice President, Finance
Department, pursuant to Section&nbsp;302 of the Sarbanes-Oxley Act of
2002.*</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">13.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certifications of our President pursuant to 18 U.S.C. Section&nbsp;1350
as adopted pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of
2002.*</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">13.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certifications of our Associate Vice President, Finance
Department, pursuant to 18 U.S.C. Section&nbsp;1350 as adopted pursuant
to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002.*</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">14.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Deposit Agreement, dated as of February&nbsp;7,
2002, among the Company, The Bank of New York, as depositary, and
Holders from time to time of American Depositary Receipts issued
thereunder, including the form of American Depositary Receipt(2).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">14.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Indenture, dated as of February&nbsp;10, 2003, by and between the
Company and The Bank of New York, as trustee(3).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">14.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Land Lease Agreement, dated as of March&nbsp;3, 1990, by and between
the Company and the Hsinchu Science-Based Industrial Park
Administration, in relation to Office Building and Fab I Site(4).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">14.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Land Lease Agreement, dated as of August&nbsp;1, 1994, by and between
the Company and the Hsinchu Science-Based Industrial Park
Administration, in relation to Auxiliary Vehicular Facilities(5).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">14.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Land Lease Agreement, dated as of January&nbsp;1, 1994, by and between
the Company and the Hsinchu Science-Based Industrial Park
Administration, in relation to Back-End Operation Plant(6).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">14.6
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Land Lease Agreement, dated as of June&nbsp;1, 1995, by and between the
Company and the Hsinchu Science-Based Industrial Park</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">99
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="12%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="83%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Description</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Administration, in relation to Fab II and Fab III Site (7).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">14.7
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Deposit Agreement, dated as of April&nbsp;5, 2004, among the Company,
Citibank, N.A., as depositary,
and Holders from time to time of Global Depositary Receipts issued
thereunder, including the form of Global Depositary Receipt(8).</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="93%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Description</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">*</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Filed with this Form 20-F.</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">(1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Incorporated by reference to Exhibit 3.1 to the Company&#146;s Form 20-F filed with the Commission on June 29, 2004.</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">(2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Incorporated by reference to Exhibit 3(a) to the Company&#146;s Registration Statement on Form F-6 (File No. 333-8602) filed with the Commission on February 7, 2002.</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">(3)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Incorporated by reference to Exhibit 10.2 to the Company&#146;s Form 20-F filed with the Commission on July 1, 2003.</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">(4)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Incorporated by reference to Exhibit 10.6 to the Company&#146;s Registration Statement on Form F-1 (File No. 333-1870) filed with the Commission on March 1, 1996.</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">(5)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Incorporated by reference to Exhibit 10.7 to the Company&#146;s Registration Statement on Form F-1 (File No. 333-1870) filed with the Commission on March 1, 1996.</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">(6)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Incorporated by reference to Exhibit 10.8 to the Company&#146;s Registration Statement on Form F-1 (File No. 333-1870) filed with the Commission on March 1, 1996.</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">(7)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Incorporated by reference to Exhibit 10.9 to the Company&#146;s Registration Statement on Form F-1 (File No. 333-1870) filed with the Commission on March 1, 1996.</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">(8)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Incorporated by reference to Exhibit 14.9 to the Company&#146;s Form 20-F filed with the Commission on June 29, 2004.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">100
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>INDEX TO CONSOLIDATED FINANCIAL STATEMENTS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Consolidated Financial Statements of Macronix
International Co., Ltd. and its Subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#402">Independent Auditors&#146; Report</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#403">Consolidated Balance Sheets as of December&nbsp;31, 2004 and 2005</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#404">Consolidated Statements of Operations for each of the three
years in the period ended December&nbsp;31, 2005</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#405">Consolidated Statements of Cash Flows for each of the three
years in the period ended December&nbsp;31, 2005</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#406">Consolidated Statements of Shareholders&#146; Equity for each of
the three years in the period ended December&nbsp;31, 2005</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#407">Notes to Consolidated Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-9</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">F-1
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left">
<A name="402"></A>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Report of Independent Registered Public Accounting Firm</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To the Board of Directors, Supervisors, and Shareholders<BR>
of Macronix International Co., Ltd.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have audited the accompanying consolidated balance sheets of Macronix International Co.,
Ltd. as of December&nbsp;31, 2004 and 2005, and the related consolidated statements of operations,
shareholders&#146; equity, and cash flows for each of the three years in the period ended December&nbsp;31,
2005. These financial statements are the responsibility of the Company&#146;s management. Our
responsibility is to express an opinion on these financial statements based on our audits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We conducted our audits in accordance with the standards generally accepted in the Republic
of China and the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. We were not engaged to perform an
audit of the Company&#146;s internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company&#146;s internal control over financial reporting.
Accordingly we express no such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In our opinion, the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Macronix International Co., Ltd. at December&nbsp;31,
2004 and 2005, and the consolidated results of its operations and its cash flows for each of the
three years in the period ended December&nbsp;31, 2005, in conformity with accounting principles
generally accepted in the Republic of China, which differ in certain respects from accounting
principles generally accepted in the United States of America (see note 28 to the consolidated
financial statements).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As described in Note 2 to the consolidated financial statements, effective January&nbsp;1, 2005,
Macronix International Co., Ltd. and its subsidiaries adopted the R.O.C. Statement of Financial
Accounting Standards No.&nbsp;35, &#147;Accounting for Asset Impairment&#148;, adopted the R.O.C. Statement of
Financial Accounting Standards No.&nbsp;5 &#147;Accounting for Long-term Equity Investment&#148;, and adopted the
amendments to the R.O.C. Statement of Financial Accounting Standards No.&nbsp;7, &#147;Consolidation of
Financial Statements&#148;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As more fully described in note 28, the consolidated financial statements for the years ended
December&nbsp;31, 2003 and 2004 have been restated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;</DiV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>DIWAN, ERNST &#038; YOUNG<BR>
CERTIFIED PUBLIC ACCOUNTANTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;</DiV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Taipei, Taiwan, R.O.C.<BR>
June&nbsp;14, 2006
</DIV>



<P align="center" style="font-size: 10pt">F-2
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left">
<A name="403"></A>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>MACRONIX INTERNATIONAL CO., LTD.<BR>
CONSOLIDATED BALANCE SHEETS<BR>
December&nbsp;31, 2004 and 2005<BR>
(Amounts in thousands except share and per share data)</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>ASSETS</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Notes</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Current assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,115,688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,133,620</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">339,440</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Restricted investments-current</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,429,606</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,928,913</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,808</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">918,040</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Notes and accounts receivable (net)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,553,510</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,006,456</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,172</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Receivables from related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132,286</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">707,095</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,558</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other receivables from related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,379</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,170</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventories (net)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,826,241</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,589,445</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">109,434</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred income taxes (net)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,951</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,494</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">594</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Prepaid expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">496,326</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">464,723</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,169</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">215,622</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">139,295</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,247</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,706,270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,027,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">610,592</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Property, plant and equipment</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" nowrap>9,14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Land</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,288,720</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">598,076</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,234</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Buildings and facilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,666,553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,833,841</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">482,739</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Production equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,438,058</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,780,215</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,517,690</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Research and development equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,187,554</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,388,842</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72,831</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Office furniture and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">900,149</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">907,391</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,664</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Leased equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,754,540</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Construction in progress and prepaid equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,130,130</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">285,338</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,699</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,365,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,793,703</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,127,857</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Less: Accumulated depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(49,372,239</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(53,591,454</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,633,886</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Net property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,993,465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,202,249</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">493,971</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Deferred income taxes (net)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,877,349</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,679,447</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,203</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Intangible assets (net)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">928,015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">810,010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,695</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Long-term investments</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,620,465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,226,753</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,401</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Idle assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">314,802</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,598</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Assets to be disposed (net)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,300,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">161,585</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Refundable deposits</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">87,620</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,506</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">534</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Other assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">182,492</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,232</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">800</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,395,676</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,604,419</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,390,379</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><I>See accompanying notes to consolidated financial statements.</I>
</DIV>


<P align="center" style="font-size: 10pt">F-3
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>MACRONIX INTERNATIONAL CO., LTD.<BR>
CONSOLIDATED BALANCE SHEETS-(Continued)<BR>
December&nbsp;31, 2004 and 2005<BR>
(Amounts in thousands except share and per share data)</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">

<TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>LIABILITIES
&#038; SHAREHOLDERS&#146; EQUITY</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Notes</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Current liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short-term debts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,896,854</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,893,754</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,736</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short-term notes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99,924</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current portion of capital lease obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">303,446</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current portion of long-term debts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,196,469</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,635,295</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">141,320</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Notes and accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,685,279</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,931,183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,878</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Payables to related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,776</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79,413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,421</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Payables to equipment suppliers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">327,314</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">147,958</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,511</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,630,357</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,667,294</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,832</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income taxes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">197,218</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">205,158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,255</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,523</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">104,110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,174</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,449,160</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,664,165</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">325,127</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Long-term liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term debts, less current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,313,038</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,777,743</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">176,151</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued pension cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">278,656</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">371,792</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,335</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Credit balance of long term equity investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,838</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">910</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">349</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,041,203</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,843,681</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">513,527</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Commitments and contingencies</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Shareholders&#146; equity</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common shares NT$10
par value, authorized 6,550,000,000
shares as of December&nbsp;31, 2005
and issued 5,035,296,328 and 4,995,296,328
shares as of December&nbsp;31, 2004 and 2005,
respectively.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,352,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,952,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,522,956</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Additional paid-in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">315,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Capital reserve</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,945</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,990</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,768</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accumulated deficits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(13,886,018</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(21,388,090</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(652,076</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrealized losses on long-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,351,527</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cumulative translation adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,042</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,902</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,375</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Treasury stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,188,436</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(142,365</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,340</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total shareholders&#146; equity</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,344,673</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,558,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">870,683</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Minority interests</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">202,338</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,169</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Total liabilities and shareholders&#146; equity</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,395,676</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,604,419</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,390,379</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><I>See accompanying notes to consolidated financial statements.</I>
</DIV>


<P align="center" style="font-size: 10pt">F-4
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left">
<A name="404"></A>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>MACRONIX INTERNATIONAL CO., LTD.<BR>
CONSOLIDATED STATEMENTS OF OPERATIONS<BR>
For the years ended December&nbsp;31, 2003, 2004 and 2005<BR>
(Amounts in thousands except share and per share data)</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000">For the year ended December 31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Notes</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">US$000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Sales revenue</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,058,229</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,499,507</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,990,422</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">578,976</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: Sales returns</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(313,544</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(30,453</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(51,047</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,556</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Sales discounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(32,498</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(89,331</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(31,239</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(952</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,712,187</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,379,723</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,908,136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">576,468</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cost of goods sold</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(20,656,731</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18,990,296</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18,666,372</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(569,097</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Gross profit (loss)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,944,544</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,389,427</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">241,764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,371</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Less: Unrealized profit</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,895</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,451</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Realized gross profit (loss)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,941,649</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,387,976</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">241,764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,371</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Operating expenses</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Selling expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(560,660</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(729,246</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(699,370</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(21,322</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Administrative expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,443,449</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,430,617</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,307,283</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(39,856</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Research and development expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000" nowrap align="left">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000" align="right">(2,738,231</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000" nowrap align="left">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000" align="right">(2,576,801</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000" nowrap align="left">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000" align="right">(3,109,670</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000" nowrap align="left">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000" align="right">(94,807</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,742,340</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,736,664</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,116,323</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(155,985</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Operating income (loss)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,683,989</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(348,688</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,874,559</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(148,614</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Non-operating income</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Research and development subsidies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">668</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103,847</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">101,646</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99,860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,045</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Dividend income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,349</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,589</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,852</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,124</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Reversal of allowance for bad debts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,476</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,119</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,712</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,546</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Foreign exchange gain</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">375,087</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gain on disposal of property,
plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">308</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,408</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">396</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gain on disposal of long-term
investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,565</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">374,806</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,898</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">729</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net gain on short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,591</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,209</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">365,304</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,137</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Reversal of inventory and spare
parts loss provision</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,185,227</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">918,545</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">476,780</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,536</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000" align="right">54,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000" align="right">162,601</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000" align="right">121,222</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000" align="right">3,696</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,876,584</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,619,048</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,196,942</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,493</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Non-operating expenses</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,077,898</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(684,105</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(377,261</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,502</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Foreign exchange loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(154,023</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(88,395</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,695</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net loss from equity investment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(87,219</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(99,073</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(89,525</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,729</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net investment loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(737,382</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(56,218</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,536,483</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(46,844</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Impairment loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(905,658</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(27,612</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loss on allowance for prepaid
expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(334,971</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(141,711</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,321</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000" nowrap align="left">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000" align="right">(132,162</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000" nowrap align="left">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000" align="right">(29,801</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000" nowrap align="left">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000" align="right">(65,472</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000" nowrap align="left">&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000" align="right">(1,996</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Total other expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,369,632</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,023,220</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,204,505</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(97,699</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Income (loss)&nbsp;before taxes and
minority interest</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,177,037</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">247,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,882,122</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(209,820</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Income tax expense</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(21,027</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(34,781</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(215,414</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,568</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Income (loss)&nbsp;before minority
interest</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,198,064</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">212,359</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,097,536</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(216,388</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Minority interest loss</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">319</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,145</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net income (loss)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,197,745</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">217,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,027,189</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(214,243</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Earnings Per Common Share*:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net income (loss)&nbsp;per common share
- basic</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">NT$</TD>
    <TD align="right">(3.65</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">NT$</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">NT$</TD>
    <TD align="right">(2.41</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">US$</TD>
    <TD align="right">(0.07</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net income (loss)&nbsp;per common share
- diluted</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">NT$</TD>
    <TD align="right">(3.65</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">NT$</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">NT$</TD>
    <TD align="right">(2.41</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">US$</TD>
    <TD align="right">(0.07</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pro-forma data: assuming that the
Company&#146;s shares owned by subsidiaries were not
treated as treasury stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">
<B>Net income (loss)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,222,374</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">221,787</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,043,761</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(214,749</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net income (loss)&nbsp;per common share
- basic</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">NT$</TD>
    <TD align="right">(3.66</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">NT$</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">NT$</TD>
    <TD align="right">(2.42</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">US$</TD>
    <TD align="right">(0.07</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net income (loss)&nbsp;per common share
- diluted</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">NT$</TD>
    <TD align="right">(3.66</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">NT$</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">NT$</TD>
    <TD align="right">(2.42</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">US$</TD>
    <TD align="right">(0.07</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><I>See accompanying notes to consolidated financial statements.</I>
</DIV>


<P align="center" style="font-size: 10pt">F-5
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="405"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>MACRONIX INTERNATIONAL CO., LTD.<BR>
CONSOLIDATED STATEMENTS OF CASH FLOWS<BR>
For the years ended December&nbsp;31, 2003, 2004 and 2005<BR>
(Amounts in thousands except share and per share data)</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000">For the year ended December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from operating activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,197,745</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">217,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,027,189</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(214,243</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Adjustments to reconcile net income (loss)&nbsp;to net cash provided by
operating activities :</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,614,734</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,092,077</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,740,549</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">205,505</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">672,277</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">470,083</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">511,984</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,609</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation and market-value decline on idle assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91,530</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on allowance for prepaid expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">334,971</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">141,711</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,320</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gain on disposal of long-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(63,565</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(374,806</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(23,898</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(729</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net gain on short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(43,591</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(10,209</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(365,304</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(11,137</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Change in valuation allowance of accounts receivable and other receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(33,059</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(238</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(49,886</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,521</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Inventory and spare parts provision (reversal)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,185,227</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(918,545</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(476,780</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(14,536</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss from equity investment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">87,219</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99,073</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,525</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,729</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impairment loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">905,658</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,612</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Write off on long-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,344</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,536,483</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,844</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net gain on disposal of property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(308</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,408</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(396</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net changes in operating assets and liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Notes and accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(56,457</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">151,459</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">634,589</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,347</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Receivables from related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,137</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(27,016</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(555,538</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(16,937</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other Receivable from relted parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(49,911</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,522</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,268,453</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">191,223</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,654,614</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,446</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135,347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,371</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,359</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Prepaid expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92,071</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(81,366</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,337</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">681</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Deferred income tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,914</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">198,039</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,038</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Notes and accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">569,471</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(270,018</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">245,904</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,497</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Payables to related parties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(53,239</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(60,794</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,638</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,117</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(416,501</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(299,759</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,126</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Income taxes payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(83,518</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(23,708</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,940</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">242</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(381,938</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,470</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,587</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,054</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accrued pension cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86,569</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86,893</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93,136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,840</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Interest payable of debentures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(989,775</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(336,725</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(21,778</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(664</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,483,725</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,986,636</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,397,323</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">134,065</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from investing activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Decrease (increase)&nbsp;in restricted investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,527,888</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(345,297</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">358,349</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,925</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Payments for purchase of marketable securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(10,077,010</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(21,961,161</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(11,467,983</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(349,634</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from disposal of marketable securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,455,091</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,911,781</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,995,611</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">396,208</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Payments for purchase of other financial assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(173,730</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(101,280</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from disposal of other financial assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">173,730</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">101,280</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Additions to long-term equity investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(542,451</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(278,694</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from disposals of long-term equity investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">124,113</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">463,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">175,705</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,357</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Payments for purchase of property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,616,208</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,768,934</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,774,419</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(54,098</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from disposals of property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,979</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,186</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Refundable deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">893,434</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(161,182</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,636</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,184</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,678</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,575</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(44,507</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,357</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Additions to intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(235,463</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(532,968</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(187,977</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,731</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from disposals of intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">454</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash provided by (used in) investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(423,495</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,629,149</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">129,601</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,951</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">See accompanying notes to consolidated financial statements.
</DIV>


<P align="center" style="font-size: 10pt">F-6
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>MACRONIX INTERNATIONAL CO., LTD.<BR>
CONSOLIDATED STATEMENTS OF CASH FLOWS-(Continued)<BR>
For the years ended December&nbsp;31, 2003, 2004 and 2005<BR>
(Amounts in thousands except share and per share data)</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000">For the year ended December 31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">US$000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash flows from financing activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net increase (decrease)&nbsp;in short-term debts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">624,815</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">276,663</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,069,733</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(32,614</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net increase (decrease)&nbsp;in short-term notes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99,924</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(99,924</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,046</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net decrease in debentures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(415,315</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12,662</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Additions (deductions)&nbsp;to other liabilities -
refundable deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">206</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(206</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from long-term debts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,835,305</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,950,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,048</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Repayments of long-term debts and capital lease
obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8,201,614</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,773,284</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,062,822</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(62,891</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common stock issued</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,822,504</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,565,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">117,712</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(69,867</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82,070</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,502</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net cash provided by (used in) financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,198,717</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,950,654</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,465,930</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(105,669</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of exchange rate changes on cash and cash
equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,794</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,341</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(43,062</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,312</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net increase in cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,254,153</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(532,826</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,017,932</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,035</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at the beginning of the
period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,394,361</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,648,514</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,115,688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">308,405</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at the end of the period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,648,514</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,115,688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,133,620</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">339,440</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">

<TD><DIV style="margin-left:15px; text-indent:-15px"><B>Supplemental disclosures of cash flows information:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest paid during the period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">998,922</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">735,529</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">385,154</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,743</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income tax paid during the period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,064</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,261</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,770</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">664</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Non-cash activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Current portion of long-term debts and capital
lease obligations
transferred to current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,163,741</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,499,915</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,635,295</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,857</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Payments for purchases of property, plant and
equipment:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Payable to equipment suppliers (beginning balance)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,551,915</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">541,755</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">327,314</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,979</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Add: Purchases of property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,606,048</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,554,493</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,595,063</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,630</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Less: Payable to equipment suppliers (ending
balance)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(541,755</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(327,314</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(147,958</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,511</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Payments for purchases of property, plant and
equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,616,208</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,768,934</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,774,419</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,098</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Convertible bonds converted to common stock and
accumulated deficits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,453,866</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">759,067</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">See accompanying notes to consolidated financial statements.
</DIV>


<P align="center" style="font-size: 10pt">F-7
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<!-- LANDSCAPE -->
</DIV>

<DIV align="left">
<A name="406"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>MACRONIX INTERNATIONAL CO., LTD.<BR>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS&#146; EQUITY<BR>
For the years ended December&nbsp;31, 2003, 2004 and 2005<BR>
(Amounts in thousands except share and per share data)</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="12%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
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    <TD width="3%">&nbsp;</TD>
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    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
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    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
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    <TD width="3%">&nbsp;</TD>
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    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Unrealized</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Total shareholders,</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Additional</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">losses</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">equity attributable</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Common</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Common stock</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">paid-in</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Capital</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Legal</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Special</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Retained earnings</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">on long-term</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Translation</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Treasury</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">to parent company's</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">shares</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">to be registered</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">capital</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">reserve</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">reserve</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">reserve</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(accumulated deficit)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">investments</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">adjustments</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">stock</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">shareholders</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">NT$</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">NT$</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">NT$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance as of December 31, 2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,912,769</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,630,621</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">356</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,708,689</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">378,657</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9,469,175</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(979,081</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">219,894</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(1,188,436</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,214,294</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additional paid-in capital used to cover accumulated deficits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(2,630,621</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,630,621</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Legal reserve used to cover accumulated deficits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(1,708,689</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,708,689</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Special reserve used to cover accumulated deficits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(378,657</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">378,657</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock issuance for cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,750,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(927,496</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,822,504</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Conversion of convertible debentures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,364,814</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">274,936</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(185,884</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,453,866</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Adjustments of capital reserve from equity investees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,575</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,575</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrealized gains on long-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">977,222</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">977,222</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,197,745</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,197,745</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cumulative translation adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(30,182</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(30,182</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance as of December 31, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,027,583</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">274,936</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,931</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(14,062,333</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(1,859</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">189,712</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(1,188,436</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,247,534</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of common shares for Global Depositary Shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,250,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">315,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,565,704</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Conversion of convertible debentures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,075,380</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(274,936</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(41,377</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">759,067</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Adjustments of capital reserve from equity investees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,014</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,014</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrealized losses on long-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(1,349,668</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,349,668</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">217,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">217,692</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cumulative translation adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(127,670</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(127,670</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance as of December 31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,352,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">315,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,945</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(13,886,018</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(1,351,527</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,042</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(1,188,436</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,344,673</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Appropriation and distribution of 2004 retained earnings:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital reserve used to cover accumulated deficits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(315,704</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">315,704</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cancellation of treasury stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(400,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(646,071</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,046,071</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Adjustments of capital reserve from equity investees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,045</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,045</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reversal of unrealized losses on long-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,351,527</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,351,527</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,027,189</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,027,189</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cumulative translation adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,860</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Adjustments of accumulated deficits from equity investees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(144,516</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(144,516</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance as of December 31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,952,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,990</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(21,388,090</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,902</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(142,365</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,558,400</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance as of December 31, 2005 (US$)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,522,956</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,768</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(652,076</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,375</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,340</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">870,683</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">F-8
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="407"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>MACRONIX INTERNATIONAL CO., LTD.<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(Amounts in thousands except share, per share, and percentage data)</B>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>1.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Organization and Business</B></TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Macronix International Co., Ltd. (&#147;MXIC&#148;) was incorporated in the Hsinchu Science Park (&#147;HSP&#148;),
Taiwan, under the laws of the Republic of China (the &#147;R.O.C.&#148;) on December&nbsp;9, 1989. MXIC
operates principally as a designer, manufacturer and supplier of integrated circuits and memory
chips. MXIC was listed on the Taiwan Stock Exchange (&#147;TSE&#148;) since March&nbsp;15, 1995. Starting in
May&nbsp;1996 and in April&nbsp;2004, MXIC listed on the NASDAQ, Luxemburg Stock Exchange in the form of
American Depositary Shares (&#147;ADS&#148;) and Global Depositary Shares (&#147;GDS&#148;), respectively.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">As of December&nbsp;31, 2005, MXIC and its subsidiaries (hereinafter referred to collectively as the
&#147;Company&#148;) had 4,000 employees.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>2.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Summary of Significant Accounting Policies</B></TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The consolidated financial statements are presented in conformity with Guidelines Governing the
Preparation of Financial Reports by Securities Issuers and accounting principles generally
accepted in the R.O.C.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B><I>Consolidation</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Effective January&nbsp;1, 2005, the Company complies with the revised R.O.C. Statement of
Financial Accounting Standard (&#147;SFAS&#148;) No.&nbsp;7 &#147;Consolidated Financial Statements&#148;. The
accompanying consolidated financial statements include the accounts of all directly and
indirectly majority owned subsidiaries of MXIC, and the accounts of all the investees under
substantial control of MXIC. All inter-company balances and transactions are
eliminated upon consolidations. Minority interest in subsidiaries aforementioned is presented
under minority interest in subsidiaries in the consolidated balance sheets.
</DIV>

<P align="center" style="font-size: 10pt">F-9
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company&#146;s consolidated financial statements include all the consolidated entities were
listed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="26%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="24%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="21%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Ownership</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">% as of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">December</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD style="border-bottom:1px solid #000000" nowrap align="left">Name of Investor</TD>
    <TD>&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000" nowrap align="center">Name of Investee</TD>
    <TD>&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000" nowrap align="center">Main Business</TD>
    <TD>&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000" nowrap align="center" colspan="3">31, 2005</TD>
    <TD>&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000" nowrap align="center" colspan="3">Note</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">MXIC
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Hui Ying Investment,
Ltd. (&#147;Hui Ying&#148;)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Investment
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">MXIC
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Run Hong Investment,
Ltd. (&#147;Run Hong&#148;)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Investment
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top">&#151;
</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">MXIC
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Kang Bao Investment,
Ltd. (&#147;Kang Bao&#148;)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Investment
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top">&#151;
</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">MXIC
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">MaxNova Inc. (&#147;MaxNova&#148;)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Research,
development,
design,
manufacturing and
sales of memory
system and ASIC
memory products
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">85.50</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">MXIC
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Magic Pixel Inc. (&#147;MPI&#148;)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Research,
development,
design,
manufacturing and
sales of digital
still camera
controller IC and
flat panel display
controller IC
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">44.91</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">MXIC
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Macronix America Inc.
(&#147;MXA&#148;)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Sales and marketing
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top">&#151;
</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">MXIC
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Macronix (BVI)&nbsp;Co.,
Ltd. (&#147;MXBVI&#148;)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Investment
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top">&#151;
</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Hui Ying
Investment, Ltd.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Joyteck Co., Ltd.
(&#147;Joyteck&#148;)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Research,
development,
design,
manufacturing and
sales of the
software and
hardware of
handheld device
products
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">87.98</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Macronix (BVI)
Co., Ltd.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Macronix Japan
(Cayman Islands)
Limited. (&#147;MXJ Cayman&#148;)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Sales and marketing
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top">&#151;
</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Macronix (BVI)
Co., Ltd.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Wedgewood
International Co., Ltd.
(&#147;Wedgewood&#148;)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Investment
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Macronix (BVI)
Co., Ltd.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">New Trend Technology
Inc.
(&#147;NTTI&#148;)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">IC design
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top">&#151;
</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-10
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="26%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="24%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="21%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Ownership</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">% as of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">December</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD style="border-bottom:1px solid #000000" nowrap align="left">Name of Investor</TD>
    <TD>&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000" nowrap align="center">Name of Investee</TD>
    <TD>&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000" nowrap align="center">Main Business</TD>
    <TD>&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000" nowrap align="center" colspan="3">31, 2005</TD>
    <TD>&nbsp;</TD>
    <TD style="border-bottom:1px solid #000000" nowrap align="center" colspan="3">Note</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Macronix (BVI)
Co., Ltd.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Macronix (Hong Kong)
Co., Ltd. (&#147;MXHK&#148;)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Sales and marketing
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Macronix (BVI)
Co., Ltd.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Macronix Europe NV.
(&#147;MXE&#148;)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Sales and marketing
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top">&#151;
</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Macronix (BVI)
Co., Ltd.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Macronix Pte. Ltd.
(&#147;MPL&#148;)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Sales and marketing
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top">&#151;
</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Macronix (BVI)
Co., Ltd.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Macronix
Microelecronics
(Suzhou) Co., Ltd. (&#147;MX
Suzhou&#148;)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Sales and marketing
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top">&#151;
</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Run Hong
Investment, Ltd.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Biomorphic Microsystems<BR>
Corporation (&#147;BC&#148;)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Research,
development,
design,
manufacturing and
sales of digital
still camera CMOS
Sensor
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">54.77</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Biomorphic<BR>
Microsystems<BR>
Corporation (&#147;BC&#148;)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Biomorphic VLSI, Inc.
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">IC design
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">100.00</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top">&#151;
</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Biomorphic<BR>
Microsystems<BR>
Corporation (&#147;BC&#148;)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">BM Chip Design Private
Limited.
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">IC design
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">97.75</TD>
    <TD nowrap valign="top">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top">&#151;
</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<DIV align="left" style="margin-top: 3pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">Note 1:</TD>
    <TD>&nbsp;</TD>
    <TD>As of December&nbsp;31, 2005, Hui Ying held 6,023,152 shares of MXIC, which represented
0.12% of MXIC&#146;s outstanding common stock.</TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="margin-top: 3pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">Note 2:</TD>
    <TD>&nbsp;</TD>
    <TD>As of December&nbsp;31, 2005, MXIC and Hui Ying held in aggregate an 85.5% ownership of
MaxNova. MXIC held a 50% of ownership of MaxNova and Hui Ying held a 35.5% of ownership of
MaxNova.</TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="margin-top: 3pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">Note 3:</TD>
    <TD>&nbsp;</TD>
    <TD>As of December&nbsp;31, 2005, MXIC held a 44.91% of ownership of MPI. MXIC had the
controlling interest over the financial and operating decision in MPI as MXIC represented
over majority of the directors in MPI.</TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="margin-top: 3pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">Note 4:</TD>
    <TD>&nbsp;</TD>
    <TD>As of December&nbsp;31, 2005, MXIC held a 87.98% of ownership of Joyteck. MXIC held
18.18% of Joyteck and Hui Ying held 69.8% of Joyteck.</TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="margin-top: 3pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">Note 5:</TD>
    <TD>&nbsp;</TD>
    <TD>On June&nbsp;15, 2005, Wedgewood merged with MXBVI.</TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="margin-top: 3pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">Note 6:</TD>
    <TD>&nbsp;</TD>
    <TD>MXIC directly held the ownership of MXHK before the Company changed investment
structure on April&nbsp;26, 2005.</TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="margin-top: 3pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">Note 7:</TD>
    <TD>&nbsp;</TD>
    <TD>As of December&nbsp;31, 2005, MXIC held in aggregate a 54.77% of ownership of BC that
Hui Ying held a 20.41% of BC and Run Hong held 34.36% of BC.</TD>
</TR>
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">F-11
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B><I>Use of Estimates</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The preparation of the consolidated financial statements in conformity with the aforementioned
guidelines and principles requires management to make reasonable estimates and assumptions that
are inherently uncertain, and therefore; that affect the amounts reported in the financial
statements and accompanying notes. The actual results experienced by the Company may differ from
management&#146;s estimates.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B><I>Foreign Currency Transactions and Translation</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company and its subsidiaries in Taiwan maintain the accounting records in New Taiwan dollars
(&#147;N.T. dollars&#148; or &#147;NT$&#148;), the national currency of the R.O.C. Transactions denominated in
foreign currencies are recorded in N.T. dollars on the transaction dates. Foreign exchange gains
and losses derived from foreign currency transactions are included in the statement of
operations. At the end of each year, assets and liabilities denominated in foreign currencies
are revalued at the prevailing exchange rates with the resulting gains or losses recognized in
the statement of operations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The R.O.C. Statement of Financial Accounting Standard (&#147;SFAS&#148;) No.&nbsp;14, &#147;Accounting for
Foreign-Currency Transactions and Translation of Foreign Financial Statements&#148; applies to foreign
subsidiaries that use their respective local currencies as their functional currencies. Assets
and liabilities denominated in foreign currencies are translated into N.T. dollars using the
exchange rates in effect on the balance sheet date. Revenue and expenses denominated in foreign
currencies are translated into N.T. dollars using the average exchange rate for the relevant
period. The resulting translation adjustment is recorded as a component of shareholders&#146; equity.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B><I>Cash and Cash Equivalents</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Cash includes cash on hand, saving deposits, checking deposits, cancelable time deposits,
available-for-sale transferable certificates of deposits, and cash equivalents.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Cash equivalents are short-term, highly liquid investments that are readily convertible to known
amounts of cash, and so near to their maturity that they present insignificant risk of changes in
interest rates. Commercial paper, negotiable certificates of deposit, and bank acceptances are
classified as cash equivalents.
</DIV>

<P align="center" style="font-size: 10pt">F-12
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B><I>Short-Term Investments</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Short-term investments are recorded at historical cost and carried at the lower of cost or market
value on the balance sheet date. The cost of short-term investments is accounted for using
the weighted average method. The market value of the publicly traded securities or
close-ended funds is determined using the average closing prices during the last month of
the reporting year, while open-ended funds are valued using the net asset value at the end
of reporting year.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">An allowance for decline in value is provided and is charged to the statement of operations
when the aggregate carrying value exceeds the aggregate market value of the short-term
investment. A reversal of the allowance is recorded for a subsequent recovery of the
aggregate market value.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Cash dividends are recorded as investment income in the year received. Stock dividends are
accounted for the increase of the number of holding shares in the investments.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B><I>Allowance for Doubtful Accounts</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The allowance for doubtful accounts is recorded based on the review of the Company&#146;s credit
policies, the collectibility of the accounts, and the aging analyses on notes receivables,
accounts receivables and other receivables.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B><I>Inventories</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Inventories are carried at the lower of cost or market value using the weighted average cost
method. The lower of cost or market method is applied to each major category of inventory. The
inventory cost is determined at the acquisition. Replacement cost is used to determine the
market value of raw materials and supplies. Net realizable value is used to determine the market
value of work in process, finished goods, and commodities purchased.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The allowance for inventory loss provision is estimated proportionally based upon the aging
analyses of all inventory in each Fab. The Company reversed the inventory provision when the
inventory was written down in the previous period, written up in the current period and continues
to form part of the Company&#146;s inventory at the end of the year; or when the inventory that was
written down in the previous period, written up in the current period and sold in the current
period.
</DIV>

<P align="center" style="font-size: 10pt">F-13
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B><I>Long-Term Investments</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Long-term investments in which the Company holds an interest less than 20% and does not
exercise significant influence are recorded at historical cost. Long-term investments in
publicly traded securities are carried at the lower of cost or market method. The losses
resulted from the decline in the market value over the cost of investments in publicly traded
securities is charged against the shareholders&#146; equity at the end of the period. Long-term
investments in non-publicly traded securities are carried at the cost. When an indication of
impairment is identified in an investment, the carrying amount of the investment is adjusted to
reflect the other-than-temporary decline. The related other-than-temporary impairment loss is
charged to current income.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Long-term investments in which the Company exercises significant influence on the operating
and financial decisions or holds 20% and more interests are accounted for under the equity method
of accounting. When the equity investments are made, the difference between the acquisition cost
and the net asset value of the investments is amortized using the straight-line method over 5 to
7&nbsp;years. When the Company subscribes to additional investee shares un-proportionally, the
carrying amount of the investments differs from the amount of the Company&#146;s proportionate share
in the net equity of the investees. The Company records the resulting difference as the
adjustment to long-term investments and capital reserve. When the capital reserve is
insufficient to offset against accumulated adjustments resulted from un-proportionally sequential
stock subscriptions of the investees accounted for using the equity method, the remaining
difference will be debited to retained earnings.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">When the Company intends to continue its financial supports to the investees account for using
the equity method, or when there is sufficient indication of the short-term operation recovery in
the investees account for using the equity method, the Company will continuously record the
long-term investment loss with the corresponding amount credited to long-term investment. Other
liabilities are recognized when the net book value of the long-term investments accounted for
using the equity method becomes negative. When the investees account for using the equity method
becomes profitable, the Company will reverse the other liabilities with the corresponding amount
credited to long-term investment gain up to the accumulated balance of other liabilities resulted
from the prior adjustments.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Unrealized
inter-company gains and losses arising from downstream transactions
with investees accounted for under the equity method are eliminated
in proportion to the Group&#146;s ownership percentage while those from
transactions with majority-owned (above 50%) subsidiaries are
eliminated entirely. Unrealized inter-company gains and losses
arising from upstream transactions with investees accounted for under
the equity method are eliminated in proportion to the Group&#146;s
ownership percentage. Unrealized inter-company gains and losses
arising from transactions between investees accounted for under the
equity method are eliminated in proportion to the multiplication of
the Group&#146;s ownership percentage; while those arising from
transactions between majority-owned subsidiaries are eliminated in
proportion to the Group&#146;s ownership percentage in the subsidiary
incurred with a gain or loss.
</DIV>

<P align="center" style="font-size: 10pt">F-14
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">proportionally based upon the Company&#146;s holding interest on the investees. Unrealized gross
profits are charged against the gross profit while the deferred gains and losses on the
inter-company transactions are recorded in the current liabilities.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The realized gains and losses are recognized at the difference between the selling price and the
net book value of the long-term investments disposed. The current income is recognized in the
proportion of the disposition of long-term investments to offset remaining balance in capital
reserve resulting from the difference between the carrying amount of the investment and the
amount of the Company&#146;s proportionate share in the net equity of the investees due to the
un-proportionally sequential stock subscriptions of investees account for using the equity
method.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">When an indication of impairment is identified in the investment, the carrying amount of the
investment is reduced to reflect the other-than-temporary decline, with the related impairment
loss charged to current income.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">If the investee&#146;s functional currency is a foreign currency, translation adjustments
resulted from the translation of the investee&#146;s financial statements into the reporting
currency of the Company will be reported as the cumulative translation adjustments under
shareholders&#146; equity.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B><I>Property, Plant and Equipment</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Property, plant and equipment are recorded at cost less accumulated depreciation.
Depreciation is calculated using the straight-line method over the following estimated useful
lives: 5 to 20&nbsp;years for buildings; 5&nbsp;years for production equipment; 3 to 5&nbsp;years for research
and development equipment; 1 to 15&nbsp;years for office furniture and fixtures; 5&nbsp;years for leased
equipment; and 1 to 13&nbsp;years for leased improvement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Improvements and replacements are capitalized and depreciated over their estimated useful lives
while ordinary repairs and maintenance are expensed as incurred. Equipment held for
non-operating purposes is re-classified as idle assets or disposal assets and carried based
upon the lower of net realized value or book value. Depreciation of the idle assets is
recorded as non-operating expenses.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Effective January&nbsp;1, 2005, upon the compliance with R.O.C. SFAS No.35 &#147;Accounting for Impairment
of Assets&#148;, when an indication of impairment is identified, any excess of the carrying
amount of an asset over its recoverable amount is recognized as an impairment loss. If the
recoverable amount increases in the future period, the impairment loss would be reversed and
recognized as the gain up to the carrying amount of the impaired assets after net of
depreciation as if no impairment had not incurred.
</DIV>

<P align="center" style="font-size: 10pt">F-15
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Upon disposal or scrap of property, plant and equipment, the related cost and accumulated
depreciation are removed from the corresponding accounts, with any gains or losses adjusted
to non-operating gains or losses in the year of disposal.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B><I>Lease agreements</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Properties covered by agreements qualifying as capital leases are carried at the lower of market
value of the leased equipment at the lease inception or the present value of minimum lease
payments, with the corresponding amount recorded as capital lease obligation. The properties of
capital leases are amortized over estimated useful lives or the lease term using the
straight-line method. The capital lease obligation is amortized over the lease term using the
effective interest method. The rental expense is recorded for the operating leases at the
incurrence of lease payments.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B><I>Intangible Assets</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Intangible assets are recorded at cost and are amortized over the estimated useful lives using
the straight-line method. Royalties and issuing cost of corporate bonds are amortized over the
terms of contracts and the bond&#146;s maturity, respectively. Computer software is amortized over 2
to 3&nbsp;years, while other intangible assets are amortized over 1 to 5&nbsp;years. Goodwill represents
the excess of the consideration paid for the acquisition over the fair value of identifiable net
assets acquired. Goodwill is amortized using the straight-line method over the estimated life of
5&nbsp;years.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Effective January&nbsp;1, 2005, upon adopting R.O.C. SFAS No.&nbsp;35 &#147;Accounting for Impairment of
Assets&#148;, when an indication of goodwill impairment is identified, the impairment loss is charged
to current income. No reversal of the impairment loss from the subsequent recovery in the
goodwill is allowed.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B><I>Income Taxes</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company complies with R.O.C. SFAS No.&nbsp;22, &#147;Accounting for Income Tax&#148; that requires the
Company use an inter-period tax allocation method for income tax. Deferred income tax assets and
liabilities are recognized for the tax effect on temporary differences, net operating loss
carry-forwards and unused tax credits. A valuation allowance is recorded based on the expected
realization of the deferred tax assets. Deferred income tax assets and liabilities are classified
as current and non-current accounts in accordance with the classification of the related assets
and liabilities, or with the expected length of time that the deferred income tax assets and
liabilities are realized or settled.
</DIV>

<P align="center" style="font-size: 10pt">F-16
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company complies with R.O.C. SFAS No.&nbsp;12, &#147;Accounting for Income Tax Credits&#148; that requires
the Company recognize in current year the tax credits arising from purchases of machinery,
equipment and technology, research and development expenditures, personnel training, and
investments in selected technology-based enterprises.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Undistributed earnings generated after 1997 are subject to the 10% tax withholding in compliance
with R.O.C. Income Tax Law. The 10% tax withholding on undistributed earnings is expensed when
the shareholders resolve that the Company&#146;s earnings shall be retained in the year subsequent to
the earnings year.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B><I>Derivative Financial Instruments</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company enters into foreign currency forward contracts to manage the foreign exchange
exposures on its assets and liabilities denominated in foreign currencies. The contracts are
recorded in New Taiwan dollars at the spot rates on the contract dates. The differences in the
New Taiwan dollars amounts translated using the spot rates and using the contracted forward rates
on the contract date are accreted or amortized to the statement of operations over the contract
terms using the straight-line method. At the year end, the Company restates the receivables and
payables arising from the forward contracts using the spot rates at the balance sheet date and
records the resulting difference in the statement of operations as foreign exchange gains or
losses. The net balance of receivables and payables arising from the same forward contract is
included in other assets or other liabilities. Gain and losses arising from the settle of
foreign currency forward contracts are recorded in the settlement year.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The foreign currency option contracts entered into for hedging purposes are not recognized as
assets or liabilities on the contract dates. Any gain or losses resulting from settlement are
credited or charged to income in the settlement year. The premium paid for the foreign currency
option contracts are amortized over the terms of related contracts and charged to the statement
of operations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company enters into interest rate swap contracts to manage exposure to changes in interest
rates on existing assets or liabilities. The transactions are accounted for on the accrual
basis, in which the cash settlement receivable or payable is recorded as an adjustment to
interest income or expenses associated with the hedged items. The difference between the spot
rate at the contract date and the contracted forward rate is amortized over the terms of the
contract using the straight-line method. Realized gains and losses from settlement or unrealized
gains and losses resulting from changes in the spot exchange rate at the balance sheet date are
recorded in the statement of operations as foreign exchange gains or losses.
</DIV>

<P align="center" style="font-size: 10pt">F-17
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The gain or loss resulting from the difference between the related floating rate interest and
fixed rate interest at the balance sheet date is recorded in the statement of operations for the
period ending on the balance sheet date. The realized gains and losses upon settlement are
recorded in the statement of operations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">A structured deposit represents a deposit with an embedded currency option placed with a
financial institution to earn higher interest income. At maturity the financial institution that
accepts the deposit has an option to pay the remittance and the pre-determined accrued interest
in the original currency or in an alternative currency based on the terms of the structured
deposit contract. The amount of the pre-determined interest is accrued. The gains and losses
arising from the currency portion of the contracts are recorded in the statement of operations
for the relevant period at the balance sheet date.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B><I>Convertible Bonds</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The interest premium of convertible bonds, which is the difference between the put price and the
par value of the bonds, is recorded as the interest expenses using the effective interest method
with the corresponding amount credited to the interest premium liability over the period from the
issuance date of the bonds to the expiry date of the put option. If the bondholders do not
exercise the put option, the interest premium liability is amortized over the period from the
expiry date of put options to the maturity date of the convertible bonds using the effective
interest method.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The issuing cost of convertible bonds is recorded as a deferred asset and amortized over the
period between the issuance date of the convertible bonds and the expiration date of the put
option. The amortization of issuing cost for convertible bonds is recorded as the interest
expenses under non-operating expenses.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">When bondholders exercised the conversion rights, the Company debited the bonds payable subject
to the adjustment of unamortized discount or premium of the bonds payable, the accrual interest
and interest premium payable, and credited the common stock at the par value with the difference
between the net book value of the convertible bonds and the converted balance of common stock
credited or charged to capital reserve. No gain or loss is recognized upon conversion.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B><I>Pension Plans</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company and its subsidiaries in Taiwan have defined benefit plans under Labor Standard Law
(the &#147;Old Act&#148;) that provide benefits based on the employee&#146;s length of service and average
monthly salary prior to retirement. For employees under the Old Act, the Company and its
domestic subsidiaries contribute at a certain percentage of the salaries monthly to individual
employee&#146;s account under the Labor Retirement Fund (the &#147;Funds&#148;). The Funds are administered by
the Pension Fund Monitoring Committees (the &#147;Committees&#148;) and deposited in the Central Trust of
China in Taiwan.
</DIV>

<P align="center" style="font-size: 10pt">F-18
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Labor Pension Act (the &#147;New Act&#148;) became effective on July&nbsp;1, 2005 and the pension mechanism
under the New Act is deemed a defined contribution plan. The employees who were subject to the
Labor Standards Law prior to July&nbsp;1, 2005 were allowed to choose either to apply for the defined
contribution plans under the New Act, or the defined benefit plans under the Old Act. For those
employees who apply for the defined contribution plans under the New Act and still work for the
Company on and after July&nbsp;1, 2005, their length of service prior to July&nbsp;1, 2005 shall be
accumulated. The New Act prescribes that the Company shall make monthly contribution to the
employees&#146; pension accounts and the rate of the contribution from the Company shall be not less
than 6&nbsp;percent of the employees&#146; monthly wages.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company and its domestic subsidiaries comply with R.O.C. SFAS No.&nbsp;18, &#147;Accounting for
Pensions&#148;. For employees apply for the defined contribution plans under the New Act, pension
costs are recorded as the current expenses based on the actual contribution made to employees&#146;
individual pension accounts. For employees apply for the defined benefit plans under the Old
Act, pension costs are recorded based on actuarial calculation. The pension cost based on
actuarial calculation includes the prior service cost, interest cost, expected returns on the
pension assets and the amortization of unrecorded net transition obligation. The unrecorded net
transition obligation is amortized over the expected average remaining service lives of the
employees or 15&nbsp;years, whichever is longer.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B><I>Employees&#146; Stock Option Plan</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Effective from January&nbsp;1, 2004, the Company complies with the interpretations issued by the
R.O.C. Accounting Research and Development Foundation (&#147;ARDF&#148;) and adopted intrinsic value method
for the compensating employees&#146; stock option plans. The excess of the market price over exercise
price at the plan date is recognized as the compensation cost and amortized over grantee&#146;s
vesting periods. Disclosure of pro forma information for net income and earnings per share using
fair value method is required.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B><I>Treasury Stock</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company complies with R.O.C. SFAS No.30, &#147;Accounting for Treasury Stock&#148; that require the
Company record the cost of re-acquired stock as treasury stock, a reduction to shareholders&#146;
equity, when the Company buys back its own stocks. Any surplus or deficit on treasury stock
transactions are credited or charged to capital reserves. MXIC&#146;s stock held by its subsidiaries
is treated as treasury stock and reclassified from long-term investments to treasury stock.
</DIV>

<P align="center" style="font-size: 10pt">F-19
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B><I>Minority Interests</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Minority interest in the statements of operations includes interest in the earnings or losses of
less than wholly owned subsidiaries excluding the pre-acquisition earnings of subsidiaries acquired during the year that the Company was not entitled to recognize.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B><I>Earnings Per Share</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company complies with the R.O.C. SFAS No.&nbsp;24, &#147;Earnings per Share&#148; that requires the Company
discloses basic earnings per share if the capital structure is simple; otherwise, the Company is
required to disclose both the basic earnings per share and diluted earnings per share when the
capital structure is complicated. Basic earnings per share are equal to the net income (loss)&nbsp;of
MXIC attributable to the shareholders divided by the weighted-average number of common shares
outstanding in each period. Dilutive earnings per share is equal to the net income (loss)&nbsp;of
MXIC adjusted for the potential common stock dividends, interest expenses and other income and
expenses resulted in the dilution effects on earnings per share, divided by the weighted-average
number of outstanding common shares and the weighted-average number of outstanding shares
converted from the potential common shares resulted in the dilution effects.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B><I>Revenue Recognition and Allowance for Sales Returns and Others</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company complies with R.O.C. SFAS No.&nbsp;32, &#147;Accounting for Revenue Recognition&#148; that requires
the Company recognize sales revenue when evidence of an arrangement exists, shipment is made,
price is determined, and the collectibility of billing is reasonably assured. Delivery is
considered to have occurred when title and risk of loss have transferred to the customer.
Sales prices are determined using the fair market value considering the related sales discounts
agreed between the Company and its customers.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Sales
to customers and distributors generally do not contain rights of return, price protection privileges
or other forms of compensation. Payments are typically due 45&nbsp;days to 90&nbsp;days after legal title
to the products is passed to the customers and distributors. Delivery terms are typically F.O.B.
shipping point.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">In some circumstances, the sales to distributors contain rights of return and price protection
clauses. In the circumstance when the rights of return occur, the Company recognizes revenue
when the Company can reasonably estimates returns. In the circumstance when the sales to
distributors contain price protection clauses, the Company recognizes revenue when the future
price changes can be reasonably estimated. To the extent that these criteria are not met, sales revenue is deferred until the distributor sells
the merchandise or the rights of return and the price protection privileges lapse, whichever occurs first.
</DIV>

<P align="center" style="font-size: 10pt">F-20
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company records provisions for estimated sales returns and other allowances in the period the
related revenue is recorded. Provisions for estimated sales returns and other allowances are
generally made based upon historical experience, management&#146;s judgment, and any known factors
that would significantly affect the allowance. The Company&#146;s management periodically reviews the
adequacy of the percentage used. Due to the nature of estimation, the actual sales returns and
allowances could be significantly different from the Company&#146;s estimates. When the actual
returns and allowances are greater than the Company&#146;s estimates on sales and allowances, the
Company records additional provisions for sales returns and allowances, which would have a
negative effect on the Company&#146;s net sales and gross margin.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B><I>Research and Development Subsidies</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Government subsidies for research and development are recorded as non-operating income in the
period the qualifying research and development activities are undertaken.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B><I>Employee Bonuses</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Amounts distributed to employees, directors and supervisors pursuant to the Company&#146;s Articles of
Incorporation on the distribution of earnings are recorded as an appropriation from retained
earnings in the period shareholder approval is obtained for the distribution of the Company&#146;s
earnings. If such distribution is made in the form of common shares, the amount transferred from
retained earnings is calculated based on the par value of the common shares issued.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B><I>Reason and Effect of a Change in Accounting Policies</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">In July&nbsp;2004, ADRF issued SFAS No.35 &#147;Accounting for Impairment of Assets&#148;, which was required
the Company to comply on January&nbsp;1, 2005. For all assets, excluding certain assets specified by
SFAS No.35, the Company is required to evaluate holding assets for any indication of impairment.
If there is an indication that an asset may be impaired, the Company is required to estimate the
recoverable amount of assets and to record impairment loss when the carrying value is less than
the recoverable amount of the assets. Subsequent reversal of an impairment loss is allowed when
any indication of the impairment loss recognized in the prior years may no longer exist. The
Company is required to evaluate the goodwill for impairment on the annual basis. The reversal of
an impairment loss for goodwill is not allowed. The changes of the accounting policies for
compliance with R.O.C. SFAS No.35 results in the decreases of goodwill, idle assets, and assets
to be disposed at the amount of NT$3,679, NT$391,497, and NT$510,482 respectively. As of
December&nbsp;31, 2005, the total assets decreased at the amount of NT$905,658 with the increases of
net losses at the amount of NT$905,658 and the decrease in basic earnings per share at the amount
of NT$0.31 for the Company.
</DIV>

<P align="center" style="font-size: 10pt">F-21
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Effective January&nbsp;1, 2005, the Company complies with the revised R.O.C. SFAS No.&nbsp;5, &#147;Accounting
for Long-Term Equity Investment&#148; that requires the Company recognize the investment gains or
losses for the investee companies under the equity method. The changes of the accounting
policies for compliance with R.O.C. SFAS No.5 result in no significant effect on the Company&#146;s
net income.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">In December&nbsp;2004, ARDF revised SFAS No.7, &#147;Consolidated Financial Statements&#148;, which requires the
Company to comply on June&nbsp;30, 2005. The Company is required to consolidate all the investees
that the Company held the controlling interest. Controlling interests is presumed not only when
the Company held majority of the investees&#146; voting shares, but also under certain circumstances
specified in the revised R.O.C. SFAS No.&nbsp;7. Beginning January&nbsp;1, 2005, the Company consolidated
the accounts of MPI as the Company held a majority of the directors on the board of MPI.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B><I>Recent Accounting Pronouncements</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">In December&nbsp;2003, the R.O.C. Accounting Research and Development Foundation (&#147;ARDF&#148;) issed SFAS
No.34 &#147;Accounting for Financial Instruments&#148;, which is required to be applied by the Company on
January&nbsp;1, 2006. SFAS No.34 will require the Company to classify all financial instruments,
excluding limited financial instruments specified by SFAS No.34, as either trading,
available-for-sale or held-to-maturity. Debt securities that the Company has the positive intent
and ability to hold to maturity are classified as held-to-maturity securities and reported at
amortized cost. Debt and equity securities that are bought and traded for short-term profit are
classified as trading securities and reported at fair value, with unrealized gains and losses
charged to earnings for the current period. Debt and equity securities not classified as either
held-to-maturity or trading are classified as available-for-sale securities and reported at fair
value, with unrealized gains and losses excluded from earnings and reported as a separate
component of shareholders&#146; equity. Furthermore, SFAS No.34 will require the Company to recognize
all derivatives on the balance sheet at fair value. Derivatives that are not deemed as hedges
under SFAS No.34 must be adjusted to fair value through income. If the derivative is deemed a
hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either
be offset against the change in fair value of the hedged assets, liabilities or firm commitments
through earnings, or recognized in other comprehensive income until the hedged item is recognized
in earnings. The Company is currently evaluating the effect of adopting the standard but
expects the implementation will not have a material effect on the Company&#146;s financial position or
overall trends in results of operations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">In June&nbsp;2005, ARDF issued R.O.C. SFAS No.&nbsp;36, &#147;Financial Instruments: Disclosure and
Presentation&#148;, which is also required the Company comply on January&nbsp;1, 2006. The Company is
required to present the financial instruments, from the perspective of the issuer, into financial
assets, financial liabilities and equity instruments. In addition, the Company is required to
classify the related interests, dividends, losses and gains. The Company is also required to
disclose the information about the nature and extent of the
</DIV>

<P align="center" style="font-size: 10pt">F-22
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Company&#146;s use of financial instruments, the business purposes of the financial instruments, the
risks associated with the financial instruments as well as the management&#146;s policies on
controlling those risks. The principles in R.O.C. SFAS No.36, &#147;Financial Instruments: Disclosure
and Presentation&#148; complement the principles for recognizing and measuring financial assets and
financial liabilities in R.O.C. SFAS No.&nbsp;34, &#147;Accounting for Financial Instruments&#148;.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B><I>Reclassifications</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Certain accounts in the consolidated financial statements as of December&nbsp;31, 2004 and for the
years ended December&nbsp;31, 2003 and 2004 have been reclassified to conform to the consolidated
financial statements as of and for the year ended December&nbsp;31, 2005.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>3.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Information Expressed in U.S. Dollars</B></TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company expresses its consolidated financial statements in N.T. dollars. Translation of
N.T. dollar amounts into U.S. dollar amounts is included solely for the convenience of the
readers and has been made at the rate of NT$32.80 to US$1.00 on the basis of the noon buying
rate in New York for cable transfers as certified for customs purposes by the Federal
Reserve Bank of New York on December&nbsp;31, 2005. No representation is made that the N.T.
dollar amounts have been, could have been, or could be in the future converted into U.S.
dollars at that or any other rate.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>4.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Cash and Cash Equivalents</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">As of December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Petty cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,814</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">55</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Checking and savings accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,948,043</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,246,740</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">220,938</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Time deposits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">112,139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,778,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,704</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,054,906</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,106,783</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,743</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,115,688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,133,620</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">339,440</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-23
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>5.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Short-Term Investments</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">As of December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mutual funds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">901,871</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,169</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">918,040</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: Allowance for market value decline</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">918,040</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>6.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Notes and Accounts Receivable</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">As of December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Notes receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">184</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,615,335</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,093,185</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,816</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,715,343</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,099,213</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: Allowance for doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(161,833</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(92,757</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,828</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,553,510</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,006,456</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,172</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>7.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Inventories</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">As of December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Merchandise</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">232,339</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">184,471</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,624</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Finished goods</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,389,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,716,412</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,330</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Work in process</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,217,347</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,925,020</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119,665</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Raw materials</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,159</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">220,930</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,735</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Supplies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79,287</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119,087</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,631</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">324</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,899</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,068,456</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,167,819</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">188,043</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: Allowance for market
value decline and obsolescence</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,242,215</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,578,374</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(78,609</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,826,241</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,589,445</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">109,434</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The insurance coverage for inventories amounted to NT$6,032,985 and NT$ 6,055,495 (US$184,619) as
of December&nbsp;31, 2004 and 2005, respectively.
</DIV>

<P align="center" style="font-size: 10pt">F-24
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>8.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Long-Term Investments</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">As of December 31, 2004</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Percent</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Shares</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">NT$000</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">owned</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounted for under equity method:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Magic Pixel Inc. (&#147;MPI&#148;)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,264,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95,032</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">48.76</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Biomorphic Microsystems Corporation (&#147;Biomorphic&#148;)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,524,521</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">30.08</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Raio Electronic Co. Ltd. (&#147;Raio&#148;)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,523,210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">26.28</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Procomm Inc. (&#147;Procomm&#148;)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,132,513</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">38.38</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Xinmax Technology Development (&#147;XTD&#148;)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,226</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">45.00</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Subtotal</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">176,438</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounted for under cost method:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Ardentec Corp. (&#147;Ardentec&#148;)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,148,752</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">309,064</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">10.64</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Chien Cheng Venture Capital Co., Ltd. (&#147;Chien&#148;)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">15.38</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Chipbond Technology Corp. (&#147;Chipbond&#148;)**</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,749,765</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,122</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.77</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">FueTrek Co., Ltd. (&#147;FueTrek&#148;)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">480</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,324</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">16.22</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Global Strategic Investment Fund (&#147;GSI&#148;)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.52</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Honbond Venture Capital Co., Ltd. (&#147;Honbond&#148;)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">15.00</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Pico Netics Inc. (&#147;Pico&#148;)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.35</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Powertech Co., Ltd. (&#147;Powertech&#148;)**</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,694,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,433</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.09</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Quality Test System Inc. (&#147;QTS&#148;)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,538,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">14.64</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tower Semiconductor Ltd. (&#147;Tower&#148;)**</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,773,395</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,034,691</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">13.35</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">United Industrial Gases Co., Ltd. (&#147;UIG&#148;)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,274,212</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.24</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Subtotal</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,795,554</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Less:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Allowance for market value decline</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,351,527</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net of Long-Term Investment under Cost Method</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,444,027</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total Long-Term Investment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,620,465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">**</TD>
    <TD>&nbsp;</TD>
    <TD>Publicly traded</TD>
</TR>

</TABLE>



<P align="center" style="font-size: 10pt">F-25
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000">As of December 31, 2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Percent</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Shares</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">NT$000</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">US$000</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">owned</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounted for under equity method:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Raio Technology Co., Ltd. (&#147;Raio&#148;)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">504,642</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">18.32</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounted for under cost method:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Ardentec Corporation (&#147;Ardentec&#148;)**</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,679,983</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">261,192</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">8.83</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Chien Cheng Venture Capital Co., Ltd. (&#147;Chien&#148;)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,439</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">15.38</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Chipbond Technology Inc. (&#147;Chipbond&#148;)**</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,871,134</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,799</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,152</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.44</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">FueTrek Co., Ltd. (&#147;FueTrek&#148;)**</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">919</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6.27</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Global Strategic Investment Fund (&#147;GSI&#148;)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.52</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Honbond Venture Capital Co., Ltd. (&#147;Honbond&#148;)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,659</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">15.00</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Pico Netics Inc. (&#147;Pico&#148;)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2.23</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Quality Test System, Inc. (&#147;QTS&#148;)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,538,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">14.64</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tower Semiconductor Ltd. (&#147;Tower&#148;)**</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,773,395</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">540,583</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,481</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">13.11</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">United Industrial Gases Co., Ltd. (&#147;UIG&#148;)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,274,212</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,783</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.18</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Sub-total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,193,903</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,399</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Add: Prepayment of long-term investment &#151; Tower</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,226,753</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,401</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">**</TD>
    <TD>&nbsp;</TD>
    <TD>Publicly Traded</TD>
</TR>

</TABLE>




<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">For the years ended December&nbsp;31, 2003, 2004 and 2005, the net investment loss from the investees
accounted for under the equity method was NT$87,219, NT$99,073, and NT$89,525 (US$2,729),
respectively. The carrying amounts and the related equity in earnings of the investees accounted
for under the equity method were determined based upon the audited financial statements of the
investees as of and for the same periods ended December&nbsp;31, 2004 and 2005.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">For the years ended December&nbsp;31, 2004 and 2005, the unrealized loss from the market value decline
in the long-term investment of Tower was NT$1,349,668 and NT$1,351,527 (US$41,205), respectively.
The Company evaluated the effects on the continuous declines in Tower&#146;s stocks to the long-term
investment of the Company. The Company impaired the investment in Tower due to the
other-than-temporary decline of Tower&#146;s shares and recorded the impairment loss of US$47,709 for
the year ended December&nbsp;31, 2005.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">As of December&nbsp;31, 2005, the investment in Procomm carried a negative balance of NT$29,838
(US$910). The Company recorded other liabilities for the investment in Procomm due to the
negative book value of investment in Procomm.
</DIV>

<P align="center" style="font-size: 10pt">F-26
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">In 2005, Ardentec commenced trading on GTSM. The Company was required by GTSM to deposit shares
as the Company represented on Ardentec&#146;s Board. Under
GTSM&#146;s regulation, such compulsive deposit shares shall not be transferred or pledged. As of December&nbsp;31, 2005, the Company deposited
25,026,183 shares with book value of NT$227,916 (US$6,949). The Company held 28,679,983 shares
of Ardentec with the book value of NT$261,192 (US$7,963) as of December&nbsp;31, 2005.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">In 2003, Powertech commenced trading on GreTai Securities Market (&#147;GTSM&#148;). The Company was
required by GTSM to deposit Powertech&#146;s shares as the Company represented on Powertech&#146;s Board.
Under GTSM&#146;s regulation, such compulsive deposit shares shall not be transferred or pledged. For
the year ended December&nbsp;31, 2003, no deposit shares have been withdrawn. For the Year ended
December&nbsp;31, 2004, 3,077,225 shares have been withdrawn. As of December&nbsp;31, 2003 and 2004,
6,771,225 shares and 3,694,000 shares, with book value of NT$72,584 and NT$34,433 were deposited,
respectively. In 2005, the Company resigned from the Board of Powertech, re-classified the
investment in Powertech as the short-term investment, and deposed the remaining holding shares of
Powertech.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">In 2002, Chipbond commenced trading on GreTai Securities Market (&#147;GTSM&#148;). The Company was
required by GTSM to deposit Chipbond&#146;s shares as the Company represented on Chipbond&#146;s Board.
Under GTSM&#146;s regulation, such compulsive deposit shares shall not be transferred or pledged. For
the year ended December&nbsp;31, 2003, no deposited shares have been withdrawn. For the year ended
December&nbsp;31, 2004 and 2005, 1,487,000 and 1,680,000 shares have been withdrawn, respectively. As
of December&nbsp;31, 2003, 2004, and 2005, 5,574,000 shares, 4,087,000 shares and 2,407,000 shares,
with book value of NT$87,657, NT$59,697 and NT$23,503 were deposited, respectively.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">In 2001, QTS proceeded to reduce its paid-in capital to offset accumulated deficit. The Company
evaluated the effects on the reduction of capital of QTS to the long-term investment of the
Company. In 2001, the Company fully impaired the investment in QTS due to the less possibility
to recover the investment loss in QTS.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Except for those shares compulsorily deposited by GTSM, no other long-term investments were
pledged or restricted as of December&nbsp;31, 2004 and 2005.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>9.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Property, Plant and Equipment</B></TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">For the years ended December&nbsp;31, 2003, 2004 and 2005, depreciation expenses on property,
plant and equipment were NT$8,614,734, NT$7,092,077, and NT$6,742,955 (US$205,578),
respectively.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">As of December&nbsp;31, 2003, 2004 and 2005, the insurance coverage for property, plant and
equipment was NT$60,701,821, NT$58,910,730 and NT$61,466,524 (US$1,873,979), respectively.
</DIV>

<P align="center" style="font-size: 10pt">F-27
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">For the years ended December&nbsp;31, 2003, 2004 and 2005, the interest expenses, before deducting
capitalized interest amount of NT$79,114, NT$32,467, and NT$80,744 (US$2,462) for the respective
years, were NT$1,157,012, NT$716,572, and NT$458,005 (US$13,964), respectively. For the years
ended December&nbsp;31, 2004 and 2005, the capitalized interests and the effective interest rate were
listed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000">For the year ended December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2003</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Capitalized Interest</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Buildings and facilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,801</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">222</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">862</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Production equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77,313</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,245</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79,882</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,436</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total of capitalized interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79,114</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,467</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">80,744</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,462</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effective interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4.01</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.81</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.05</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.05</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">For the years ended December&nbsp;31, 2003, 2004 and 2005, depreciation expenses of the idle assets
were NT$49,868, NT$0, and NT$0, respectively. The Company evaluated the recoverable amount of
idle assets held by the subsidiaries based upon the fair market value of the idle assets. For
the year ended December&nbsp;31, 2005, the Company recognized the impairment loss on idle assets of
NT$391,497 (US$11,936) under the non-operating expenses. As of December&nbsp;31, 2004 and 2005, the
details in idle assets were listed as follows:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>10.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Idle Assets</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">As of December 31</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2005</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">US$000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Land</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">706,125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,528</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Production equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,043</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">398</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research and development equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Office furniture and fixtures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">353</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Subtotal</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">719,701</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,942</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accumulated Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Production equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,043</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(397</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research and development equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(108</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Office furniture and fixtures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(251</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(8</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Subtotal</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,402</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(408</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accumulated Impairment Loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-28
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">As of December 31</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2005</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">US$000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Land</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(391,324</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,931</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research and development equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(72</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Office furniture and fixtures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(101</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Subtotal</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(391,497</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,936</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net of Idle Assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">314,802</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,598</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company recognizes assets impairment loss amounted to NT$510,482 based on net fair value
of disposing FAB III. Please refer to Note 27 &#147;Other Disclosures&#148;. Assets held for
disposition pledged as the collateral for loans will be rescinded in the first quarter of
2006 as the related loans have been discharged as of December&nbsp;31, 2005. As of December&nbsp;31,
2004 and 2005, the details in assets held for disposition were listed as follows:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>11.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Assets to be Disposed</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">As of December 31</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2005</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">US$000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Building and facilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,030,938</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">244,846</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accumulated Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Building and facilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,220,456</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(67,697</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accumulated Impairment Loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Building and facilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(510,482</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(15,564</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net of assets held for disposition</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,300,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">161,585</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>12.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Short-Term Debts</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">As of December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD  style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Letter of credit due within 180&nbsp;days
at variable interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">342,282</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,921</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">241</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Working capital loans and secured
loans within 180&nbsp;days at variable
interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,554,572</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,885,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,495</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,896,854</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,893,754</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,736</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-29
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">As of December&nbsp;31, 2004 and 2005, the weighted average interest rate of the short-term debts was
2.81% and 1.70% to 5.87%, respectively.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">As of December&nbsp;31, 2004 and 2005, the Company&#146;s unused line of credit with terms of 180&nbsp;days
(including unused letter of credit) was NT$5,424,345 and NT$5,179,454 (US$157,910), respectively.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>13.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Short-Term Notes</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">As of December 31, 2004</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2" style="border-bottom: 1px solid #000000">Interest</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="left" colspan="2" style="border-bottom: 1px solid #000000">Period</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="left" colspan="2" style="border-bottom: 1px solid #000000">NT$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commercial Paper</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.43463</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2004.10.29~2005.1.21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: Discount</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(76</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99,924</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">There were no short-term notes outstanding as of December&nbsp;31, 2005. As of December&nbsp;31, 2004 and
2005, the Company&#146;s unused short-term line of credit for short-term notes was NT$80,000 and
NT$180,000 (US$5,488), respectively. There were no assets pledged as collateral for short-term
notes.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>14.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Capital Lease Obligations</B></TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">In 2001, the Company signed a lease agreement with Nintendo for equipment with a cost of
NT$1,750,658. The lease term is from July&nbsp;31, 2001 to June&nbsp;30, 2005. The lease obligation was
repayable in 36&nbsp;monthly installments from July&nbsp;31, 2002 to June&nbsp;30, 2005. During the lease
period, the Company was not allowed to modify or sublease the equipment. The ownership of the
equipment must be unconditionally transferred to the Company at the end of lease term.
Accumulated depreciation of assets under capital leases was NT$890,653 and NT$0 (US$0) as of
December&nbsp;31, 2004 and 2005, respectively. As of June&nbsp;30, 2005, the lease agreement had expired
and the Company did not have any capital lease obligations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">As of December&nbsp;31, 2004, capital lease obligations were listed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">2005.01.01 ~ 2005.06.30</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">NT$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital lease obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">306,533</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: unrealized interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,087</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current portion of lease obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">303,446</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">F-30
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>15. Long-Term Debts</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Interest Rate</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">Balance</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">As of December 31</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">As of December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2005</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Secured</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Medium term loan
from one bank,
repayable in 8
semi-annual
installments from
June&nbsp;2003 to
December&nbsp;2006 with
variable interest
rates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.025</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.92</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,049</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Medium term loans
from one bank,
repayable in 96
monthly installments
from May&nbsp;1999 to
April&nbsp;2007 with
variable interest
rates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,780</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Medium term loan
from 14 banks,
repayable in 19
quarterly
installments from
July&nbsp;1999 to
December&nbsp;2005 with
variable interest
rates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.684~4.040</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,070</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Medium term loan
from 1 bank,
repayable in 156
monthly installments
from May&nbsp;2003 to
April&nbsp;2016 with
variable interest
rates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.47</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">775,024</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">706,638</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,544</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Medium term loan
from 1 bank,
repayable in 17
quarterly
installments from
April&nbsp;2002 to April
2006 with variable
interest rates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.255</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94,120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Medium term loan
from 20 banks,
repayable in 10
semi-annual
installments from
March&nbsp;2005 to
September&nbsp;2009 with
variable interest
rates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.579</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,060,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,648,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">172,195</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Medium term loan
from 1 bank,
repayable in full at
maturity with
variable interest
rates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">800,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">800,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,390</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Medium-term loan
from 1 bank,
repayable in 9
quarterly
installments from
December&nbsp;2006 with
variable interest
rates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,049</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SB II Debentures,
5-year secured
debentures repayable
in full at maturity
in October&nbsp;2006 with
interest paid
annually at a fixed
interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91,464</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-31
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Interest Rate</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">Balance</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">As of December 31</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">As of December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2005</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unsecured</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ECB IV Debentures,
5-year unsecured
convertible
debentures puttable
in August&nbsp;2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">DCB I Debentures,
5-year unsecured
convertible
debentures puttable
in December&nbsp;2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">209,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ECB V Debentures,
5-year unsecured
convertible
debentures puttable
in February&nbsp;2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">202,944</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Subtotal</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,487,729</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,413,038</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">317,471</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Add: Reserve for
redemption of
convertible bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,778</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: Current portion</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,196,469</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,635,295</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(141,320</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,313,038</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,777,743</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">176,151</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s unused line of credit for long-term debts was NT$0 and NT$500,000 (US$15,244) as of
December&nbsp;31, 2004 and 2005, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>16. Convertible Bonds</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The non-interest bearing 5-year unsecured convertible debentures (&#147;DCB I&#148;) due December&nbsp;2007. The
initial conversion price was NT$11. The conversion price was subject to adjustment and was reset to
NT$8.8 and NT$8.7 on June&nbsp;27, 2003 and December&nbsp;31, 2004, respectively. As of December&nbsp;31, 2005,
an aggregate principal amount of NT$2,990,800 (US$91,183) has been converted. In 2005, the Company
repurchased the outstanding DCB I at the amount of NT$73,700 (US$2,247) and called back the
outstanding DCBI at the amount of NT$20,400 (US$622). The bondholders put back the outstanding DCB
I at the amount of NT$115,100 (US$3,509) in 2005. As of December&nbsp;31, 2005, the outstanding DCB I
has been fully redeemed. The debt extinguishment gain was NT$778 (US$24) for the year ended
December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On October&nbsp;29, 2001, the Company issued NT$3,000,000 of five-year secured debentures (&#147;SB II&#148;), due
in October&nbsp;2006 with a stated interest rate of 3.3%. SB II was guaranteed by 20 banks in total of
NT$3,099,000. The interest expense is repayable annually while the bonds will be paid in full at
maturity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The 0.5% 5-year unsecured convertible debentures due in February&nbsp;2007 (&#147;ECB IV&#148;). The initial
conversion price was NT$31.32 per share. The conversion price was subject to adjustments in the
events that certain changes occurred to the Company&#146;s capital structure was reset to NT$28.2329.
The holders of the ECB IV had the right to put the debentures at predetermined price. As of
December&nbsp;31, 2004 and 2005, the Company
</DIV>

<P align="center" style="font-size: 10pt">F-32
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">repurchased and canceled outstanding balance of ECB IV at the amount of US$169,124 and US$166,124,
respectively. In 2005, the Company called back the outstanding ECB IV at the aggregate amount of
US$100 while the bondholders put back the remaining outstanding ECB IV at the amount of US$3,000.
For the year ended December&nbsp;31, 2003, 2004 and 2005, the related debt extinguishment gain was NT$0,
NT$63,070 and NT$422 (US$13) recorded as non-operating income, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The non-interest bearing 5-year unsecured convertible debentures (&#147;ECB V&#148;) due February&nbsp;2008. The
initial conversion price was NT$12.06. The conversion price was subject to adjustments in the
events that certain changes occurred to the Company&#146;s capital structure was reset to NT$11.9584.
As of December&nbsp;31, 2004, the bondholders has put back and converted the outstanding ECB V at the
amount of US$78,100 and US$5,500, respectively. As of December&nbsp;31, 2005, the bondholders has put
back and converted the remaining outstanding ECB V at the amount of US$84,500 and US$5,500,
respectively. For the year ended December&nbsp;31, 2003, 2004 and 2005, the extinguishment gain was
NT$0, NT$0 and NT$300 (US$9), respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of December&nbsp;31, 2005, the future principal repayments for the Company&#146;s long-term bank loans and
bonds were listed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">

<TD nowrap align="left"><DIV style="margin-left:30px; text-indent:-15px">Years</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,635,295</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">141,320</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,339,428</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71,324</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,524,829</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,489</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,480,384</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,134</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68,384</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,085</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">After 2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">364,716</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,119</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,413,036</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">317,471</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company pledged the assets as collateral for security for foreign labor, customs clearance
deposits, deposit for technology with government, compensated deposits, secured loans and capital
leases as of December&nbsp;31, 2004 and 2005 were listed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">As of December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Restricted investments-current</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,429,606</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,928,913</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,808</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,644,550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,656,690</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">202,948</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Held-for-Sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,939,213</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,586</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,074,156</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,524,816</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">412,342</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-33
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>17. Pension Plan</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Labor Pension Act of the R.O.C. (the Act), which adopts a defined contribution plan, became
effective on July&nbsp;1, 2005. Employees may choose to elect either the Act, by retaining their
seniority before the enforcement of the Act, or the pension mechanism of the Labor Standards Law.
According to the Act, the rate of contribution by any employer to an employee&#146;s pension account per
month shall not be less that 6% of each employee&#146;s monthly salary or wage. The Company and the
domestic subsidiaries have made monthly contributions based on each individual employee&#146;s salary or
wage to employees&#146; pension accounts since July&nbsp;1, 2005, and amounting to NT$56&nbsp;million as of
December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The defined benefit plan under the Labor Standards Law is disbursed based on the units of service
years and the average salary in the last month of the service year. Two units per year are
entitled for the first 15&nbsp;years of services while one unit per year is entitled after the
completion of the fifteenth years. The total units shall not exceed 45 units. In accordance with
the plan, the Company contributes an amount equivalent to 2% of the employee&#146;s total salaries and
wage on a monthly basis to the pension fund deposited at the Central Trust of China in the name of
an administered pension fund committee. Government authority will collect the fund as a Labor
Retirement Fund and determine the allocation and investment policy of the assets. The unrecognised
net asset or obligation at transition based on actuarial valuation is amortized on a straight-line
basis over 25&nbsp;years.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The changes in benefit obligation and plan assets for the years ended December&nbsp;31, 2004 and
2005 were listed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">As of December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Benefit obligation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Projected benefit obligation at beginning of the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">870,495</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,077,317</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,845</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119,969</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83,782</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,554</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,326</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,281</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,137</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrecognized actuarial loss (gain)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(135,411</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,128</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Benefit paid to retirees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,324</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,965</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(60</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,792</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">153</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Projected benefit obligation at end of the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,077,317</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,066,014</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,501</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Plan assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Plan assets at beginning of the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">636,062</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">679,505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,717</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Actual return on plan assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,727</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,075</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">307</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Employer&#146;s Contributions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,040</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,025</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,281</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Benefit paid to retirees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,324</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,965</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(60</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Plan assets at end of the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">679,505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">729,640</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,245</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-34
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reconciliation of funded status of the plans and accrued pension costs was listed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">As of December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pension obligation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Vested benefit obligation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Non-vested benefit obligation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(649,133</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(650,810</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(19,842</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accumulated benefit obligation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(649,133</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(650,810</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(19,842</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Additional benefits based on future salary increases</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(428,184</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(415,204</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,659</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Projected benefit obligation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,077,317</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,066,014</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(32,501</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Plan assets at fair value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">679,505</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">729,640</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,245</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Projected benefit obligation in excess of plan assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(397,812</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(336,374</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(10,256</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrecognized net transition obligation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,475</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,363</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,444</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrecognized prior service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,504</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,202</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">738</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrecognized actuarial loss (gain)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,396</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(78,831</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,403</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,781</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrued pension under LPA</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(28,152</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(858</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrued pension cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(278,656</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(371,792</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(11,335</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The components of net pension costs for the years ended December&nbsp;31, 2003, 2004 and 2005 were
listed as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000">For the year ended December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2003</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">118,257</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119,969</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132,450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,038</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,326</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,281</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,137</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected return on plant assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(24,483</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(22,906</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(22,990</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(701</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of prior service costs and unrecognized</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,394</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,394</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,469</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Curtailment
gain</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(48,668)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(1,484)</TD>
    <TD>&nbsp;</TD>
</TR>



<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net pension cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">125,131</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">131,783</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">102,542</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,126</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-34
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Actuarial assumptions for Years ended December&nbsp;31, 2003, 2004 and 2005 were listed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">For the year ended December 31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2003</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Discount rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD nowrap align="right">2.5%&#150;3.75</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Rate of increase in future compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected long-term rate of return on
plan assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.5</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD nowrap align="right">2.5%&#150;2.75</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Expected future benefit payments were listed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="56%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="19%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Years ended December 31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">NT$</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,432</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,658</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,659</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,384</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,272</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2011-2015</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">129,445</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company expects to contribute NT$40,726 to the pension funds in 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>18. Income Taxes</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The statutory tax rate is 25%. The Company is entitled to a four-year income tax exemption period
on income generated from the cost of the expansion of operations located in the HCSP. Such
exemption period must start within four years from the date the expanded operations begin
operational activities. Alternatively, the Company may irrevocably elect to utilize tax credits
at 15% of the cost of the expansion operations located in the HSP during a five year period
beginning in the year taxable income is first generated from the expanded operations. The Company
has elected to start the four-year tax exemption period to run from January&nbsp;1, 2001 to December
31, 2004.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">As of December&nbsp;31, 2005 unused tax credits available to reduce future taxable income were
NT$3,003,591 (US$91,573). The available tax credit in each year is limited to 50% of the
corporate tax payable in that year, except in the last of such five-year period when there is no
such limit.
</DIV>

<P align="center" style="font-size: 10pt">F-36
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of December&nbsp;31, 2005, the available tax credits were listed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Expiration Years</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:40px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,361,171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,499</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">600,688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,314</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:40px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">569,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,351</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">472,630</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,409</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:38px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,003,591</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">91,573</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Under the rules of the R.O.C. Income Tax Law, operating losses can be carried forward for five
years. As of December&nbsp;31, 2005, the Company had the following unutilized loss carry-forwards:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Expiration Years</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:40px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,059,315</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">184,735</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,604,045</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">262,319</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:40px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">338,469</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,319</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:40px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,762,561</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,224</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:38px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,764,390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">541,597</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The components of income tax expense (benefit)&nbsp;were listed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000">As of December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2003</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(27,116</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,867</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,054</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">551</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,914</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">197,360</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,017</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,027</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,781</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">215,414</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,568</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-37
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The reconciliation of book income tax expense (benefit)&nbsp;to income tax expense (benefit)&nbsp;recorded
is summarized below:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000">For the year ended December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2003</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected income tax expense (benefit)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,044,259</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,785</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,720,531</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(52,455</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Undistributed earnings tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Investment credits (earned)&nbsp;expired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">829,546</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(294,120</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">611,131</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,632</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Change in valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,256,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,349,198</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,656,582</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,506</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Permanent differences</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">317,135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,884</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(84,630</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,580</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of rate change</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(373,681</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,156,129</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(246,630</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,519</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,146</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,163</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(508</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(16</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,027</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,781</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">215,414</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,568</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Deferred income tax assets and liabilities consisted of:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">As of December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Tax depreciation in excess of book depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">282,970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrealized foreign exchange gains</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total deferred tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">282,970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Investment tax credits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,530,772</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,919,641</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,013</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventory provision</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">804,719</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">617,120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,815</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Bad debt allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,979</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,439</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">654</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrealized royalty expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">175,443</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">153,669</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,685</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Book amortization in excess of tax amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,194</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrealized foreign exchange loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82,619</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,278</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">222</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loss carry-forwards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,485,110</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,345,568</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132,487</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrealized pension expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">112,215</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,421</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrealized equity investment loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">819,931</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,425,991</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,475</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrealized interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,093</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,908</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">515</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrealized production variance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,711</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">112,595</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,433</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-38
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">As of December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">NT$000</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">NT$000</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Book depreciation in excess of tax depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">313,003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,543</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Impairment loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">127,621</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,891</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,082</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">782</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,022,288</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,198,715</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">310,936</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,843,018</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,499,600</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(259,134</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,179,270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,699,115</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,802</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total net deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,896,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,698,941</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,797</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net deferred tax assets-current</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,951</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,494</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">594</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net deferred tax assets- non-current</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,877,349</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,679,447</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,203</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total net deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,896,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,698,941</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,797</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;&nbsp;&nbsp;The
Company may lose some of its investment tax credits as a result of
its selling of FAB&nbsp;III in 2006.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>19. Shareholders&#146; Equity</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Common Stocks
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">As of January&nbsp;1, 2004, the Company&#146;s authorized and issued common shares, with par value of NT$10
per share, at the total amount of NT$65,500,000 for 6,550,000,000 shares (including 650,000,000
shares and 972,241,695 shares reserved for future exercise of stock options and conversion of
convertible bonds, respectively) and NT$44,027,583 for 4,402,758,305 shares, respectively.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">328,078,360 common shares, with the par value of NT$10 per share, were issued for conversion of
MXIC&#146;s domestic convertible bonds (&#147;DCB I&#148;) as of December&nbsp;31, 2005. On October&nbsp;27, 2004, MXIC&#146;s
BOD approved to change the authorized common shares reserved for convertible bonds to 864,703,672
common shares.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">On June&nbsp;27, 2003, the Board of Directors approved a resolution to issue 525,000,000 common shares
with NT$10 at par by means of 13,125,000 Global Depositary Shares (&#147;GDS&#148;). Each GDS represents
40 common shares. The GDS offering was listed on Luxembourg Stock Exchange on April&nbsp;5, 2004 and
issued at a premium of NT$10.87317 per common share. After April&nbsp;13, 2004, GDS holders may elect
to convert GDS into common shares.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">15,941,093 common shares, with the par value of NT$10 per share, were issued for conversion of
MXIC&#146;s ECB IV as of December&nbsp;31, 2005.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">On August&nbsp;8, 2005, the BOD approved to cancel 40,000,000 common shares for treasury stocks bought
back in 2002. The record date for the cancellation of treasury stock was August&nbsp;8, 2005.
</DIV>




<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Capital reserve
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">According to the R.O.C. Company Law, the capital reserve can only be used to offset a deficit.
However, the capital surplus generated from donations and the excess of the issue rice over the
par value of capital stock, including the stock issued for new capital, mergers, convertible
bonds and the surplus from treasury stock transactions, may be appropriated as stock dividends,
which are restricted to a certain percentage of the paid-in capital of the Company. The Company
cannot use the capital reserve to offset accumulated deficits unless the legal capital reserve
and special capital reserve are insufficient for offsetting such deficits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">On June&nbsp;27, 2003, the MXIC&#146;s shareholders approved a resolution at the annual meeting to use the
capital reserve of NT$2,630,621 to offset its accumulated deficits.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">On May&nbsp;25, 2005, the MXIC&#146;s shareholders approved a resolution at the annual meeting to use
the capital reserve of NT$315,704 to offset its accumulated deficits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Legal Capital Reserve
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">According to the R.O.C. Company Law, the appropriation of legal capital reserve shall be
made until the reserve equals to the Company&#146;s paid-in capital. The reserve can be used to
offset a deficit. When the reserve reached 50% of the paid-in capital, up to 50% of the reserve
may be transferred to capital.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">On June&nbsp;27, 2003, the MXIC&#146;s shareholders resolved in the annual meeting to use the legal
capital reserve of NT$1,708,689 to offset its accumulated deficit.
</DIV>

<P align="center" style="font-size: 10pt">F-39

</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">On November&nbsp;16, 2005, the GSM authorized the BOD to cancel 2,079,474,542 common shares at the
amount of NT$20,794,745 for the accumulated losses.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">As of December&nbsp;31, 2005, MXIC authorized and issued, with the par value of NT$10 per share,
NT$65,500,000 for 6,550,000,000 common shares (including 650,000,000 shares and 864,703,672
shares reserved for future exercise of stock options and conversion of convertible bonds,
respectively) and NT$49,952,963 for 4,995,296,328 common shares, respectively.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">As of December&nbsp;31, 2005, the company had 3,100,000 and 21,761,093 common shares outstanding in
the forms of 77,500 GDSs and 2,716,109 ADSs trading in the Luxemburg Stock Exchange and NASDAQ,
respectively.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Capital reserve
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">According to the R.O.C. Company Law, the capital reserve can only be used to offset a deficit.
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 are restricted to a certain percentage of the paid-in capital of the Company. The Company
cannot use the capital reserve to offset accumulated deficits unless the legal capital reserve
and special capital reserve are insufficient for offsetting such deficits.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">On June&nbsp;27, 2003, the MXIC&#146;s shareholders approved a resolution at the annual meeting to use the
capital reserve of NT$2,630,621 to offset its accumulated deficits.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">On May&nbsp;25, 2005, the MXIC&#146;s shareholders approved a resolution at the annual meeting to use
the capital reserve of NT$315,704 to offset its accumulated deficits.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Legal Capital Reserve
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">According to the R.O.C. Company Law, the appropriation of legal capital reserve shall be made
until the reserve equals to the Company&#146;s paid-in capital. The reserve can be used to offset a
deficit. When the reserve has reached 50% of the paid-in capital, up to 50% of the reserve may be
transferred to capital.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">On June&nbsp;27, 2003, the MXIC&#146;s shareholders resolved in the annual meeting to use the legal capital
reserve of NT$1,708,689 to offset its accumulated deficit.
</DIV>

<P align="center" style="font-size: 10pt">F-40
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Special Capital Reserve
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">According to the R.O.C. Security Exchange Law, the special capital reserve equivalent to the net
debit balance of the other components of shareholder&#146;s equity, normally arising from unrealized
losses on long-term investments or cumulative translation adjustments but excluding treasury
stock, shall be made from un-appropriated earnings pursuant to existing regulations promulgated
by the Securities and Futures Bureau (&#147;SFB&#148;). Any special capital reserve appropriated may be
reversed to the extent that the net debit balance reverses.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">On June&nbsp;27, 2003, the MXIC&#146;s shareholders resolved in the annual meeting to use the special
reserve of NT$378,657 to offset its accumulated deficits.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Earnings Distribution
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">MXIC&#146;s Articles of Incorporation as revised on June&nbsp;18, 2004 provided that, when allocating
the net profits for each fiscal year, MXIC shall first offset its accumulated losses in previous
years, set aside the legal capital reserve at 10% of the profits left over until the accumulated
legal capital reserve has equaled to MXIC&#146;s total capital, set aside the special reserve in
accordance with relevant laws and regulations, and then distributed the remaining distributable
profits according:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">a. Shareholder&#146;s dividend to shareholders equals to 83% of the Company&#146;s distributable earnings;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">b. Employee bonuses equals to 15% of distributable earnings; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">c. Remuneration for directors and supervisors&#146; services equal to 2% of distributable earnings
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The shareholder&#146;s dividend, after the approval of the General Shareholder&#146;s Meeting (&#147;GSM&#148;),
shall be retained, proportionally or in whole, as the undistributed earnings and subject to
the future distribution to the shareholders. The earnings of MXIC may be distributed by way
of cash dividend or stock dividend. However, the distribution of earnings shall be made
preferably by way of stock dividend. Distribution of earnings may also be made by way of
cash dividend; provided however, the ratio for cash dividend shall not exceed 20% of the
total distributable earnings. MXIC may issue stock bonuses to employees of an affiliated
company meeting the conditions set by MXIC&#146;s Board of Directors (&#147;BOD&#148;).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">As of December&nbsp;31, 2005, the Company had accumulated losses and did not have any
distributable earnings available. The information about the appropriations of bonus to
employees, directors and supervisors and earnings distribution is available at the Market
Observation System website.
</DIV>

<P align="center" style="font-size: 10pt">F-41
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>20. Employees&#146; Stock Option Plans</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">MXIC has five employees&#146; stock option plans (&#147;2001 plan&#148;, &#147;2002 plan&#148;, &#147;2003 plan&#148;, &#147;2004 plan&#148;
and &#147;2005 plan&#148;) approved by the Stock Futures Board (&#147;SFB&#148;). The maximum number authorized to
be granted under the 2001 plan, 2002 plan, 2003 plan, 2004 plan and
2005 plan was 80,000 thousand shares, 170,000 thousand shares, 200,000 thousand shares, 200,000 thousand shares and 200,000
thousand shares, respectively, with each option unit eligible to subscribe for one common share
when exercisable. The Company will issue additional common shares for the options exercised.
Unless the granted options were cancelled when the qualified employees violated the Company&#146;s
Code of Conducts, the aforementioned options are valid in six years subsequent to the grant dates
and exercisable up to 50%, 75% and 100% of the shares granted subsequent to the second
anniversary, the third anniversary and the fourth anniversary of the grant date, respectively.
The options are granted at the exercise price equal to the closing price of MXIC&#146;s common shares
listed on the Taiwan Stock Exchange (&#147;TSE&#148;) on the grant date. Exercise price is subject to
adjustments for changes of capital structure in accordance with the plans. As of December&nbsp;31,
2005, none of the employees&#146; stock options had been exercised.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">As of December&nbsp;31, 2005, information about MXIC&#146;s outstanding and exercisable options was as
follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">a. 2001 plan
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Grant Dates</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Units Issued</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Units Outstanding</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Exercise Price</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2002.01.16
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">71,768,500</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" colspan="3">20.10</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2002.05.06
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">560,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" colspan="3">19.80</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2002.10.01
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1,507,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">112,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" colspan="3">11.10</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2002.12.16
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6,164,500</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">217,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" colspan="3">11.30</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Total
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">80,000,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">329,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top">Total units authorized: 80, 000,000
</TD>
</TR>
<TR><TD colspan="5">&nbsp;</TD></TR>
<TR><TD colspan="5">b. 2002 plan</TD></TR>
<TR><TD colspan="5">&nbsp;</TD></TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Grant Dates</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Units Issued</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Units Outstanding</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Exercise Price</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2002.10.01
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">150,000,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">87,286,500</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" colspan="3">11.10</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2002.12.16
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10,284,500</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4,149,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" colspan="3">11.30</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2003.04.07
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2,753,500</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1,802,500</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" colspan="3">9.20</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Total
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">163,038,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">93,238,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top">Total units authorized: 170,000,000
</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-42
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">c. 2003 plan
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Grant Dates</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Units Issued</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Units Outstanding</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Exercise Price</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2003.06.13
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">193,212,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">138,906,453</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" colspan="3">7.75</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2003.11.04
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">829,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">496,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" colspan="3">9.00</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2004.03.11
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">685,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">314,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" colspan="3">12.90</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2004.03.30
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">785,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">553,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" colspan="3">12.20</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2004.04.27
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">749,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">749,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" colspan="3">14.10</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Total
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">196,260,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">141,018,453</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top">Total units authorized: 200,000,000
</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">d. 2004 plan
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Grant Dates</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Units Issued</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Units Outstanding</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Exercise Price</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2004.04.09
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">176,972,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">151,214,500</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" colspan="3">14.55</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2004.04.27
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4,919,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2,626,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" colspan="3">14.10</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2004.06.02
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2,176,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1,780,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" colspan="3">11.00</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2004.08.11
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5,015,500</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4,054,500</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" colspan="3">9.25</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2004.10.27
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4,466,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3,393,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" colspan="3">7.05</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2005.01.28
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4,428,500</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3,988,500</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" colspan="3">7.05</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2005.03.07
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1,172,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">888,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" colspan="3">6.88</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Total
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">199,149,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">167,944,500</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="center" valign="top">Total units authorized: 200,000,000
</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">e. 2005 plan
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Grant Dates</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Units Issued</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Units Outstanding</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Exercise Price</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2005.08.08</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">188,958,500</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">186,129,500</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" colspan="3">5.84</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2005.08.29</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7,978,500</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7,530,500</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" colspan="3">5.83</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2005.10.25</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2,372,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2,372,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top" colspan="3">5.81</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">199,309,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">196,032,000</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="right" nowrap>Total units authorized: 200,000,000</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">As of December&nbsp;31, 2005, none of the stock options has been exercised. Total outstanding
units were lesser than total issued units resulted from the cancellation of stock options
for the employees&#146; resignation or voluntary abstention from the stock options.
</DIV>

<P align="center" style="font-size: 10pt">F-43
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The information on MXIC&#146;s stock options that had never been granted or had been granted and
subsequently cancelled under the 2001 plan, 2002 plan, 2003 plan and 2004 plans was listed as
follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Expiration Date of Issuance</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Units Cancelled</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2001 plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2002.12.17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2002 plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2003.04.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,962,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2003 plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2004.04.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,740,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2004 plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2005.03.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">851,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The information on MXIC&#146;s outstanding stock options for the years ended December&nbsp;31, 2003, 2004
and 2005 was listed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>2003</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Units</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Weighted-Average Exercise Price</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding units at beginning of the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">217,741,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.77</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Units granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">196,794,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.78</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Units cancelled</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(129,545,675</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.56</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding units at end of the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">284,990,625</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Units exercisable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted-average fair value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.48</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Units</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Weighted-Average Exercise Price</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding units at beginning of the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">284,990,625</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Units granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">195,767,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Units cancelled</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(47,979,907</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.89</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding units at end of the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">432,778,218</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Units exercisable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,938,950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted-average fair value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.59</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Units</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Weighted-Average Exercise Price</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding units at beginning of the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">432,778,218</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Units granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">204,909,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.87</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Units cancelled</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(39,125,765</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.75</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding units at end of the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">598,561,953</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Units exercisable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">139,425,852</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted-average fair value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.55</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">F-44
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The aforementioned stock options granted on and after January&nbsp;1, 2004 were accounted for under
intrinsic value method required by the R.O.C. Accounting Research and Development Foundation
(&#147;ARDF&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the years ended December&nbsp;31, 2004 and 2005, no compensation expense was recognized under the
intrinsic value. The assumption and pro forma information under fair value method using
Black-Scholes Options Pricing Model was listed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Expected dividend yield
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" colspan="3">0%</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Expected volatility
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top" colspan="3">57.50% &#150; 52.10%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Risk-free interest rate
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" colspan="3">2.05% &#150; 1.55%</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Expected weighted-average life
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="3" align="left" valign="top">4.38 Years
</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Fair value
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" colspan="3">6.77 &#150; 1.10</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the
years ended December&nbsp;31, 2004 and 2005, the compensation expense recognized under fair
value method would have been NT$338,091 and NT$513,301 (US$15,649), respectively. The MXIC&#146;s
pro-forma information of net income and earnings per share was listed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">For the year ended December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Basic EPS</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Diluted EPS</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Basic EPS</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 0px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">As reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">217,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">217,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,027,189</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Earnings per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2.41</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(120,399</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(120,399</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,540,490</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Earnings per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.04</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.04</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2.59</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">MPI has the employees&#146; stock option plan (&#147;MPI 2004 plan&#148;) approved by its Board of Directors on
March&nbsp;12, 2004. The maximum units of options authorized to be granted under the MPI 2004 plan
was 1,000 thousand units, with each option unit eligible to subscribe for one common share at the
exercise price of NT$11. The exercise price is subject to the
adjustment to reflect the changes in capital structure or the appropriation of cash dividend in
accordance with the plan. The option is exercisable 30&nbsp;days subsequent to the grant date.
</DIV>


<P align="center" style="font-size: 10pt">F-45
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The information on the aforementioned stock option plans for MPI was listed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center">Grant Date</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Units Issued</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Exercise Price</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" valign="top" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">2004.06.25
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">180,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">11.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">2004.11.29
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">167,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">11.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">2005.02.21
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">124,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">11.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">2005.06.20
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">417,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">11.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">2005.08.15
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">112,000</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">11.00</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The information on MPI&#146;s outstanding stock options for the year ended December&nbsp;31, 2004 and 2005
was listed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Units</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Weighted-Average Exercise Price</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding units at beginning of the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Units granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">347,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Units cancelled</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding units at end of the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">347,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Units exercisable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted-average fair value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Units</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Weighted-Average Exercise Price</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding units at beginning of the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">347,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Units granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">653,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Units exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(900,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Units cancelled</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(100,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding units at end of the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Units exercisable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted-average fair value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The aforementioned stock options granted on and after January&nbsp;1, 2004 were accounted for under
intrinsic value method required by the R.O.C. Accounting Research and Development Foundation
(&#147;ARDF&#148;).
</DIV>

<P align="center" style="font-size: 10pt">F-46
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the year ended December&nbsp;31, 2004 and 2005, no compensation expense was recognized under
the intrinsic value method. The assumption and pro forma information
to value stock compensation expenses using minimum value method is as
follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected dividend yield</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Risk-free interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">1.15% &#150; 0.99 </TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected weighted-average life</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" nowrap align="right">0.25 year</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fair value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">MPI is a private holding company and carries no historical data for volatility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the year ended December&nbsp;31, 2004 and 2005, the compensation expense recognized under fair
value method would have been NT$0 and NT$0, respectively. The pro-forma information of net
income and earnings per share under consolidated basis was as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">For the year ended December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR valign="bottom" style="font-size: 8pt">
    <TD nowrap align="left">As reported</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Basic EPS</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Diluted EPS</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Basic EPS</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">217,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">217,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,027,189</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Earnings per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2.41</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">217,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">217,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,027,189</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Earnings per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2.41</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Biomorphic has the employees&#146; stock option plan (&#147;BIO 2004 plan&#148;) approved by its Board of
Directors on July&nbsp;26, 2004. The maximum units of options authorized to be granted under the BIO
2004 plan was 1,717,826 units, with each option unit eligible to subscribe for one common share.
Exercise price is subject to adjustments for changes of capital structure in accordance with the
plans. Biomorphic will issue additional common shares for the options exercised. The
aforementioned options are valid in six years subsequent to the grant dates and exercisable up to
50%, 75% and 100% of the shares granted subsequent to the second anniversary, the third
anniversary and the fourth anniversary of the grant date, respectively. As of December&nbsp;31, 2005,
none of the employees&#146; stock options had been exercised.
</DIV>

<P align="center" style="font-size: 10pt">F-47
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The information on the aforementioned stock option plan for Biomorphic was listed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Grant Dates</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Units Issued</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Units Outstanding</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Exercise Price</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2004.07.26</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">660,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">660,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005.12.09</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,054,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,054,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.00</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,714,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,714,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" align="center"><FONT style="white-space: nowrap">Total units authorized: 1,717,826</FONT></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Under the intrinsic value method, the compensation expense of NT$653 and NT$1,567 (US$48) was
recognized for the year ended December&nbsp;31, 2004 and 2005, respectively. The assumption and pro
forma information to value stock compensation expenses using minimum value method is as
follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected dividend yield</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">4.88</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Risk-free interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD nowrap align="right">2.10% &#150; 1.55</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected weighted-average life</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" nowrap align="right">4.38 Years</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fair value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.07  &#150; 1.88</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Biomorphic is a private holding company and has no historical data for the volatility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For the year ended December&nbsp;31, 2004 and 2005, the compensation expense recognized by Biomorphic
under fair value method would have been NT$878 and NT$2,173 (US$66), respectively. The pro-forma
information of net income and earnings per share under the consolidated basis was as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">For the year ended December 31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 8pt">
    <TD nowrap align="left">As reported</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Basic EPS</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Diluted EPS</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Basic EPS</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">217,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">217,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,027,189</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Earnings per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.41</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">217,467</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">217,467</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,027,521</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Earnings per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2.41</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-48
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>21. Treasury Stock</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">For the year ended December&nbsp;31, 2004 and 2005, the details in shares of treasury stock were
listed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Beginning Balance</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Addition</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Disposal</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Ending Balance</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">For the year ended December&nbsp;31, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">MXIC&#146;s stocks held by Hui Ying</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,023,152</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,023,152</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Repurchase under share buyback plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,000,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Subtotal of Treasury Stocks</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,023,152</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,023,152</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">For the year ended December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">MXIC&#146;s stocks held by Hui Ying</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,023,152</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,023,152</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Repurchase under share buyback plan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Subtotal of Treasury Stocks</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,023,152</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,023,152</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">As of December&nbsp;31, 2004 and 2005, the book value of MXIC&#146;s treasury stocks was NT$1,188,436
and NT$142,365 (US$4,340), respectively. The market value of MXIC&#146;s treasury stocks was
NT$333,208 and NT$27,036 (US$824), respectively.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">MXIC&#146;s stocks held by Hui Ying were reclassified to MXIC&#146;s treasury stocks and Hui Ying was
entitled to the rights of shareholders, except that starting from June&nbsp;24, 2005, pursuant to
the revised Company Law, the holders are no longer entitled to the right to vote.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">On April&nbsp;24, 2002, the Company&#146;s BOD approved the buyback plan to repurchase 335,934,621
shares of MXIC&#146;s common stocks listed on the TSE. The Company repurchased 40,000,000 shares
for the total cost of NT$1,046,071 in 2002. The treasury shares held by MXIC from the
repurchase cannot be pledged, nor MXIC was entitled to the rights of shareholders for those
buyback shares. All the treasury stock repurchased under the buyback plan was retired on
August&nbsp;8, 2005.
</DIV>

<P align="center" style="font-size: 10pt">F-49
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>22. Earnings per Share</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The weighted average numbers of outstanding common shares for the calculation of basic earnings per
share were computed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">For the year ended December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2003</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Beginning balance of common shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,651,276,875</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,390,251,943</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,995,296,328</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Retroactive adjustment for cancellation of
common stock on February&nbsp;16, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,606,084,898</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,015,097,916</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,079,474,542</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of 475,000,000 common shares for
cash on November&nbsp;11, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">66,369,863</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bonds converted to common shares for the year
ended December&nbsp;31, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">134,088,222</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Retroactive adjustment for bonus element
included in the rights offering on <br>November
3, 2003 (0.1688%)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,388,732</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of 525,000,000 common shares for
Global Depositary Shares on April&nbsp;5, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">388,729,508</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bonds converted to common shares for the year
ended December&nbsp;31, 2004 (80,044,385 shares)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,669,886</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Subtotal</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,252,038,794</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,825,553,421</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,915,821,786</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Treasury stock owned by subsidiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,515,795</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,515,795</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,515,795</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Retroactive adjustment of treasury stock
owned by the subsidiary for bonus element
included in the rights offering on November
11, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,935</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average common shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,248,517,064</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,822,037,626</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,912,305,991</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dilutive effect of employee stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,900,447</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dilutive weighted average common shares
outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,248,517,064</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,840,938,073</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,912,305,991</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-50
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Consolidated
EPS were calculated as follows: (The following EPS&nbsp;presentation
for the years of 2003 and 2004 are retroactively adjusted to reflect
the cancellation of common stock on February 16, 2006.)
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">For the year ended December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2003</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2005</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income before tax available to MXIC&#146;s shareholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,197,745</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">217,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,829,227</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average common shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,248,517,064</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,822,037,626</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,912,305,991</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic EPS before tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3.65</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2.34</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)&nbsp;available to MXIC&#146;s shareholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,197,745</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">217,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,027,189</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average common shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,248,517,064</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,822,037,626</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,912,305,991</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic EPS after tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3.65</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2.41</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income before tax available to MXIC&#146;s shareholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,197,745</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">217,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,829,227</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of dilutive potential common shares -options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income before tax available to common shares
(including the effect of dilutive potential common
stock)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,197,745</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">217,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,829,227</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dilutive weighted average common shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,248,517,064</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,840,938,073</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,912,305,991</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted EPS before tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3.65</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2.34</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)&nbsp;available to MXIC&#146;s shareholders</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,197,745</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">217,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,027,189</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of dilutive potential common shares -options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)&nbsp;available to common shares
(including the effect of dilutive potential common
stock)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,197,745</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">217,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,027,189</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dilutive weighted average common shares outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,248,517,064</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,840,938,073</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,912,305,991</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted EPS after tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3.65</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2.41</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Assuming that the Company&#146;s shares owned by its subsidiaries were not treated as treasury
stock for the years ended December&nbsp;31, 2004 and 2005, the net income (loss)&nbsp;and earning (loss)
per share would be listed as follows: (The following
EPS&nbsp;presentation for the years of 2003 and 2004 are retroactively adjusted to reflect the cancellation of common stock on February 16, 2006.)</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">For the year ended December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 0px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">217,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,027,189</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(214,244</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrealized short-term investment income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,095</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(16,572</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(505</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income
(loss) &#151; pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">221,787</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,043,761</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(214,749</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-51
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="25%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Amount (numerator)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Shares</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Net loss per share</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>EPS</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Before tax</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">After tax</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(Denominator)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Before tax</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">After tax</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">For the year ended 12/31/2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic EPS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">221,787</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">221,787</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,825,553,421</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted effect:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Employee Stock Options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,900,447</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Diluted EPS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">221,787</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">221,787</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,844,453,868</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.08</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap><DIV style="margin-left:15px; text-indent:-15px">For the year ended 12/31/2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Basic EPS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(6,845,799</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(7,043,761</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,915,821,786</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Diluted EPS equaled to basic EPS as the potential common shares would have anti-diluted effect
on the Company&#146;s net loss for the year ended December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>23. Related Party Transactions</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">a. Related Parties and Relationships

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Related parties</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Relationship</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Procomm Inc. (&#147;Procomm&#148;)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The Company&#146;s equity investee</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Prominent Communications, Inc. (&#148;Prominent&#148;)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Procomm&#146;s equity investee</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Raio Technology Co., Ltd. (&#147;Raio&#148;)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">A subsidiaries&#146; equity investee</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">(Raio has not been a related party since
December, 2005)</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Tower Semiconductor Ltd. (&#147;Tower&#148;)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">A subsidiary served under the Board</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">FueTrek Co., Ltd. (&#147;FueTrek&#148;)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">A subsidiary served under the Board</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ardentec Corporation (&#147;Ardentec&#148;)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The Company served under the Board</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Macronix Education Foundation (&#147;MXIC Education&#148;)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The Company&#146;s executive director served as the
chairman</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">MegaChips Corporation(&#147;MegaChips&#148;)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">One of its sister company served under the Board</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">MegaChips LSI Solutions Inc. (&#147;MagaChips LSI&#148;)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">A subsidiary under MegaChips</TD>
</TR>
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">MegaChips
LSI Solutions Inc. Taiwan Branch<BR>

(&#147;MagaChips LSI Taiwan Branch&#148;)
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Taiwan Branch of MegaChips</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-52
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">b.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Major transactions with related parties</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left:2%">Sales to related parties were listed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000">For the year ended December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2003</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 0px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">BC</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">239,748</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">MPI</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">175,894</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Raio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">174,466</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,065</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,087</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">338</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Biomorphic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,953</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">FueTrek</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,591</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,674</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,329</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">101</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">PCI</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">341</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">428</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">MegaChips LSI</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,620,371</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">171,353</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">141,016</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,299</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">226,351</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">445,820</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,775,803</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">176,091</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left:2%">Sales prices to MegaChips LSI, FueTrek and Raio are not comparable with those of regular
customers because the Company is the sole provider for them. The payment term with the related
parties is between 30 to 60&nbsp;days, similar to that with regular customers.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">c.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Manufacturing processing charges to related parties for the years ended December&nbsp;31, 2003,
2004 and 2005 were summarized as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000">For the year ended December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2003</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 0px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Powertech</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">211,188</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ardentec</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">130,270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">260,199</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">218,274</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,655</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">341,458</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">260,199</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">218,274</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,655</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">d.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company purchased industrial gases from UIG at NT$100,016 for the year ended December&nbsp;31,
2003. Such purchases were included in cost of good sold. There are no purchases of industrial
gases from UIG for the years ended December&nbsp;31, 2004 and 2005, respectively.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-53
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">e.&nbsp;&nbsp;&nbsp;Wafer purchased from related parties was as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000">For the year ended December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2003</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 0px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tower</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,959</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">188,562</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,749</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">MegaChips LSI Taiwan
Branch</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,380</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,627</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,595</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">241,942</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,376</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Such purchases are included in cost of goods sold. Prices for wafer purchased from Tower and
MegaChips LSI Taiwan Branch were not comparable with prices for other vendors since we purchased
the customized wafers from both companies. For the years ended December&nbsp;31, 2003, 2004 and 2005,
the payment term to Tower and MegaChips LSI Taiwan Branch was Net 30&nbsp;days and Net 45&nbsp;days,
respectively.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">f.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Merchandise purchased from related parties was as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000">For the year ended December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2003</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 0px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Raio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,257</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,570</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,285</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">PCI</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,798</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Biomorphic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,935</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">120,990</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,570</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,781</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">146</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">g.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Operating leases to related parties were listed as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000">For the year ended December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2003</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 0px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">MPI</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,835</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Raio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">587</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,295</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,649</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">587</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,130</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,649</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The lease income from the related parties was charged monthly and recorded as other income under
non-operating income.
</DIV>

<P align="center" style="font-size: 10pt">F-54
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">h.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company entered into IP license agreements with FueTrek in 2002 and 2004 and obtained
related technology. The contractual amount of NT$ 13,502 (JPY45,800) and NT$19,743 (JPY66,650)
has been paid as of December&nbsp;31, 2004 and 2005, and was recorded as deferred charges and
amortized over the contract terms. For the year ended December&nbsp;31, 2004 and 2005, the amount
of research and development expenses paid to FueTrek was NT$0 and NT$3,780 (US$115),
respectively.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">i.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company donated NT$22,360, NT$16,300 and NT$10,166 (US$310) to Macronix Education
Foundation for the years ended December&nbsp;31, 2003, 2004 and 2005, respectively.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">j.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>For the year ended December&nbsp;31, 2004 and 2005, the amount of research and development
expenses paid to Tower was NT$213 and NT$43,832 (US$1,336), respectively.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">k.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>For the year ended December&nbsp;31, 2005, the amount of research and development expenses and the
sales expenses paid to MegaChips was NT$63 (US$2) and NT$1,452 (US$44), respectively. The
Company did not pay any research and development expenses and the sales expenses to MegaChips
for the year ended December&nbsp;31, 2004.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">l.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Accounts receivable from related parties as of December&nbsp;31, 2004 and 2005 were listed as
follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">As of December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 0px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">BC</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">95,443</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">MPI</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,447</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">FueTrek</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,836</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Procomm</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,722</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">541</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Raio</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,879</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,432</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">257</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">MegaChips</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,453</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">105</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">MegaChips LSI</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">570,814</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,403</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">MegaChips LSI Taiwan Branch</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">126,876</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,868</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">188</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135,730</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">727,485</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,180</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: Allowance for doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,444</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(20,390</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(622</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132,286</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">707,095</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,558</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-55
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">m.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Other receivables from related parties as of December&nbsp;31, 2004 and 2005 were listed as
follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">As of December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="4" style="border-bottom: 1px solid #000000">2004</TD>

    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 0px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">MegaChips LSI</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,911</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,522</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less: Allowance for doubtful accounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(11,532</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(352</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,379</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,170</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The other receivables were reclassified from the accounts receivable over the due dates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">n.&nbsp;&nbsp;&nbsp;Payables to related parties as of December&nbsp;31, 2004 and 2005 were listed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">As of December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 0px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ardentec</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,335</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,298</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">497</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">MPI</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,898</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tower</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,364</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,701</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,729</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">PCI</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,414</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">195</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,776</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79,413</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,421</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>24. Commitments and Contingencies</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left:2%">As of December&nbsp;31, 2005, the significant commitments and contingencies of the Company were as
follows:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">a.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Amount available under unused letters of credits was NT$17,959 (US$548).</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">


    <TD colspan="3"><div style="margin-left: 2%">b.&nbsp;&nbsp;The Company&#146;s significant construction and machinery contracts totaled approximately
NT$1,857,463 (US$56,629). As of December&nbsp;31, 2005, the Company has paid NT$1,607,005
(US$48,994) pursuant to these contracts. Future irrevocable payment
is NT$250,459(US$7,636).</div></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="right">c.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>MXIC leases parcels of land from the SPA located in HCSP. The lease term is from 1990 to 2022
and renewable at the Company&#146;s option.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-56
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Future minimum payments under these irrevocable operating leases as of December&nbsp;31, 2005 were as
follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="7%">&nbsp;</TD>
    <TD width="71%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Operating Leases</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="right"><DIV style="margin-left:45px; text-indent:-15px">2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,348</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,114</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:45px; text-indent:-15px">2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,029</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,983</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="right"><DIV style="margin-left:45px; text-indent:-15px">2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,029</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,983</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:45px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,029</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,983</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="right"><DIV style="margin-left:45px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,029</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,983</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="right"><DIV style="margin-left:45px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">65,029</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,983</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">198,503</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,051</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:15px; text-indent:-15px">Total minimum lease payments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">592,996</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,080</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Rental expenses under the operating leases were NT$70,160, NT$73,221 and NT$78,267 (US$2,386) for
the years ended December&nbsp;31, 2003, 2004 and 2005, respectively.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">d.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>MXIC entered into an operating lease agreement of US$2,608 for R&#038;D software. The lease term
is from 2003 to 2006. The lease obligations shall be paid annually in four installments,
starting from November&nbsp;20, 2003 to April&nbsp;20, 2006. As of December&nbsp;31, 2005, the Company has
paid US$2,131 pursuant to the agreements. Future irrevocable payment in 2006 is US$477.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">e.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>MXIC with Company A and Company B entered into the product royalty agreements for the terms
from January&nbsp;2002 to December&nbsp;2006, and from January&nbsp;2001 to December&nbsp;2006, respectively. The
total royalty fee was US$46,000 (NT$1,460,040). As of December&nbsp;31, 2005, the Company has paid
US$41,000 (US$1,344,800) pursuant to the agreements. Future irrevocable payment in total is
US$5,000 (NT$164,000).</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">f.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>MXIC and Company C entered into the product license agreement. The total license fee was
US$2,907 (NT$95,350). As of December&nbsp;31, 2005, the Company has paid the total license fee in
full pursuant to the agreement. Future running royalties will be charged based on percentage
of net sales from licensed products as determined under the aforementioned agreement. For the
year ended December&nbsp;31, 2005, no royalty was paid to Company C as the licensed products had
not been commercialized.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">g.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>MXIC and Company D entered into the technology agreement. As of December&nbsp;31, 2005, the
Company has paid the total license fee in full pursuant to the aforementioned agreement.
Future running royalties will be charged based on percentage of net sales from the licensed
products pursuant to the agreement. According to the aforementioned agreement, the Company is
required to prepay US$24,000 of running royalty. As of</TD>
</TR>

</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-57
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>December&nbsp;31, 2005 US$24,000 has been paid. As of December&nbsp;31, 2005, the unused running
royalty was NT$629,538 (US$19,193), of which NT$135,364 (US$4,127) was recorded under prepaid
expenses, while NT$494,174 (US$15,066) was recorded under deferred charges.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">h.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In 2004, MXIC and Company D entered into two addendums to the aforementioned technology
agreement with the agreed license fee of US$7,500 in the contract term. As of December&nbsp;31,
2005, the Company has paid the license fee of US$1,250 and accrued the license fee of US$250.
For the year ended December&nbsp;31, 2005, no royalty was paid to Company D for the aforementioned
addendums as the licenses products had not been commercialized.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">i.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In August&nbsp;1997, Atmel Corporation (&#147;Atmel&#148;) filed a complaint against MXA for infringement of
Atmel&#146;s patents No.&nbsp;096 and 747. MXA applied for Motion for Summary Judgment for both patents.
On January&nbsp;14, 2002, the Court issued an order denying Atmel&#146;s motion to correct inventorship
of the 747 patents. Based on the order, MXA had sought a ruling of invalidity of the 747
patents due to incorrect inventorship, and kept awaiting the Court&#146;s decision. On May&nbsp;14,
2003, the Court granted the Company&#146;s Motion for Summary Judgment of invalidity of the 747
patent due to nonjoinder of co-inventor. Specifically, the Court&#146;s Order found that all claims
of the 747 patent were invalid for nonjoinder of a co-inventor. The Court has also granted the
Company&#146;s Motion for Summary Judgment against three of the four asserted claims of the 096
patent, leaving only one claim to be litigated on the 096 patent. Both parties applied for
summary judgment for infringement of the 096 patent. On February&nbsp;23, 2004, the court revoked
both parties&#146; summary judgments as the evidence was insufficient. However, the court&#146;s
explanation of inventorship was in favor of MXA. On April&nbsp;16, 2004, MXA applied &#147;Renewed
Motion for Summary Judgment of Non-infringement&#148; according to the court explanation of the
patents&#146; scope. After Atmel applied the counterplea on May&nbsp;26, 2004, MXA replied to Atmel&#146;
counterplea on June&nbsp;18, 2004. On September&nbsp;9, 2004, Atmel and MXA reached a settlement that
both parties agree to withdraw from the issue with no claim of loss reimbursement. The Court
dismissed the case accordingly.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">j.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On April&nbsp;1, 2002, certain shareholders of Tower Semiconductor Ltd. (&#147;Tower&#148;) filed a
lawsuit in U.S., naming Tower, several shareholders (including the Company), and Board
members (including Miin Wu, one of the Board member and the Chairman of the Company) as
defendants, alleging the defendants for violation of U.S. Securities Exchange Act of 1934
Section&nbsp;14(a), Section 20(a) and Rule&nbsp;14a-9. The Court overruled the alleging in August&nbsp;19,
2004. One of the shareholders has further appealed. The Company believes it has meritorious
defense to the case.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">k.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company entered into an agreement with Tower Semiconductor Ltd. (&#147;Tower&#148;), an Israeli
public company whose shares are quoted on the NASDAQ, to purchase silicon wafers to be
manufactured by Tower (&#147;Wafer&#148;) in an amount of 25% of then available quarterly manufacturing
capacity of a specified production line, after it passes qualification testing, but not more
than 4,750 Wafer outs per month (the &#147;Minimum Loading Obligation&#148;) commencing on the date
manufacturing on a specified production line commences and</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-58
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>ending 12&nbsp;months following the expected production date, the Minimum Loading Obligation shall,
from the third quarter of the expected production date, be reduced by 950 wafer outs per month
each quarter. The minimum Loading Obligations may be limited to 15% of Tower&#146;s capacity before
Tower proves to the Company that the one time programmable or multiple time programmable pass the
production qualification. If the Company maintains specified levels of investment in Tower&#146;s
shares, the Company will receive favorable pricing terms on the first 3,800 wafers purchased each
month until the contract expires in 2011. In conjunction with the foundry agreement, the Company
entered into share purchase agreements in December&nbsp;2000 with Tower whereby the Company agreed to
invest US$75&nbsp;million (NT$2,460&nbsp;million) in Tower. Following an initial payment of US$20&nbsp;million
(NT$656&nbsp;million) for 866,551 shares (US$11,215 or NT$367,852) and US$8,785 (NT$288,148) of
prepaid credits made in January&nbsp;2001, upon completion by Tower of certain milestones specified in
the agreement, payments to Tower are made in five equal installments of US$11&nbsp;million each. Upon
satisfaction of each milestone, the Company is required to purchase 733,380 shares of Tower.
Payments for the first milestone and the second milestone were made in March and April&nbsp;2001,
respectively. The Company acquired a total of 733,380 shares and increased its prepaid credit
account by US$12,564 (NT$412,099) with the first two payments. The prepaid credit account is held
on deposit with Tower. Pursuant to the terms applicable to the credits issued in connection with
the various milestone payments, the prepaid credit account may be applied against wafer purchases
by 7.5% to 15% of each wafer purchase amount. In addition, this account may in certain
circumstances be applied towards the purchase of additional unregistered ordinary shares or
credited against other amounts payable by the Company to Tower, including certain payments to be
made by the Company and Tower under the SCM Waiver Agreement dated December&nbsp;12, 2000 between the
Company and Tower.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In 2001, the initial investment and the first and the second milestone payment were undertaken to
a total amount of US$42,001 (NT$1,377,633), of which US$21,349 (NT$700,247) was reserved as
prepaid credit for future wafer purchase. In September&nbsp;2001, the Company utilized US$16&nbsp;million
(NT$525&nbsp;million) of its prepaid credit account to purchase 1,255,848 Tower shares for US$12.75
(NT$418) per share.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On March&nbsp;22, 2002, an amendment to the above-mentioned share purchase agreements was implemented.
According to this amendment, the Company is required to make the third and fourth milestone
payments no later than April&nbsp;2002 and October&nbsp;2002, respectively, without regard to whether each
milestone is achieved. For 60% of each of the third and fourth milestone payment, Tower is
required to issue shares based on the average closing price of Tower&#146;s shares on the NASDAQ in
the 30 trading days preceding the date of payments, provided, however, the average price per
share shall not exceed US$12.50. (NT$410) For the remaining 40%, Tower is required to increase
the Company&#146;s prepayment account. Accordingly, the Company made the third and the forth milestone
payment on April&nbsp;23 and October&nbsp;1, 2002, respectively. For these payments, the Company acquired
1,071,497 and 1,344,829 of Tower&#146;s shares, respectively, at US$6.16 (NT$202) and US$4.908
(NT$161) per share, respectively, and aggregately increased its prepaid credit account by
US$8,800. In addition, the Company participated in Tower&#146;s shares offering on October&nbsp;21, 2002
and acquired 660,000 shares at US$5 (NT$164) per share.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-59
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In February&nbsp;2003, the board of Tower agreed to further amend the shares purchase agreement. The
terms of the amendment require the payment of US$11,000 (NT$360,800) for the fifth and also the
final milestone and this payment will be made in two installments. The first installment of
approximately US$6,600 (NT$216,480) will be due five business days after the amendment is
approved by Tower, the Company and certain shareholders of Tower; the second installment of
approximately US$4,400 (NT$144,320) will be due five business days after Tower has raised
additional funds equal to approximately US$22,000 (NT$721,600), referred to as the Minimum
Financing. In addition, under the terms of the amendment, the Company is granted an option to
convert all or a portion of its unused prepaid credit account associated with the fourth
milestone payment in the aggregate amount of NT$304,524 into Tower&#146;s unregistered shares based on
the average closing price of Tower&#146;s common shares during the 30 consecutive days preceding
December&nbsp;31, 2005. On May&nbsp;16, 2003, the Company paid US$3,600 (NT$118,080) for the first
installment, obtaining 1,206,839 shares of Tower&#146;s at the price of US$2.983 (NT$98) per share.
There was US$3,000 (NT$98,400) of the first installment remained unpaid as of June&nbsp;30, 2003.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In November&nbsp;2003, the Company agreed to amend the shares purchase agreement with Tower to, among
other things, (a)&nbsp;advance the entire amount of the remaining fifth milestone payment of US$7,400
(NT$242,720), (b)&nbsp;defer the use of the Company&#146;s wafer credits in Tower, and (c)&nbsp;extend the
lock-up period for the Company&#146;s Tower shares. Specifically,</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company agreed to waive all terms of Tower&#146;s milestones and advance to Tower in one
aggregate lump sum the remaining portion of the first installment (US$3,000 or NT$98,400) and
the entire second installment (US$4,400 or NT$144,320). With respect to the remaining portion
of the first installment, the Company will be issued non-assessable ordinary shares equivalent
to the aggregate of its remaining portion of the first installment divided by US$2.983
(NT$98). With respect to the second installment, the Company will be issued non-assessable
ordinary shares equal to the second installment divided by the price per share in a certain
public offering, provided, however, that such public offering is not consummated within 180
days from the date of the amendment, the Company will be issued non-assessable ordinary shares
equal to the second installment divided by the average trading price for Tower&#146;s shares during
the 15 consecutive trading days preceding the payment of the second installment.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company agreed not to use wafer credits until January&nbsp;1, 2007, except with respect to
purchase orders issued before the date of the amendment utilizing wafer credits. However, the
amendment provides an option for the Company to convert credits it would have otherwise been
able to utilize per quarter into non-assessable ordinary shares of Tower. Unconverted credits
will accrue interest at a rate per annum equal to three-month LIBOR plus 2.5% through December
31, 2007. Interest payments will be made quarterly and the aggregate principal amount of the
unconverted credits will be repaid in one lump sum on December&nbsp;31, 2007.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-60
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company agreed not to sell the Tower shares until January&nbsp;29, 2006, except the Company
may sell 30% of the Tower shares held by it as of January&nbsp;29, 2004.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In December&nbsp;2003, the Company advanced to Tower the remaining portion of the fifth milestone
payment in the amount of US$4,400 (NT$144,320).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As of December&nbsp;31, 2005, the Company owned approximately 13.11 % of Tower&#146;s shares and held
NT$463,726 or about US$14,138 of prepaid credit account. As of December&nbsp;31, 2004 and 2005, the
Company provided an allowance of US$14,138 (NT$46,726) and US$14,138(NT$46,726), respectively,
for such prepaid credit account after assessing the impairment.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>25.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Financial Instruments</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company&#146;s derivative financial instruments are entered into for hedging and trading purposes.
The purposes of forward exchange contracts, option contracts and cross currency swaps for hedging
purpose were to hedge exchange rate risks resulting from assets, liabilities or commitments
denominated in foreign currency. The Company&#146;s hedging strategies were to mitigate into market
price risks. Derivative financial instruments selected for hedging purposes are reviewed
and inversely correlated with the fluctuation of the fair value of derivatives hedges. Derivatives are
evaluated periodically. In addition, the primary purposes of holding structured deposit contracts
are to earn higher interest revenue within a fixed range of foreign exchange rates, while premium
received from written option contracts is offset by that paid for purchased option contracts. To
mitigate the credit risk associated with financial instruments, all the counter-parties of the
contracts entered into by the Company are reputable global financial institutions.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>For the years ended December&nbsp;31, 2003, 2004 and 2005, the foreign exchange gains or losses
resulted from the derivatives in aggregate were NT$236, NT$(13,442),
and NT$9,061 (US$297,201),
respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As of December&nbsp;31, 2004 and 2005, the details of outstanding derivatives were listed as follows:</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-61
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">a.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Forward exchange contracts</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As of December&nbsp;31, 2005, the Company did not have any outstanding forward exchange
contracts. As of December&nbsp;31, 2004, the outstanding forward exchange contract was listed as
follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Maturity</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">Amount to Pay</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">Amount to Receive</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005.01.18</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">US$ 2,000</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">NT$ 64,624</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005.01.31</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">US$ 2,000</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">NT$ 63,828</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2005.02.03</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">US$ 2,000</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">NT$ 63,946</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">US$ 6,000</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="bottom">NT$ 192,398</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The receivable from forward exchange contracts was recorded as other receivables under current
assets.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">As of December&nbsp;31, 2004 and 2005, the net receivables or payables resulted from forward exchange
contracts were listed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">As of December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>

<TD nowrap align="left" colspan="3" style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000" nowrap align="left" colspan="3">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3">NT$</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3">NT$</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3">US$</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Receivable from forward exchange contracts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">192,398</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Payables from forward exchange contracts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(190,260</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Premium for forward exchange contracts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">304</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Receivables (Payables) from forward
exchange contracts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,442</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The net exchange (gains)&nbsp;or losses arising from forward exchange contracts for the years ended
December&nbsp;31, 2003, 2004 and 2005 were NT$0, NT$11,695 and
NT$(11,851) (US$388,713), respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">b.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Option contracts</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As of December&nbsp;31, 2005, the Company did not have any outstanding foreign currency option
contracts. As of December&nbsp;31, 2004, the outstanding foreign currency option contracts were
listed as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000">Purchase</TD>
    <TD  style="border-bottom: 0px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000">Sale</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Transaction Type</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">Settlement Date</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Amount</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Amount</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sell</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2005.01.10</TD>
    <TD>&nbsp;</TD>
    <TD align="left" nowrap>NT$</TD>
    <TD align="right" nowrap>50,550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">US$</TD>
    <TD align="right">1,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sell</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2005.01.10</TD>
    <TD>&nbsp;</TD>
    <TD align="right">US$</TD>
    <TD align="right">1,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">NT$</TD>
    <TD align="right" nowrap>47,700</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Total</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">NT$</TD>
    <TD align="right" nowrap>50,550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">US$</TD>
    <TD align="right">1,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">US$</TD>
    <TD align="right">1,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">NT$</TD>
    <TD align="right" nowrap>47,700</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="7" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-62
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The gains or losses resulted from the foreign currency option contracts were recorded as the
non-operation income or losses when the option contracts were exercised. For the year ended
December&nbsp;31 2003, 2004 and 2005, the (gains)&nbsp;or losses recorded upon exercise of the foreign
currency option contracts were NT$(311), NT$1,503 and NT$0, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">c.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Cross currency and interest rate swaps</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To hedge against certain of the Company&#146;s long-term debts denominated in U.S. dollars which
bear interest at floating three-month SIBOR, the Company entered into cross currency and
interest rate swaps which effectively converted the debts into Japanese Yen and the floating
interest rate into a fixed interest rate. Since most of the Company&#146;s receivables are
denominated in Japanese Yen, the conversion from U.S. dollar to Japanese Yen mitigates the
foreign exchange exposure.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As of December&nbsp;31, 2004 and 2005, the Company did not have any outstanding cross currency
and interest rate swap contracts. The gains or losses resulted from the cross currency and
interest rate swaps were recorded as the non-operating income or losses. For the year ended
December&nbsp;31, 2003, 2004 and 2005, the gains or losses from cross currency and interest rate
swaps were NT$(20,220), NT$0 and NT$0, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">d.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Structured deposits</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company entered into certain structured deposits, or dual currency deposits, to earn
higher interest rates, but they exposed the Company to foreign exchange risk. The Company placed
deposits with certain financial institutions, which entitled the Company to earn interest rates
in excess of the market rates for a &#147;basic&#148; deposit. However, the financial institutions have the
option to settle the deposit and accrued interest in the original currency or settle the deposit
and accrued interest with an alternative currency other than the original currency. The
conversion rate is stated in the contracts. These contracts are entered into for hedging
purposes.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As of December&nbsp;31, 2004 and 2005, the Company did not have any outstanding structure
deposits. The gains or losses resulted from the structure notes were recorded as the
non-operating income or losses. For the year ended December&nbsp;31, 2003, 2004 and 2005, the (gains)
or losses from structure notes NT$(20,296), NT$(3,249) and NT$2,790, respectively.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-63
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">e.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Transaction Risk</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>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 counter-parties to the foregoing derivative financial
instruments are the reputable financial institutions. The Company believes its exposure
related to the potential default by the counter-parties is minimized.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Market price risk: All derivatives are intended to hedge for fluctuation in foreign
exchange rates and interest rates. The Company believes the market price risk related to
the derivatives is minimal as gains or losses from the derivative contracts for hedging
purpose are likely to be offset by gains or losses from the underlying assets and
liabilities denominated in foreign currencies.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">iii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Cash flow risk: The Company has sufficient Japanese and US dollar assets to meet the
cash requirements for the future needs. Further, there will be corresponding cash inflow
for the cash outflow. The Company believes the cash flow risk related to the derivative
contracts is minimal.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">f.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Fair values of the financial instruments were listed as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="23" style="border-bottom: 1px solid #000000">As of December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2004</TD>
    <TD  style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3" style="border-bottom: 1px solid #000000">Carrying amount</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="left" colspan="3" style="border-bottom: 1px solid #000000">Fair value</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="left" colspan="7" style="border-bottom: 1px solid #000000">Carrying amount</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="left" colspan="7" style="border-bottom: 1px solid #000000">Fair value</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3">US$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Non-Derivatives</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,115,688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,115,688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,133,620</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">339,440</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,133,620</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">339,440</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">918,040</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">934,197</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Long-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,620,465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,036,402</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,226,753</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,401</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,497,109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">76,131</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Short-term debts and notes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,996,778</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,996,778</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,893,754</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(57,736</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,893,754</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(57,736</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Long-term debts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,509,507</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,550,359</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(10,413,038</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(317,470</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(10,451,654</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(318,648</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Credit balance of long
term equity investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(29,838</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(910</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(29,838</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(910</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Derivatives</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Forward</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,477</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(165</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-64
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The fair value of financial instruments were determined as follows:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The fair value of the Company&#146;s short-term financial instruments was based on the book
value of the instruments at the report date due to the short maturities. The aforementioned
short-term financial instruments included cash and cash equivalents, restricted cash,
receivables, payables, short-term debts and notes.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The fair value of the Company&#146;s marketable securities was based on the market price of
the marketable securities at the reporting date when the market price is available. If
there is no market price for the marketable securities, the fair value of the Company&#146;s
marketable securities was based on the financial or other related information available.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">iii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The fair value of the Company&#146;s long-term debts included current portion bearing variable
interest rates was estimated using the book value of the debt at the report date.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">g.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Derivatives</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On May&nbsp;5, 1998, the Company issued convertible debentures in an aggregate principal amount of
US$150,000 (NT$4,761,000), which were privately placed with a financial institution. A wholly
owned subsidiary (the &#147;Subsidiary&#148;) of the Company subsequently entered into a call option
contract with the financial institution, the underlying reference being the convertible
debentures. The terms of the contract provided that the notional amount of US$150,000
(NT$4,761,000) is divided into fifteen options and the Subsidiary is entitled to exercise the
options separately, at the discretion of the Subsidiary during the life of the contract, but at a
minimum number of two and a maximum number fifteen. The Company simultaneously entered into
currency swaps, based on the notional amount of the debt, converting Japanese Yen was combined
into one contract. The Subsidiary exercised two options and five options on January&nbsp;22, 2000 and
June&nbsp;26, 2000, respectively. In April&nbsp;2003, the Company settled the remaining eight options by
paying US$13,147 (NT$417,286). The related settlement gain was US$1,207 (NT$38,310).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In June&nbsp;2000, the Company entered into a contract with a financial institution for the settlement
of five options relating to a zero coupon convertible debenture due 2003 with the underlying
reference being 47,727,535 of the Company&#146;s common shares. The contract, as amended, expires in
May&nbsp;2003. However, in April&nbsp;2003, the Company extended the contract to May&nbsp;2004, which was
subsequently extended to May&nbsp;2005. As of December&nbsp;31, 2004, the remaining underlying reference
was 53,253,964 of the Company&#146;s common shares. If the share price was lower than the
predetermined contract price, then the Company would pay the difference between the two amounts
to the financial institution. The contract rate at which the contract is settled is based on U.S.
dollars, and the Company&#146;s share price is converted into U.S. dollars using current N.T. dollars
to U.S. dollars exchange rates in order to determine the settlement amount. The</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-65
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>predetermined contract price and the share price converted into U.S. dollars using current
exchange rate were US$1.37 (NT$43) and US$0.23 (NT$7) per share, respectively. The carrying
amount of this contract as of December&nbsp;31, 2004 was a receivable of US$1.7&nbsp;million (NT$54
million), while the fair value was a receivable of US$1.4&nbsp;million (NT$44&nbsp;million).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>26.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Segment Information</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company operates predominantly in one industry segment, the design, manufacturing, and
supply of integrated circuits. The Company&#146;s chief operating decision maker is the Chief
Executive Officer, who reviews consolidated results of manufacturing operations when making
decisions about allocating resources and assessing performance of the Company. The Company
believes it operates in one segment, and all financial segment information can be found in the
consolidated financial statements.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The geographic Information was listed as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 0px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Domestic</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Others</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Elimination</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Consolidated</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales to unaffiliated customers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,799,829</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,912,358</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,712,187</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales between geographic areas</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,782,732</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">391,747</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,174,479</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,582,561</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,304,105</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,174,479</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,712,187</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income (loss),
including other expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,289,636</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,198,463</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,285,113</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,202,986</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">103,847</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,077,898</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income before taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,177,037</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(21,027</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">319</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,197,745</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Identifiable assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">57,769,932</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,288,840</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,140,075</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,918,697</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital expenditures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,598,526</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,522</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,606,048</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,278,878</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,420</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,287,011</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-66
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 0px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Domestic</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Others</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Elimination</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Consolidated</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales to Unaffiliated Customers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,485,417</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,894,306</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,379,723</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales between geographic areas</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,515,956</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,793</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,529,749</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,001,373</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,908,099</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,529,749</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,379,723</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income (loss)
including other expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">561,410</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">168,718</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99,471</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">829,599</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">101,646</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(684,105</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income before taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">247,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(34,781</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">217,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Identifiable assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,401,768</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,492,353</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,498,445</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,395,676</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital expenditures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,551,655</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,838</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,554,493</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation and Amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,557,032</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,562</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,434</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,562,160</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 0px solid #000000">2005</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Domestic</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Asia</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Others</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Elimination</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Consolidated</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">NT$000</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales to unaffiliated Customers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,440,265</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,928,043</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,539,828</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,908,136</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales between geographic areas</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,445,552</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,445,552</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,885,817</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,928,043</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,539,828</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,417,261</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,908,136</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income (loss)
including other expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,197,081</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,596</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,240,903</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,786,667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,604,721</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">99,860</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(377,261</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income before taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,882,122</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(215,414</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Minority interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,347</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,027,189</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Identifiable assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,877,132</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">363,210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">991,301</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(548,725</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,682,918</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Capital expenditures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,578,868</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,327</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,868</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,595,063</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,251,710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,601</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,670</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,448</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,252,533</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="19" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-67
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Major customers
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenues from customers representing over 10% of total net sales were listed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="27" style="border-bottom: 1px solid #000000">For the year ended December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2003</TD>
    <TD  style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$00</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Customers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nintendo</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,256,764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24.03</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,239,963</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22.41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,574,616</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29.48</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">169,958</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="27" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exports
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company&#146;s export sales accounted for 68.94%, 66.47% and 70.24% of total net sales for the
years ended December&nbsp;31, 2003, 2004 and 2005, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Export sales from the R.O.C. were listed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000">For the year ended December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2003</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Japan</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,269,548</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,363,806</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,706,521</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">234,955</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Singapore and Hong Kong</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,487,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,119,396</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,076,395</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">124,280</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">United States</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">823,145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">980,911</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">629,235</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,184</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Europe</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">453,641</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,077,416</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">888,687</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,094</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,033,584</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,541,529</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,300,838</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">405,513</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-68
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Products
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s principal products and services consist of memory products, SOC products and
services, and multimedia products. The following table sets forth the amounts of total net sales
revenue from external customers represented by these products for the years ended on December&nbsp;31,
2003, 2004 and 2005:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000">For the year ended December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2003</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">ROM</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,463,464</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,372,758</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,712,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">265,611</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Flash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,810,494</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,714,857</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,870,378</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">209,463</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SMS*</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,359,687</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,732,539</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,661,678</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,661</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SLC**</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,286,807</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,786,711</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,191,553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,328</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">EPROM</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">303,519</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">162,573</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,883</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">515</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">488,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">610,285</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">455,584</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,890</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total net sales Revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,712,187</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,379,723</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,908,136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">576,468</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 6pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top">
    <TD  width="3%" nowrap align="left">*</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="96%">SMS (Strategic Manufacturing Service) refers to value added service of memory and wafer
manufacturing to strategic alliance.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">**</TD>
    <TD>&nbsp;</TD>
    <TD>SLC (Systematic Logic Chip) refers Logic and Core SOC products.</TD>
</TR>

</TABLE>



<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>27.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Other Disclosures</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">a.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Significant Subsequent Events</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company&#146;s shareholders approved and authorized in the Special Shareholder&#146;s Meeting (&#147;SSM&#148;),
held on November&nbsp;16, 2005, the Company&#146;s BOD to cancel 2,079,474,542 common shares at the amount
of NT$20,795&nbsp;million. On February&nbsp;7, 2006, the Company&#146;s BOD resolved to issue, by private
placement, 100,000 common shares at the discount price of NT$8.07 per share. The record dates
for cancellation and issuance of common shares were February&nbsp;16, 2006 and February&nbsp;17, 2006,
respectively. As of April&nbsp;21, 2006, the registration has been completed.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On January&nbsp;18, 2006, the Company&#146;s BOD resolved to sell the FAB III building with the clean room
and adjunctive facilities to Powerchip Semiconductor Corporation at the amount of NT$5,300
million.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On February&nbsp;7, 2006, the Company&#146;s BOD resolved to issue 691,000 units of employee stock options
as the 4<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> issuance under 2005 Plan. The grant date of the issuance was set on
February&nbsp;7, 2006 with the exercise price at the amount of NT$5.72 per unit.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-69
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On March&nbsp;7, 2006, Spansion, Inc. filed an action against Macronix International Co., LTD. and
Macronix America Inc. in the U.S. District Court for the Northern District of California (Case
No.&nbsp;C 06-1733 MJJ). The original Complaint asserted causes of action for false advertising,
trademark dilution and unfair competition. The Complaint further sought $100&nbsp;million in
enhanced damages, attorneys&#146; fees, and injunctive relief. On May&nbsp;19, 2006, Spansion filed a
First Amended Complaint alleging an additional claim for copyright infringement. All claims
asserted by Spansion arise out of the comparative advertising and marketing of the Macronix
NBit<FONT style="font-family: Symbol">&#212;</FONT> flash memory chips. On June&nbsp;5, 2006, Macronix International and Macronix America
filed Answers to the first Amended Complaint denying the allegations of the First Amended
Complaint and asserting a number of affirmative defenses. A Case Management Conference was
held on June&nbsp;13, 2006, and the trial date was set on April&nbsp;16, 2007. The parties are currently
in the beginning stages of discovery. Macronix International and Macronix America deny any
liability to Spansion and intend to vigorously defend the action. The management
considered the outcome of the judgment on and the expenditures from the lawsuit to be quite
uncertain. Therefore, no provision was made for any losses that may arise on the lawsuit.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">b.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Significant Disaster Losses</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>No significant disasters occurred during the year ended December&nbsp;31, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>28.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Summary of Significant Differences between Accounting Principles Followed by the Company and
Accounting Principles Generally Accepted in the United States of
America (Restated)</B></TD>
</TR>

</TABLE>

</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">Subsequent to the filing of our initial consolidated financial statements on Form 20-F for the
year ended December&nbsp;31, 2004 and through the process of addressing financial statement comments
raised by the US SEC, we noted that certain US GAAP financial
information as disclosed in Note 22
to our previously issued financial statements were miscalculated for the years ended
December&nbsp;31, 2002, 2003 and 2004.
The Company restated the consolidated financial statements pursuant to US GAAP for a
convertible bond which contains embedded derivatives which were
previously inappropriately accounted for as a
convertible bond with a beneficial conversion feature. The error resulted in an
overstatement/(understatement) to US GAAP net loss of NT$167&nbsp;million, NT$850&nbsp;million and NT$(40)
million for the years ended December&nbsp;31, 2002, 2003 and 2004, respectively.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">The effects arising from the amendments to the consolidated financial statements under US GAAP are
summarized as follows:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>As of December 31, 2002</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>(In million NT dollars)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>As reported</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Restatement</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>As restated</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,351</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,518</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>For the year ended December 31, 2003</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>(In million NT dollars, except per share amounts)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>As reported</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Restatement</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>As restated</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,877</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(850</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,027</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic loss per share (in dollars)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.22</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.06</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted loss per share (in dollars)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.22</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.06</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic loss
per share with reverse stock split retroactively adjusted
(in dollars)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.91</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.38</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.53</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted loss per share with
reverse stock split retroactively
adjusted (in dollars)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.91</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.38</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.53</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>As of December 31, 2003</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>(In million NT dollars)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>As reported</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Restatement</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>As restated</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(46</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,149</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>For the year ended December 31, 2004</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>(In million NT dollars, except per share amounts)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>As reported</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Restatement</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>As restated</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net Loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">429</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">469</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic loss per share (in dollars)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.09</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">0.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted loss per share (in dollars)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.09</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic loss
per share with reverse stock split retroactively adjusted
(in dollars)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted loss per share with
reverse stock split retroactively
adjusted (in dollars)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.17</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>As of December 31, 2004</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>(In million NT dollars)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>As reported</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Restatement</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>As restated</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,760</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,755</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The accompanying consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the Republic of China (&#147;R.O.C. GAAP&#148;) that differ in
the following respects from accounting principles generally accepted in the United States of
America (&#147;U.S. GAAP&#148;):</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">a.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Reclassification of time deposits</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under R.O.C GAAP, cash and cash equivalents include time
deposits regardless of original maturity. Under U.S. GAAP, cash
equivalents are short-term, highly liquid investments that are readily convertible to cash with
original maturities of 3&nbsp;months or less. Therefore, time deposits with original maturities of
more than 3&nbsp;months would not be considered cash and cash
equivalents under U.S. GAAP. As of
December&nbsp;31, 2005 and 2004, time deposits with original maturities of
more than 3&nbsp;months amounted to NT$1,520&nbsp;million
(US$46.3&nbsp;million) and NT$0, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">b.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Marketable Securities</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under R.O.C. GAAP, the Company carries the short-term marketable equity securities at the
lower of aggregate cost or market value. The unrealized losses of short-term marketable
equity securities are recorded as investment losses in the statement of operations, while
unrealized gains of short-term marketable equity securities are not recognized. The
Company carries the long-term marketable equity securities at the lower of aggregate cost
or market value if market price is available. The unrealized losses of long-term marketable
equity securities are reported as a deduction of shareholders&#146; equity, while the unrealized
gains are not recognized. Until January 1, 2005, the Company does not evaluate the marketable equity securities
for an other-than-temporary decline in value since the evaluation is not specifically
required under R.O.C. GAAP. The Company&#146;s policy is to account for all unrealized losses on
long-term investments as a charge to shareholders&#146; equity. Beginning January&nbsp;1, 2005, the Company is required by ROC GAAP SFAS No.35 to evaluate
holding assets for any indication of impairment. If there is an indication that an asset may
be impaired, the Company is required to estimate the recoverable amount of assets and to record
impairment loss when the carrying value is less than the recoverable amount of the assets.
Subsequent reversal of an impairment loss is allowed when any indication of the impairment loss
recognized in the prior years may no longer exist.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under U.S. GAAP, SFAS No.&nbsp;115, &#147;Accounting for Certain Investments in Debt and Equity
Securities&#148;, debt and equity securities that have readily determinable fair values are to be
classified as either trading,</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-70
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>available-for-sale or held-to-maturity securities. Debt securities that the Company has the
positive intent and ability to hold to maturity are classified as held-to-maturity securities
and reported at amortized cost. Debt and equity securities that are bought and traded for
short-term profits are classified as trading securities and reported at fair value, with
unrealized gains and losses included in earnings of the current period. Debt and equity
securities not classified as either held-to-maturity or trading are classified as
available-for-sale securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of shareholders&#146; equity; however,
unrealized losses relating to declines in fair value deemed to be other-than-temporary are
recorded in earnings for both available-for-sales and held to maturity
securities. The Company did not have any investments classified as trading securities
or held-to-maturity securities during the periods presented.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under U.S. GAAP, the available-for-sale securities as of December&nbsp;31, 2004 and 2005 were as
follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="23" style="border-bottom: 1px solid #000000">As of December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Market value</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Cost</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Market value</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Cost</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Classified as short-term investments:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Open-end mutual funds, marketable
securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">904,190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">901,871</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,660</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,169</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="23" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Subtotal of short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">935,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">918,040</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="23" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Classified as long-term investments:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,049,921</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">719,296</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,245,220</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68,452</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">747,019</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,775</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="23" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Realized gains from sale of securities classified as available-for-sale for the years ended
December&nbsp;31, 2003, 2004 and 2005 were NT$111,957, NT$243,497 and NT$531,378 (US$16,201),
respectively. For the purpose of determining realized gains and losses, the cost of securities
sold was based on specific identification.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The following table shows the gross unrealized losses and fair value of the Company&#146;s investment
with unrealized losses that are not deemed to be other-than-temporary impaired, aggregated by
investment category and length of time that individual securities have been in a continuous
unrealized loss position, on December&nbsp;31, 2005:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Less than 12 months</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">12 months or more</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">Total</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Fair value</TD>
    <TD style="border-bottom: 0px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Unrealized loss</TD>
    <TD style="border-bottom: 0px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Fair value</TD>
    <TD style="border-bottom: 0px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Unrealized loss</TD>
    <TD style="border-bottom: 0px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Fair value</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Unrealized loss</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="23" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Classified as
short-term
investments:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Open-end mutual
funds, marketable
securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Equity securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Classified as
long-term
investments:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Equity securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-71
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company accounts for the investments either on the cost basis or equity basis. The Company
regularly reviews its cost and equity investments to determine whether a significant event or
changes in circumstances has occurred that may have an adverse effect on the fair value of the
each investment. In the event a decline in fair value of an investment is determined, the
Company will evaluate if the decline in value is other than temporary.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company generally considers its investments to be strategic and long-term in nature, so the
Company will evaluate if the fair value decline is recoverable within a reasonable period of
time. For investments accounted for using cost or equity method of accounting, the Company
evaluates fair value based on specific information available. Factors indicative of
other-than-temporary decline include, but are not limited to, recurring operating losses, credit
defaults and subsequent rounds of financing with pricing that is below the cost basis of the
investment. The Company considered all available quantitative and qualitative factors in
determining if an other-than-temporary decline in value of an investment has occurred. In the
event the carrying value of an investment exceeds its fair value and the decline in fair value
is determined to be other than temporary, the Company writes down the value of the investment to
its fair value. The Company generally believes when the fair value of an investment is below the
carrying value for six consecutive months, a rebuttable presumption exists that such decline is
other than temporary.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As of December&nbsp;31, 2005, the market price of Tower of US$1.45 was significantly below our
average cost basis of US$2.26 for a prolonged period of time without indicators of a near-term
recovery. Accordingly, the Company concluded the decline in the market value of Tower&#146;s shares
was other-than-temporary. On a U.S. GAAP basis, an impairment charge of NT$210,843(US$6,428) was
recognized, based on the difference between Tower&#146;s market price of US$1.45 per share and
average cost of Tower&#146;s share of US$2.26 per share on
December&nbsp;31, 2005. An other-than-temporary impairment from
decline in the market value of Tower&#146;s shares of NT$0 and
NT$447,995 was recognised, in 2003 and 2004, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The aggregate cost of the Company&#146;s cost method investments totaled NT$324,200 as of December
31, 2005 and were not evaluated for impairment because (a)&nbsp;the Company did not estimate the fair
value of those investments in accordance with paragraphs 14 and 15 of Statement 107 and (b)&nbsp;the
Company did not identify any events or changes in circumstances that may have had a significant
adverse effect on the fair value of those investments.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-72

</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">c.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Purchase accounting</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under ROC GAAP SFAS No.&nbsp;5, when an investor purchased newly issued shares from an investee such
that its holding interest on the investee increases after the purchase, the investor shall book
the difference between net assets acquired and purchase consideration as an equity adjustment.
When allocating net assets acquired, ROC GAAP did not provide guidance over recognition of
intangible assets.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under US GAAP SFAS No.&nbsp;141, &#147;Business Combinations&#148;, Goodwill arises when purchase consideration
exceeds net assets acquired. In addition, Statement 141 requires that intangible assets
be recorded apart from goodwill if they meet one of the criteria established in Statement 141
(i.e., either the contractual-legal criterion or the separability criterion.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In September&nbsp;2005, the Company purchased additional shares from its then equity investee,
Biomorphic Microsystems Corporation (Biomorphic), and increased its holding interest on
Biomorphic from 30.08% to 54.77%. The transaction leads to an
adjustment to equity of NT$147,894
under ROC GAAP.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company is in the process of obtaining third-party
valuations of certain intangible assets; thus, the allocation of
purchase price is subject to change. The Company&#146;s goodwill under US GAAP is
currently valued at NT$147,894 for US GAAP purposes but is subject to
change from the allocation of the purchase price.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">d.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Goodwill impairment</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under R.O.C. GAAP, the Company recorded the excess of the investment cost over the fair value of
acquired net assets as goodwill and amortizes the goodwill over 5 to 20&nbsp;years. Effective
January&nbsp;1, 2005, the Company reviews goodwill for impairment whenever an event occurs or
circumstances change to reduce the fair value of goodwill below its carrying amount.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Effective January&nbsp;1, 2002, the Company adopted U.S. SFAS No.&nbsp;142, &#147;Goodwill and Other Intangible
Assets&#148; and ceased amortization of goodwill which is now assessed for impairment annually or
more frequently if impairment indicators arise. Statement 142 requires that all goodwill be
assigned to one or more reporting units as of the acquisition date. The Biomorphic goodwill has,
however, not yet been allocated to a reporting unit as of
December&nbsp;31, 2005, because the allocation of purchase price is not
finalized</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">e.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Impairment of long-term assets</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under R.O.C. GAAP SFAS No.&nbsp;35, effective January&nbsp;1, 2005 the Company is required to recognize an
impairment loss when there is an indication that the carrying amount
of an asset or an asset group is not recoverable from the expected future cash flows. However, if the recoverable
amount increases in a</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-73
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>future period, the amount previously recognized as impairment would be reversed and recognized
as a gain. The adjusted amount may not exceed the carrying amount that would have been
determined, net of depreciation, as if no impairment loss had been
recognized. In addition, ROC GAAP SFAS No.
35 requires an asset to be assessed for impairment individually when
an indication of
impairment exists for the individual asset.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under U.S. GAAP SFAS No.&nbsp;144, &#147;Accounting for the Impairment or Disposal of Long-Lived Assets&#148;,
an impairment loss is recognized when the carrying amount of an asset or a group of assets is
not recoverable from the expected future cash flows and an impairment loss is measured as the
difference between fair value and carrying amount of the asset or group of assets. The
impairment losses are recorded in current period earnings and cannot be reversed subsequently.
Long-lived assets (excluding goodwill and other indefinite-lived assets effective January&nbsp;1,
2002) held and used by the Company are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. US GAAP SFAS
No.&nbsp;144 requires a company to group its assets at the lowest
level of identifiable cash flows for determining possible impairment.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In 2005 the Company has two assets where indicators of impairment exist and are required to be
assessed for impairment individually, and the Company wrote-off a
total of NT$901M impairment loss under R.O.C. GAAP. Under US GAAP such assets are either grouped or
considered entity-wide assets and are evaluated for impairment as
part of the group compared with the group&#146;s expected future cash flows. No
impairment under US GAAP is required and the Company reversed the impairment loss
under US GAAP.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">f.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Pension benefits</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As permitted under R.O.C. GAAP, prior to 1996, the pension expense recorded by the Company in
connection with its defined benefit plans was based on the amount of the contributions made by
the Company to the pension plans required by government regulations. In 1996, the Company
adopted R.O.C. SFAS No.&nbsp;18 that is similar in many respects to U.S. SFAS No.&nbsp;87, &#147;Employer&#146;s
Accounting for Pensions&#148;.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>U.S. SFAS No.&nbsp;87, &#147;Employer&#146;s Accounting for Pensions&#148; requires the Company to determine the
accumulated pension obligation and the pension expense on an actuarial basis. The difference in
the dates of adoption gives rise to a U.S. GAAP difference in the actuarial computation for
transition obligation pension expense and is allocated directly to
equity. The Company believes
the amount of the transition obligation is insignificant.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">g.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Derivative Financial instruments</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under R.O.C. GAAP, foreign currency forward contracts are accounted for in a manner similar
to the requirement under U.S. SFAS No.&nbsp;52. All other derivative financial instruments are
recorded based upon the accounting policies stated in Note 2.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-74
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Differences between R.O.C. GAAP and U.S. GAAP in accounting for derivative financial instruments
were listed as follows:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Currency option contracts</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under R.O.C. GAAP, the Company recorded gains or losses from the currency option contracts upon
settlement. Effective in October&nbsp;2004, the Company complied with R.O.C. SFAS No.&nbsp;32, &#147;The
Accounting Treatment of Foreign Exchange Option Contracts Before the Effectiveness of Financial
Accounting Standards No.&nbsp;34&#148;, issued by the ARDF, and accounted for the option at the fair
values on the balance sheet date with the differences recorded in the net income.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under U.S. GAAP, the Company is required to record the gains or losses resulted from the
difference of the fair value at the balance sheet dates for the option contracts that do not
qualify for hedge accounting. The option contracts entered into by the Company did not
qualify as hedges for financial reporting purpose under U.S. GAAP; therefore, the Company
carried the option contracts at the fair value and recorded the gain
or losses resulting from
the changes in fair value at the balance sheet dates.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Structured deposits</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under R.O.C. GAAP, the Company recorded the interest on the structure deposits on the accrual
basis. The gains and losses arising from the settlement of the structure deposit contracts are
recorded in the statement of operations.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under U.S. SFAS No.&nbsp;133, &#147;Accounting for Derivative Instruments and Hedging Activities&#148;. The
Company is required to recognize the derivatives including embedded
derivatives not qualifying for hedge accounting at fair value on the
balance sheet with the difference recognized as gains or losses in the statement of operation.
Subsequent to December&nbsp;31, 2000, none of the Company&#146;s derivatives contracts qualified for
hedges purpose under U.S. GAAP.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">h.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Convertible bonds</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under ROC GAAP, when convertible bonds are issued, the entire instrument is recorded as a
liability at an amount equal to the proceeds received. Any discount or premium to the par value
of the convertible bond is amortized to the statement of income by using the effective interest
rate method. If the convertible bonds contain a redemption premium above its par value amount,
the excess is accrued, using the effective interest rate method, over the period to redemption as
a charge to interest expense. Upon conversion, the carrying value of the bond is credited to
common stock at its par value and the difference between the carrying value of the bond and the
par value of stock is recorded to capital reserve. No gain or loss is recognized. Effective</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-75
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>from January&nbsp;1, 2006, ROC SFAS No.&nbsp;34 and ROC SFAS No.&nbsp;36, &#147;Financial Statement Presentation and
Disclosure of Financial Instruments&#148; (&#147;ROC SFAS 36&#148;) require derivative embedded in hybrid
instrument, if not clearly and closely related to the host contract, to be bifurcated and
accounted for at fair value.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company issued certain convertible debt instruments that contained embedded derivatives
based upon the features set in the convertible bond contracts. Under R.O.C. GAAP, there is no
accounting guidance specific to the embedded derivatives and beneficial conversion features. The
Company accounted for the convertible bonds with the aforementioned features in the manner
similar to the conventional bonds without the aforementioned features.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under U.S. GAAP, the Company considered whether the convertible bonds contain embedded
derivative features using the guidance provided in U.S. SFAS No.&nbsp;133. Convertible bonds with
premium put options contain embedded derivatives subject to bifurcation in accordance with EITF
85-29.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD> To the extent the embedded derivatives are determined to exist, the embedded derivatives
are bifurcated and accounted for in accordance with SFAS No.&nbsp;133. If there are no
embedded derivatives present, the Company then considers whether there are beneficial
conversion features. To the extent the beneficial conversion features exist, the Company
would account for the beneficial conversion features in accordance with EITF 98-5 and EITF 00-27.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under U.S. GAAP, in accordance with EITF 00-27 &#147;Application of EITF98-5 Accounting for
Convertible Securities with Beneficial Conversion Features&#148; (EITF 00-27), convertible securities
with beneficial conversion features or contingently adjustable conversion ratios are recognized
and measured by allocating a portion of the proceeds equal to the intrinsic value of that
feature to additional paid-in capital. The amount to be allocated should be calculated at the
commitment date as the difference between the conversion price and the fair value of the common
stock into which the security is convertible, multiplied by the number of shares into which the
security is convertible. The resulting discount on the convertible security is accreted, as
interest expense, from the date the beneficial conversion feature is fixed to the stated
redemption date.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>All convertible bonds outstanding as of December&nbsp;31,
2003, 2004 and 2005 contained embedded derivatives features that
require bifurcation in accordance with SFAS&nbsp;No.&nbsp;133 and the
Company bifurcated the embedded derivatives from the host contracts
for these convertible bonds. The host bond contract was then accreted
from the initial amount to the maturity amount over the period from
the date of issuance to the maturity date using the effective
interest method. The net difference between R.O.C.&nbsp;GAAP and
U.S.&nbsp;GAAP represents 1)&nbsp;change in fair value of embedded
derivatives, and 2)&nbsp;difference between accretion period under both GAAP, and premium or discounts subject to accretion under both GAAP.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-76
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">i.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Stock appreciation rights</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>R.O.C. GAAP has no specific accounting provisions for Stock Appreciation Rights (&#147;SAR&#148;) plans
and the
Company only recognizes compensation expense for SAR to the extent it is not covered by the gain
on the derivative financial instruments intended to fund the costs of the SAR. The Company
allocates a portion of the gains or losses from a derivative contract designated as a hedge of
the SAR program for R.O.C. GAAP purposes by correlating the number of shares in the SAR plan
that have vested with a number of shares referenced in the derivative contract. The Company
records gains or losses on the portion of the derivative contract related to the SAR based on
the difference between the strike price in the derivative contract and the employees&#146; exercise
price. Under R.O.C. GAAP basis the derivative contract related to the SAR in now accounted for
as a derivative contract not held for hedging and that therefore the U.S. GAAP differences for
derivatives now include any differences related to the SAR contract.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>U.S. GAAP requires the Company to account for its stock appreciation rights granted to employees
in accordance with Accounting Principles Board Opinion No.&nbsp;25 (&#147;APB 25&#148;), &#147;Accounting for Stock
Issued to Employees.&#148; Under APB 25, the Company recognizes compensation expense for the plan
based on the amount by which the quoted market value of the shares of the Company&#146;s stock
covered by the grant exceeds the exercise price of the rights. Compensation is accrued as a
charge to expense over the vesting period based on current market values of the SAR at the end
of each period. As of December&nbsp;31, 2003, all shares under SAR totaling 72,208,948 were expired
and cancelled.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">j.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Employees&#146; stock option plans</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under R.O.C. GAAP, there were no specific regulations with respect to the accounting for stock
options prior to 2004. Effective January&nbsp;1, 2004, the Company is required to use either the
fair value method or the intrinsic value method to account for the employees&#146; stock option plan.
Under the fair value method, stock options are stated on the fair value calculated by pricing
models such as Black-Scholes or binomial model. Under the intrinsic value method, stock options
are recorded by the excess of the market price of the underlying shares at the grant date over
the exercise price of the stock option. The fair value method is encouraged but not required. If
the intrinsic value is used, the Company is required to disclose pro-forma net income and
earnings per share assuming the fair value method is used. The Company chose the intrinsic value
method to account for the employees&#146; stock option plans. Under R.O.C. GAAP, no compensation
expense was recognized for the year ended December&nbsp;31, 2003, 2004 and 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under U.S. GAAP, the Company elected to follow Accounting Principles Board Opinion No.&nbsp;25,
&#147;Accounting for Stock Issued to Employees&#148; (&#147;APB 25&#148;) and related interpretations to
account for the employees&#146; stock option plans. Under U.S. APB Opinion No.&nbsp;25 and its
related interpretations, the Company is required to record the compensation expense over
the vesting period based on the difference between the exercise price and the current
market price at the end of each period. The Company did not record any compensation
expense on the U.S. GAAP basis as the exercise price of the stock options was equal to the
market price of the underlying common stock on the grant date.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-77
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under U.S. SFAS No.&nbsp;123, &#147;Accounting for Stock-Based Compensation&#148;, the Company is required to
disclose the pro forma information regarding the options granted to the employees as if the fair
value method has been applied.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>For purposes of pro forma disclosures, the estimated fair value of the options is amortized
over the vesting period. For the year ended December&nbsp;31, 2003, 2004 and 2005, the
compensation expense recognized under fair value method would have been NT$84,913,
NT$338,091 and NT$513,301, respectively. The Company&#146;s pro-forma information is as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000">For the year ended December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2003 (Restated)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004 (Restated)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)&nbsp;under U.S. GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,026,653</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(468,884</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,635,555</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(141,328</TD>
    <TD nowrap>)</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total compensation expense of employees&#146; stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(84,913</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(338,091</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(513,301</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(15,650</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pro forma net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,111,566</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(806,975</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,148,856</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(156,978</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The pro-forma of EPS for the Company was as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000">For the year ended December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2003 (Restated)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004 (Restated)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">As reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic EPS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3.53</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.17</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.59</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.05</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted EPS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3.53</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.17</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.59</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.05</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic EPS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3.57</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.29</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.77</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.05</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted EPS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3.57</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.29</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.77</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.05</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">A summary of the Company&#146;s stock option activity and related information for the years ended
December&nbsp;31, 2004 and 2005 is as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">As of December 31, 2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">As of December 31, 2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Weighted-Average</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Options</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Weighted-Average</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Options</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Exercise</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(in thousand)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Exercise Price</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(in thousand)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Price</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding-beginning of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">290,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.31</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">432,779</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">195,768</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">204,909</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.87</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(53,289</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(39,126</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10.75</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding-end of year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">432,779</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">598,562</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-78
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Weighted-average fair value of options granted for the year ended December&nbsp;31, 2004 and 2005 was
NT$6.59 and NT$2.55 per unit, respectively. The weighted average remaining contractual life of those options
for the year ended December&nbsp;31, 2004 and 2005 is 5.29&nbsp;years
and 4.32&nbsp;years, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">k.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Purchase and Sale of the Company&#146;s Own Shares</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under R.O.C. GAAP, the net gains or losses resulting from the purchase and sale of the Company&#146;s
own shares for trading purposes are recorded as non-operating income or losses in the statements
of operations. Effective January&nbsp;1, 2002, purchases or sales of the Company&#146;s own shares are
treated as treasury stock transactions.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>U.S. GAAP requires that if the Company acquires shares of its own capital stock for purposes
other than retirement, the cost of the acquired stock should be shown separately as a
deduction from the total of capital stock, additional paid-in capital, and retained
earnings, or accorded the accounting treatment appropriate for retired stock. Gains on
sales of the repurchased stock not previously accounted for as constructively retired
should be credited to additional paid-in capital; losses should be charged to additional
paid-in capital to the extent that previous net gains from sales or retirements of the same
class of stock are included therein, otherwise the losses are charged to retained earnings.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">l.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Reclassification of Capital Account to Accumulated Deficit</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under R.O.C. GAAP, under the approval of shareholders, a company may reclassify its additional
paid-in capital account to accumulated deficit.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under U.S. GAAP, according to SAB Topic 5S, the SEC staff believes a deficit reclassification of
any nature is considered to be quasi-reorganization. As such, a company may not reclassify or
eliminate a deficit in retained earnings unless all requisite conditions for a
quasi-reorganization are satisfied. For the year ended December&nbsp;31, 2003 and 2005, the Company
reclassified NT$2,630,621 and NT$315,704 of its additional paid-in capital to accumulated
deficit account, respectively. Under U.S. GAAP, this reclassification
is reversed.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-79
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">m.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Rights issues and earnings per share</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under R.O.C. GAAP, the portion of rights issues that are offered to employees contain a bonus
element, basic and diluted EPS shall be adjusted retroactively for the bonus element for
all periods presented. However, under
U.S. GAAP, such retroactive adjustment is required for all rights issues containing bonus
element, regardless whether the rights issuance is offered to employees or existing
shareholders.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under U.S. GAAP, earnings per share is calculated by dividing net income by the
weighted-average number of shares outstanding in each period, adjusted retroactively for
any stock dividends and stock splits issued subsequently. Other shares issued from
un-appropriated earnings, such as stock bonus to employees, are included in the calculation
of weighted-average number of shares outstanding from the date of occurrence. Earnings per
equivalent American Depository Share (&#147;ADS&#148;) are calculated by multiplying earnings per
share by 10 since one ADS represents 10 common shares. Under U.S. GAAP, Earnings per share
after retroactively adjusted by the capital reduction was NT$(3.53), NT$(0.17) and
NT$(1.59) for the year ended December&nbsp;31, 2003, 2004 and 2005,
respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The number of weighted average shares outstanding under U.S. GAAP is presented below:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">For the year ended December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2003</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2005</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Number of common shares outstanding on January 1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,154,648,056</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,585,997,762</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,939,170,325</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average number of treasury stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,515,795</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,515,795</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,515,795</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cancellation of treasury stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(23,348,539</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(23,348,539</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(23,348,539</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bonds converted to common for the years ended
December&nbsp;31, 2003 (263,975,068 shares)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78,269,103</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of common shares for cash on November&nbsp;11,
2003 (475,000,000 shares*51/365)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,740,984</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of 525,000,000 common shares for Global
Depositary Shares on April&nbsp;5, 2004</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">226,906,653</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bonds converted to common shares for the year ended
December&nbsp;31, 2004 (80,044,385 shares)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,997,545</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Retroactive adjustment for bonus element included
in the rights offering on November&nbsp;3, 2003
(1.2462%)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,491,830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic and dilutive weighted-average number of shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,272,285,639</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,822,037,626</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,912,305,991</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV style="margin-left:15px; text-indent:-15px">Note: all shares presented above have been retroactively adjusted
for the capital reduction effect as discussed under footnote&nbsp;19 and 27a.</DIV>

<P align="center" style="font-size: 10pt">F-80
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">n.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Inventory cost basis</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under ROC GAAP, it is allowed to subsequently reverse inventory reserve and recognize a gain
even when said inventory is not sold yet. Under US GAAP, ARB43 requires that when inventory
is written down below cost, such reduced amount is to be
considered the cost for subsequent
accounting purposes. SEC Topic 5BB further states that a write-down of inventory to the lower of
cost or market at the close of a fiscal period creates a new cost basis that subsequently cannot
be marked up based on changes in underlying facts and circumstances.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">o.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Plant capacity variances</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As permitted under R.O.C. GAAP, all plant capacity expense variances can either be charged to
the statement of operations or allocated between cost of goods sold and inventory using an
appropriate allocation method. The Company&#146;s policy is to expense such variances.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under U.S. GAAP, such plant capacity variances can only be allocated between cost of goods sold
and inventory. This has resulted in additional inventory allowances by NT$740,416, NT$24,823
and NT$28,144 as of December&nbsp;31, 2003, 2004 and 2005, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">p.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Gross profit and operating income</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under R.O.C. GAAP, a number of operating income and expenses are presented under the non-operating
income/expenses in the statement of operations, including the government subsidies for research and
development, inventory loss provision, allowance for prepaid expenses and the reversal of bad debt
expense. Under U.S. GAAP, the government subsidies for research and development, allowance for
prepaid expenses and the reversal of bad debt expense are included in operating income. The
inventory loss provision is included in the gross profit.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">q.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Employee bonuses</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under R.O.C. GAAP, the employee bonuses and the remuneration to directors and supervisors, paid
in accordance with the provisions of the Company&#146;s articles of incorporation applicable to the
distribution of earnings, are recorded as an appropriation from retained earnings in the period
shareholder approval is obtained for the distribution of the Company&#146;s earnings. If the employee
bonuses are settled through the issuance of common shares of the Company, the amount transferred
from retained earnings is based on the par value of the common shares issued. The remuneration
to directors and supervisors may not be settled through the issuance of common shares.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>U.S. GAAP requires that such bonuses and remuneration to employees, directors and supervisors be
recorded as compensation expense in the period to which they relate. In addition, if the
employee bonuses are paid in the form of common shares, the fair value of the shares issued is
used to determine the amount of the expense. However, since the form of the payment of the
compensation expense is only determinable at the annual shareholders&#146; meeting, which is
generally after the issuance of the Company&#146;s annual financial</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-81
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>statements, the compensation
expense is initially accrued in accordance with the Company&#146;s articles of incorporation in the
period to which it relates. The difference between the compensation expense initially
recorded and the fair value of the shares issued to settle the accrual, if any, is recorded in
the period in which shareholder approval is obtained.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">r.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Research and Development Expense</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under R.O.C. GAAP, the Company recorded royalty expenses as the research and development
expense in operating expenses. Under U.S. GAAP, the Company stated the royalty
expenses as selling expenses or administrative expenses, based upon the nature of the
royalty expenses. Accordingly, U.S. GAAP basis research and development expenses
were NT$2,535,259 in 2003, NT$2,418,208 in 2004 and NT$2,784,483
(US$84,893) in 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">s.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>10% tax on undistributed earnings</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under R.O.C. Tax Law, the undistributed earnings generated after 1997 are subject to a 10%
tax. Under R.O.C. GAAP, the Company recorded the 10% tax on undistributed earnings in the
year of shareholders&#146; approval on the retained earnings.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Starting from 2002, the American Institute of Certified Public Accountants International
Practices Task Force (the &#147;Task Force&#148;) concluded that, in accordance with Emerging Issues
Task Force (&#147;EITF&#148;) 95-10, &#147;Accounting for Tax Credits Related to Dividends in Accordance
with U.S. SFAS No.&nbsp;109&#148;, the 10% tax on undistributed earnings shall be accrued during the
period the earnings arise and adjusted to the extent that distributions are approved by the
shareholders in the following year. The U.S. GAAP policy had no effect on the income tax
expenses for the year ended December&nbsp;31, 2003, 2004 and 2005 as the Company had the net
losses for tax purpose in the respective year.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under U.S. GAAP, if a company has experienced cumulative losses in recent years, it is not
generally able to consider subjective projections of future operating profits for the
purpose of determining the valuation allowance for deferred income tax assets. A valuation
allowance is provided on deferred tax assets to the extent that it is not &#147;more likely than
not&#148; that such deferred tax assets will be realized. Under U.S. GAAP, the Company&#146;s
valuation allowance for deferred tax assets was NT$10,302,448 and NT$12,096,445 as of
December&nbsp;31, 2004 and 2005, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">t.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Consolidated entities</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>R.O.C. SFAS No.7 requires a company to consolidate all investees that a company has a controlling
interest in. Such control can be established by the company&#146;s majority representation in the Board
of Directors even if a company does not have a controlling financial interest through direct or
indirect ownership of a majority voting interests.
</TD>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under U.S. GAAP, a company is required to consolidate all investees in which a company has a
controlling financial interest through direct or indirect ownership of a majority voting interest.
A company would not have a controlling financial interest in its investee by majority
representation in the Board of Directors alone. Magic Pixel Inc. was consolidated by the Company
in 2005 under R.O.C. GAAP. The Company did not have a controlling financial interest in Magic
Pixel Inc. and it should not be consolidated under U.S. GAPP. The deconsolidation of Magic Pixel Inc.
resulted in a reduction in cash and cash equivalents of NT$183,278
and revenues of NT$33,699.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Change in capital structure</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under R.O.C. GAAP, a company is not required to retroactively adjust its shares for capital
reduction, except for purpose of EPS calculation.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Under U.S. GAAP, SEC Topic 4C requires the effect of a capital structure change to a stock
dividend, stock split or reverse split which occurs after the date of the latest reported balance
sheet but before the release of the financial statements be given retroactive effect in the balance
sheet.</TD>

</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As disclosed in Note 19 and 27a, on February&nbsp;16, 2006, the Company cancelled 2,079&nbsp;million common
shares proportionately amongst existing shareholders. The cancellation is effectively a reverse
stock split and accordingly has been given retroactive effect in the balance sheet under U.S. GAAP. The
number of common shares outstanding under U.S. GAAP amounted to 2,585,997,762, 2,939,170,325 and
2,915,821,786 in 2003, 2004 and 2005, respectively.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-82
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The following reconciles net income and shareholders&#146; equity under R.O.C. GAAP as reported in
the consolidated financial statements to the net income and shareholders&#146; equity amounts
determined under U.S. GAAP, giving effect to the differences listed above.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Net income (loss)&nbsp;for U.S. GAAP purposes is reconciled as follows:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000">For the year ended December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2003</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Restated)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Restated)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Net income (loss)&nbsp;as reported under R.O.C. GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,197,745</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">217,692</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,027,189</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">214,243</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Additional pension gain on an actuarial basis</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Plant capacity loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">268,671</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(257,565</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">368</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Unrealized (losses)&nbsp;gains on marketable securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,444</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(21,659</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Other-than-temporary decline in value on marketable
securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(447,995</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,325,640</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,416</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Derivative financial instrument</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-0px">Net gains
(losses)&nbsp;on derivative financial instruments, including embedded
derivatives in convertible bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">378,615</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(31,879</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(972</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-0px">Gain on embedded derivative in share purchase
agreement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">225,753</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Adjustment for taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48,143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,914</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">197,359</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,017</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Accrued compensated absences</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,356</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(133</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Fixed asset impairment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">901,806</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,494</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Amortization of goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Net income (loss)&nbsp;in accordance with U.S. GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,026,653</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(468,884</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,635,555</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(141,328</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Other comprehensive income:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Unrealized gains (losses)&nbsp;on available-for-sale securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,642,167</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,519,910</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">618,388</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,853</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Change in translation adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(30,182</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(127,670</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(26,516</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(808</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Reclassification adjustment for realized gains (losses)
on available-for-sale securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,318</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">243,497</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">531,378</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,201</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Comprehensive income (loss)&nbsp;in accordance with U.S.
GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,395,350</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,872,967</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,512,305</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(107,082</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-83
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">For the year ended December&nbsp;31, 2003, 2004 and 2005, the earnings per share under U.S. GAAP was
listed as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2003</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Restated)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Restated)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic net income (losses)&nbsp;per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3.53</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.17</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.59</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.05</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted net income (losses)&nbsp;per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3.53</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.17</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.59</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.05</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The diluted earnings per share calculation excludes the statement of operations impact of
NT$240,708 and NT$88,181 related to the assumed conversion of convertible bonds into 659,968,955
weighted average shares and 61,094,172 weighted average shares for
years 2003 and 2004
respectively. In addition, 1,996,820 and 32,379,507 weighted average shares assumed exercise of
stock options for year 2003 and 2004 respectively were also excluded in the diluted earnings per
share calculation. The impact of the assumed conversion and exercise of stock options has been
excluded for year 2003, 2004 and 2005 due to the anti-dilutive effect.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Gross profit (losses)&nbsp;for U.S. GAAP purposes is reconciled as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000">For the year ended December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2003</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2004</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Restated)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">(Restated)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross profit (loss)&nbsp;reported under R.O.C. GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,941,649</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,387,976</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">241,764</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,371</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reversal of inventory losses provision</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,185,227</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">918,545</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">478,129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,577</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pension gain on actuarial basis</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation of idle assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(49,869</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impairment of idle assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(41,661</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Vacation Accrual</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,652</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
   $<TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(111</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deconsolidation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(31,797</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(969</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Plant capacity loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">268,671</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(257,565</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">368</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross profit (loss)&nbsp;in accordance with U.S. GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,576,585</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,051,652</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(687,508</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(20,961</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-84
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Operating income (loss)&nbsp;for U.S. GAAP purposes is reconciled as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000">For the year ended December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2003<BR>
(Restated)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004<BR>
(Restated)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income (losses)&nbsp;under R.O.C. GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,683,989</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(348,688</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,874,559</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(148,615</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pension gain on actuarial basis</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">82</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Government subsidy</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">668</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Allowance for prepaid expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(334,971</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(141,711</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(4,320</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation of idle assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(49,869</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Impairment of idle assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(41,661</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">478,129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,577</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reversal of inventory loss provision</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,185,227</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">918,545</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounts
receivable provision</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,476</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,712</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,546</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Vacation
accrued</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,356</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(133</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deconsolidation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69,740</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,126</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Plant capacity loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">268,671</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(257,565</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">368</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other reclassification</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(40,701</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,241</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income (losses)&nbsp;under U.S. GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,614,295</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">335,141</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,356,362</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(132,817</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholders&#146; equity for U.S. GAAP purposes is reconciled as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000">As of December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2003<BR>
(Restated)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>

<TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004<BR>
(Restated)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shareholders&#146; equity under R.O.C. GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,247,534</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,344,673</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,558,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">870,683</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrual for pension cost under actuarial method</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(35,039</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(32,343</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(29,647</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(904</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net unrealized gain (losses)&nbsp;on
available-for-sale Securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">682,837</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">294,013</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,375,517</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,937</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net losses
on derivative financial instruments, including embedded derivatives in convertible bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(116,598</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(31,881</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill on investment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(356</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">149,923</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,571</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additional tax on undistributed additional tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,898,214</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,896,300</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,698,941</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(51,797</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Plant capacity loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">268,671</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,106</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,474</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">350</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accrued compensated absences</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,356</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(133</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fixed asset impairment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">901,806</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,494</TD>
    <TD>&nbsp;</TD>
</TR>

<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Shareholders&#146; equity under U.S. GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28,148,835</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,755,058</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,264,176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">892,201</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-85
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shareholders&#146; equity under U.S. GAAP consists of the following:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">As of December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004<BR>(Restated)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Common shares</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,391,703</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,158,218</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">888,970</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additional paid-in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,982,563</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,003,985</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">426,951</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accumulated deficits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9,991,069</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(15,272,695</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(465,631</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accumulated other comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">410,477</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,533,728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,760</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Treasury stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,038,616</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(159,060</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,849</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reserves</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total of shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,755,058</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,264,176</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">892,201</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accumulated other comprehensive income consists of the following:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">As of December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrealized gain (losses)&nbsp;on marketable securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">348,435</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,498,202</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,677</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cumulative translation adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,042</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,526</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,083</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">410,477</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,533,728</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,760</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="11" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Domestic and international components of pre-tax income (loss)&nbsp;are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000">For the year ended December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2003<BR>(Restated)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004<BR>(Restated)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Domestic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,786,384</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(83,898</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,089,772</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(124,688</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">International</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,267,704</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(357,452</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(554,896</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(16,918</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,054,088</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(441,350</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,644,668</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(141,606</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">A reconciliation of the significant differences between the expected income tax expense
(benefit)&nbsp;and the income tax expense (benefit)&nbsp;is as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000">For the year ended December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2003<BR>(Restated)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004<BR>(Restated)</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected income tax expense (benefit)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,013,522</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(110,338</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,171,962</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(35,731</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additional income tax due to different tax rate
under U.S.&nbsp;GAAP</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">674,687</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(587,498</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(559,397</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(17,055</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax credit forfeited (earned)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">829,546</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(294,120</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">611,131</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,632</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Change in valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">468,595</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,997,992</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,793,997</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">54,695</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net losses (gain)&nbsp;on long-term equity investment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">317,135</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,884</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(84,630</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,580</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-taxable/deductible net losses (gain)&nbsp;on
financial instruments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,216</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">108,913</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(331,943</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(10,120</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effects of rate change</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(373,681</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,051,035</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(246,630</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,519</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Others</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,908</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(74,931</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,488</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">228</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income tax expense (benefit)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(27,116</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,867</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,054</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">550</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-86
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B>Concentration of Risk</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company designs, develops, manufactures and markets a variety of semiconductor products.
The Company&#146;s revenues are derived primarily from the sale of mask ROMs and Flash. The
Company&#146;s other products include SLC, logic products and wafers. The Company distributes its
products on a global basis but mainly to customers in Asia. The Company&#146;s largest customer,
Nintendo, and the Company&#146;s largest three customers accounted for 29.15% and 38.24% of the
Company&#146;s total net sales, respectively, for the period ended December&nbsp;31, 2004. The Company&#146;s
sales are primarily denominated in currencies other than N.T. Dollars, primarily U.S. Dollars
and Japanese Yen.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Financial instruments that potentially subject the Company to significant concentrations of
credit risk consist principally of cash investments and trade accounts and notes receivable.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company maintains cash and cash equivalents with various financial institutions. Most of
these financial institutions are located in the R.O.C. and Company policy is designed to limit
exposure to any one institution.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Substantially all of the Company&#146;s accounts receivable are due from companies in high
technology industries located primarily in Asia. Further, as of December&nbsp;31, 2004 and 2005, the
three largest accounts receivable balances amounted NT$1,010,033 and NT$1,245,117 (US$37,961),
respectively. The Company performs periodic credit evaluations of its customers&#146; financial
condition and generally does not require collateral. Receivables generally are due within 45 to
60&nbsp;days.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%"><B>Valuation and Qualifying Accounts</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The summary of the changes in the allowance for accounts and notes receivable, inventory and
royalty accruals was listed as follows:
</DIV>

<P align="center" style="font-size: 10pt">F-87
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000">At December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2003</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Allowance for doubtful accounts at the beginning</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">210,883</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">165,257</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">165,277</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,039</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bad debt expense (reversal)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(33,059</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">787</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(50,712</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,546</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Bad debts written Off</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,567</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(767</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,515</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">290</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at the end of the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">165,257</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">165,277</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">124,080</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,783</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Allowance for inventory losses at the beginning</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,751,735</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,380,019</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,242,215</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">98,848</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amount expensed (reversal)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1,185,227</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(923,686</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(487,070</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(14,850</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Write-off of inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(186,489</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(211,092</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(316,068</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9,636</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Change in
consolidated entities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">133,874</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4,082</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,026</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,525</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">107</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at the end of the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,380,019</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,242,215</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,576,476</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73,525</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Royalty accruals at the beginning</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">672,604</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">675,457</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">683,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,851</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amount expensed</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">195,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">140,468</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">218,051</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,648</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Payment made</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(192,147</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(132,007</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(289,495</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8,826</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance at the end of the year</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">675,457</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">683,918</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">612,474</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,673</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="15" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>29</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Summarized Financial Information of Equity Investees</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The following table presents summarized financial information in accordance with U.S. GAAP for
equity investees with an ownership percentage between 20-50% as of December&nbsp;31, 2004 and 2005
and for the years ended December&nbsp;31, 2003, 2004 and 2005:</TD>
</TR>

</TABLE>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000">Year ended December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2003</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">215,390</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">435,455</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">211,515</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,449</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,820</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,088</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,102</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,771</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">176,643</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">167,460</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">87,097</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,655</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Non-current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">326</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,423</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,690</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total shareholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,241</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">334,660</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">180,830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,513</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000">Year ended December 31</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2003</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2004</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2005</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">NT$000</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">US$000</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">311,391</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">466,717</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">209,908</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,400</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sales less cost of sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,969</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">158,614</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78,062</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,380</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income (loss)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(284,591</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(154,804</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(116,445</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,550</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-88
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>30.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>New Accounting Pronouncements</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>U.S. GAAP</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In March&nbsp;2004, the FASB approved the consensus reached on the Emerging Issues Task Force (EITF)
Issue No.&nbsp;03-1, &#147;The Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments.&#148; The Issue&#146;s objective is to provide guidance for identifying
other-than-temporarily impaired investments. EITF 03-1 also provides new disclosure requirements
for investments that are deemed to be temporarily impaired. In September&nbsp;2004, the FASB issued a
FASB Staff Position (FSP)&nbsp;EITF 03-1-1 that delays the effective date of the measurement and
recognition guidance in EITF 03-1 until further notice. In November&nbsp;2005, the FASB issued a FASB
Staff Position (FSP)&nbsp;FAS 115-1/124-1 that addresses the measurement and recognition guidance for
identifying other-than-temporarily impaired investments. This FSP also includes accounting
consideration subsequent to the recognition and requires certain disclosures about unrealized
losses that have not been recognized as other-than-temporary impairment. The disclosure
requirements of EITF 03-1 and FSP 115-1/124-1 are effective with this annual report for fiscal
2004 and 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In November&nbsp;2004, FASB issued FASB Statement No.&nbsp;151, which amended the guidance in ARB No.&nbsp;43,
Chapter&nbsp;4, &#147;Inventory Pricing,&#148; to clarify the accounting for abnormal amounts of idle facility
expense, freight, handling costs, and wasted material (spoilage). SFAS No.&nbsp;151 requires that
those items be recognized as current-period charges and requires the allocation of fixed
production overheads to inventory based on the normal capacity of the production facilities. The
guidance is effective for inventory costs incurred during fiscal years beginning after June&nbsp;15,
2005. The Company expected to adopt the guidance on January&nbsp;1, 2006. The adoption of this
Statement is expected to increase cost of goods sold and reduce inventory balance on a US GAAP
basis.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>



    <TD>On December&nbsp;16, 2004, the Financial Accounting Standards Board (FASB)&nbsp;issued FASB Statement No.
123 (revised 2004), Share-Based Payment, which is a revision of FASB Statement No.&nbsp;123,
Accounting for Stock-Based Compensation. Statement 123(R) supersedes APB Opinion No.&nbsp;25,
Accounting for Stock Issued to Employees, and amends FASB Statement No.&nbsp;95, Statement of Cash
Flows. Generally, the approach in Statement 123(R) is similar to the approach described in
Statement 123. However, Statement 123(R) requires all share-based payments to employees,
including grants of employee stock options, to be recognized in the income statement based on
their fair values. Pro forma disclosure is no longer an alternative.
</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>



    <TD>Statement 123(R) originally required adoption no later than July&nbsp;1, 2005. In April&nbsp;2005, the
Securities and Exchange Commission (&#147;SEC&#148;) issued a release that amends the compliance dates for
Statement 123(R). Under the SEC&#146;s new rule, the Company will be required to apply Statement
123(R) as of January&nbsp;1, 2006. Early adoption will be permitted in periods in which financial
statements have not yet been issued. We expect to adopt Statement 123(R) on January&nbsp;1, 2006.
</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>



    <TD>Statement 123(R) permits public companies to adopt its requirements using one of two methods:
</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>



    <TD>A &#147;modified prospective&#148; method in which compensation cost is recognized beginning with the
effective date (a)&nbsp;based on the requirements of Statement 123(R) for all share-based payments
granted after the effective date and (b)&nbsp;based on the requirements of Statement 123 for all
awards granted to employees prior to the effective date of Statement 123(R) that remain unvested
on the effective date.
</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>



    <TD>A &#147;modified retrospective&#148; method which includes the requirements of the modified prospective
method described above, but also permits entities to restate, based on the amounts previously
recognized under Statement 123 for purposes of pro forma disclosures, either (a)&nbsp;all prior
periods presented or (b)&nbsp;prior interim periods of the year of adoption.
</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>



    <TD>The company plans to adopt Statement 123 using the modified-prospective method.
</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>



    <TD>As permitted by Statement 123, the company currently accounts for share-based payments to
employees using Opinion 25&#146;s intrinsic value method and, as such, generally recognizes no
compensation cost for employee stock options. Accordingly, the adoption of Statement 123(R)&#146;s
fair value method will have a significant impact on our result of operations, although it will
have no impact on our overall financial position. The impact of adoption of Statement 123(R)
cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had we adopted Statement 123(R) in prior periods,
the impact of that standard would have approximated the impact of Statement 123 as described in
the disclosure of pro forma net income and earnings per share in Note 28(j) to our consolidated
financial statements. Statement 123(R) also requires the benefits of tax deductions in excess of
recognized compensation cost to be reported as a financing cash flow, rather than as an
operating cash flow as required under current literature. This requirement will reduce net
operating cash flows and increase net financing cash flows in periods after adoption. While the
company cannot estimate what those amounts will be in the future (because they depend on, among
other things, when employees exercise stock options), the amount of operating cash flows
recognized in prior periods for such excess tax deductions were $-, $-, and $- in 2005, 2004 and
2003, respectively.
</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-89
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In December&nbsp;2004, the FASB issued SFAS No.&nbsp;153, &#147;Exchanges of Nonmonetary Assets, an amendment
of APB Opinion No.29.&#148; APB Opinion No.29, &#147;Accounting for Nonmonetary Transactions,&#148; is based on
the principle that exchanges of nonmonetary assets should be measured based on the fair value of
the assets exchanged. SFAS No.&nbsp;153 amends APB Opinion No.&nbsp;29, eliminating the exception to fair
value accounting for nonmonetary exchanges of similar productive assets and replaces it with a
general exception to fair value accounting for nonmonetary exchanges that do not have commercial
substance if the future cash flows of the entity are expected to change significantly as a
result of the exchange. The statement is effective for non-monetary asset exchanges occurring in
fiscal periods beginning after June&nbsp;15, 2005. The Company does not expect this statement to have
a material impact on the financial condition or results of operation.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In May&nbsp;2005, the FASB issued SFAS No.&nbsp;154 &#147;Accounting Changes and Error Corrections&#148;. SFAS No.
154 replaces APB Opinion No.&nbsp;20 &#147;Accounting Change&#148;, and SFAS No.&nbsp;3 &#147;Reporting Accounting
Changes in Interim Financial Statements&#148; and changes the requirements for the accounting for and
reporting of a change in accounting principle. SFAS No.&nbsp;154 also applies to all voluntary
changes in accounting principle and changes required by an accounting pronouncement in the
unusual instance that the pronouncement does not include specific transition provision. The
statement also defines &#147;retrospective application&#148; and &#147;restatement&#148;. The retrospective
application of a change in accounting principles is limited to the direct effects of the
changes. The statement should be affective for accounting changes made in fiscal years beginning
after December&nbsp;15, 2005. The Company does not expect this statement to have a material impact on
the financial condition or results of operation.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-90
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In February&nbsp;2006, the FASB issued SFAS No.&nbsp;155 &#147;Accounting for Certain Hybrid Financial
Instruments &#150;
An Amendment of SFAS No.&nbsp;133 and 140&#148;. The Statement permits fair value remeasurement for any
hybrid financial instrument that contains an embedded derivative that otherwise would require
bifurcation; establish a requirement to evaluate interests in securitized financial assets and
allow a qualifying special-purpose entity from holding a derivative financial instrument that
pertains to a beneficial interest other than another derivative financial instrument. The
statement is effective for all financial instruments acquired or issued after the beginning of
an entity&#146;s first fiscal year that begins after September&nbsp;15, 2006. The Company is currently
evaluating the potential impact of this standard on its financial position and the result of
operations, but does not believe the adoption of SFAS No.&nbsp;155 will have a material effect on the
result of operations or financial position of the Company.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>R.O.C. GAAP</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In December&nbsp;25, 2003, the R.O.C. Accounting Research and Development Foundation (&#147;ARDF&#148;) issued
Statement of Financial Accounting Standards No.&nbsp;34, &#147;Accounting for Financial Instruments&#148;,
which is effective for financial statements with fiscal years ending on or after December&nbsp;31,
2006. Early adoption of this statement is not allowed. SFAS No.&nbsp;34 requires that all financial
instruments, excluding certain financial instruments specified in this statement, as either
trading, available-for-sale or held-to-maturity. Debt securities owned with positive intent and
ability to hold to maturity are classified as held-to-maturity securities and reported at
amortized cost. Debt and equity securities that are purchased and traded for short-term profit
are classified as trading securities and reported at fair value, with unrealized holding gains
and losses reported as part of net income. Debt and equity securities not classified as either
held-to-maturity or trading are classified as available-for-sale securities, which should be
reported at fair value, with unrealized gains and losses reported as a separate component of
stockholders&#146; equity. In addition, all derivatives are required to be reported at fair value.
The Company is currently evaluating the effect of the adoption of this statement.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In July&nbsp;1, 2004, the R.O.C. ARDF issued SFAS No.&nbsp;35, &#147;Accounting for Impairment of Assets&#148;,
which is effective for financial statements with fiscal years ending on or after December&nbsp;31,
2005. This statement requires that impairment loss should be recognized whenever events or
changes in circumstance indicate the carrying amount of an asset may be lesser than its
recoverable amount. The Company is currently evaluating the effect of the adoption of this
statement.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In December&nbsp;9, 2004, the R.O.C. ARDF issued the revision for SFAS No.&nbsp;5(R), &#147;Accounting for
Long-Term Equity Investment&#148;, which is effective for financial statements with fiscal years
beginning on or after January&nbsp;1, 2005. This revision of the guidance requires that operating
losses of investees evaluated under equity method be allocated between controlling and
non-controlling interest until those losses exceed the non-controlling interest&#146;s investment. In
that event, the excess of any further losses are charged to the</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">F-91
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>controlling interest except to
the extent that the minority interest has a binding obligation to, and is able to undertake the
losses. The Company does not expect SFAS No.&nbsp;5(R) have a material impact on the financial
condition or results of operation.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In December&nbsp;9, 2004, the R.O.C. ARDF issued the revision for SFAS No.&nbsp;7(R), &#147;Consolidated
Financial Statements&#148;, which is effective for financial statements with fiscal years beginning
on or after January&nbsp;1, 2005. This revision of the guidance requires the Company to consolidate
all investees under the control of the Company. Control is not only presumed when the parent
company owns over 50% of voting rights of the investee but also evidenced by control under
certain situations specified in SFAS No.&nbsp;7(R). In addition, the threshold for the determination
of whether to consolidate an investee was revoked. Before the adoption of SFAS No.&nbsp;7(R), the
Company was not required to file consolidated financial statements to SFC in Taiwan, as none of
the investees of the Company pass the threshold for consolidation. However, after the adoption
of this revised statement, the Company will be required to file the semi-annual consolidated
financial statements to SFC in Taiwan.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In June&nbsp;2005, the R.O.C. ARDF issued SFAS No.&nbsp;36 &#147;Financial Instruments: Disclosure and
Presentation&#148;, which is also required to be applied by the Company on January&nbsp;1, 2006. SFAS No.
36 will require the Company for the presentation of financial instruments and identifies the
information that should be disclosed about them. The presentation requirements apply to the
classification of financial instruments, from the perspective of the issuer, into financial
assets, financial liabilities and equity instruments; the classification of related interest,
dividends, losses and gains; and the circumstances in which financial assets and financial
liabilities should be offset. The guidance requires disclosure of information about factors that
affect the amount, timing and certainty of an entity&#146;s future cash flows relating to financial
instruments and the accounting policies applied to those instruments. The guidance also requires
disclosure of information about the nature and extent of an entity&#146;s use of financial
instruments, the business purposes they serve, the risks associated with them, and management&#146;s
policies for controlling those risks. SFAS No.&nbsp;36 complements the principles for recognizing
and measuring financial assets and financial liabilities in SFAS No.&nbsp;34 &#147;Accounting for
Financial Instruments&#148;.</TD>
</TR>

</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">F-92
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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="129"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>APPENDIX A</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>GLOSSARY OF TECHNICAL TERMS</B>

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="72%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">AND circuit
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">A circuit which has two or more
input signal gates and which
delivers an output only if and when
every input signal gate is energized
simultaneously.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">ASIC
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Application Specific Integrated
Circuit. A custom designed
integrated circuit that performs
specific functions which would
otherwise require a number of
commodity integrated circuits to
perform. The use of an ASIC in place
of a conventional integrated circuit
reduces product size and cost and
also improves reliability.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">ASSP
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Application Specific Standard
Product. A standard integrated
circuit designed for a specific
product or application, such as a
VCR or microwave.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">ATA
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">AT attachment, or Advanced
Technology Attachment. The
specification for an Integrated
Device Electronics interface which
is a type of hardware interface
widely used to connect various
peripheral devices to a personal
computer.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">BIOS
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Basic Input Output System. This
software controls the basic power-up
functioning of a computer system.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">CD-ROM
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Compact Disc used for data storage
on a read-only basis.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">CD-R/W
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CD-recordable and rewritable.
Originally called CD-erasable&#148;,
CD-RW can be erased and new
information can be re-recorded onto
the same physical location on the
disc by a CD-RW recorder.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">DAM
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Digital Answering Machine.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Die
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">A piece of a semiconductor wafer
containing the circuitry of a single
chip.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">DINOR
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Divided bit-line NOR
Mitsubishi-patented Flash
architecture used in its Flash
memory product line. DINOR offers
the high-speed random-access
capability of the NOR architecture,
without NOR&#146;s over-erase problems or
the need to set all bits to zero
before erase. It also offers the
high-density and single power-supply
characteristics of the NAND Flash
architecture. Programming occurs at
a lower threshold voltage than erase
in the DINOR Flash architecture, the
opposite of the NOR architecture.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">DRAM
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Dynamic Random Access Memory. A type
of volatile memory product that is
used in electronic systems to store
data and program instructions. It is
the most common type of RAM and must
be refreshed with electricity
thousands of times per second or
else it will fade away.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">A-1
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="35%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">DSP
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Digital Signal Processor. A type of
integrated circuit that processes
and manipulates digital information
after it has been converted from an
analog source. DSPs are parallel
processors used for high complexity,
high-speed real-time computations in
a wide variety of applications,
including digital cell telephone
systems and data compression
systems. A device which incorporates
Flash memory on which other devices
rely for access to a computer</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Embedded Flash controller
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">system. A disk controller, for
example, controls access to one or
more disk drives, managing physical
and logical access to the drive or
drives.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">EPROM
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Erasable Programmable ROM.
Nonvolatile memory which can be
reprogrammed by removing the device
from the system, erasing the data
through exposure to ultraviolet
light and reprogramming and
reinstalling the device in the
system.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">EEPROM
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Electrically Erasable Programmable
ROM. Similar to EPROM, except that
it can be erased electronically
before being reprogrammed.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ethernet
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">A type of LAN.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Flash Memory
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">A type of non-volatile memory, similar to an EEPROM in
tint it is erasable and reprogrammable. The difference
is that it can be erased and reprogrammed in the
electronic system into which the Flash memory chip has
been incorporated.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">GPS
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Global Positioning Satellite System. A network of
satellites that provides precise location determination
to receivers.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">GSM
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Global System for Mobile Communications. A standard for
digital mobile telephone networks.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">GUI
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Graphics User Interface. An interface which allows
operation of a computer by manipulating graphical icons
and windows (usually by pointing and clicking a mouse)
rather than using text commands.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">HDD
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Hard Disk Drive. An electro-mechanical device that
records data onto spinning rigid magnetic disks in
discrete data blocks each of which can be randomly
accessed. The primary mass storage device of a
computer.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">A-2
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="35%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Integrated Circuit
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">A combination of two or more transistors on a base
material, usually silicon. All semiconductor chips,
including memory chips and logic chips, are just very
complicated integrated circuits with thousands of
transistors.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">LAN
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Local Area Network. A short distance network designed
to connect computers within a localized environment to
enable the sharing of databases and other
communications.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">LCD
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Liquid Crystal Display. A type of display that uses a
liquid compound with a polar molecular structure,
sandwiched between two transparent electrodes. When an
electric field is applied, the molecules align with the
light passing through it. A polarized filter laminated
over the electrodes can selectively &#147;turn on&#148; a cell or
a pixel, containing the liquid crystal material,
turning it dark.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Logic Product
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">A product that contains digital integrated circuits
that process, rather than store, information.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Mask
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">A piece of glass on which an integrated circuit&#146;s
circuitry design is laid out. Integrated circuits may
require up to 20 different layers of design each with
its own Mask. In the integrated circuit production
process a light shines through the Mask leaving an
image of the design on the wafer.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Mb
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Mega Bit. One million (or 1,048,576) bits as a unit of
data size or memory capacity.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Memory
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">A group of integrated circuits that a computer uses to
store data and programs, such as ROM, RAM, DRAM and
SRAM.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">MHz
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Megahertz. One million cycles per second. Typically
measures the clock speed of microprocessors.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Micron
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">1/25,000 of an inch. Circuitry on an integrated circuit
typically follows lines that are less than one micron
wide.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Motherboard
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The main piece of circuitry inside a personal computer.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">MP3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Motion Picture Experts Group-I, Audio Layer 3. A
digital data compression and storage technology for
music.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">NAND circuit
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Not AND. A logic circuit whose output signal is a
logical 1 if any of its input signals is a logical 0
and the output signal of which is a logical 0 if all of
its input signals are logical 1s.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Nonvolatile memory
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Memory products which retain their data content without
the need for constant power supply.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">NOR circuit
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Not OR. A logic circuit in which an output signal appears
only when a signal is absent from all of its input gates.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">OR circuit
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">A logic circuit in which the output signal is a logical 1
if any one or more of its input signals is a logical 1.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">PAC
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Paired Array Contact.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">PCMCIA cards
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Personal computer cards, standardized by Personal Computer
Memory Card International of San Jose, California or
credit card sized, removable modules for portable
computers.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">A-3
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="35%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">PDA
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Personal Digital Assistant. A hand-held multifunctional
minicomputer used for, among other things, word
processing, name card retention and appointment calendars.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">PHS
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Personal Hand Set. A lower capability but less expensive
mobile telephone communications system currently achieving
substantial consumer acceptance in Japan.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">PROM
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Programmable Read-Only Memory. Similar to ROM in that once
programmed it can be &#147;read only&#148; and not changed.
Programmable ROM enables customers to program the
integrated circuits themselves, rather than it being
programmed when it is manufactured. The programming is
possible because of a series of fuses in the circuitry
that can be selectively blown to create a unique type of
data.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">RAM
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Random Access Memory. A type of volatile memory, forming
the main memory of a computer where applications and files
are run.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">ROM
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Read-Only Memory. Memory that is programmed by the
manufacturer and cannot be changed. Typically, ROM is used
to provide start-up data when a computer is first turned
on.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Semiconductor
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">A material with electrical conducting properties in
between those of metals and insulators. (Metals always
conduct and insulators never conduct, but semiconductors
sometimes conduct.) Essentially, semiconductors transmit
electricity only under certain circumstances, such as when
given a positive or electric charge. Therefore, a
semiconductor&#146;s ability to conduct can be turned on or off
by manipulating those charges and this allows the
semiconductor to act as an electric switch. The most
common semiconductor material is silicon, used as the base
of most semiconductor chips today because it is relatively
inexpensive and easy to create.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">SMIF Box System
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Standard Mechanical Interface Box System. A system which
links process microenvironments so that a wafer is never
exposed to room air. With a SMIF Box System, traditional
environmental conditions are replaced with a
microenvironment that can be pressurized with air or
nitrogen to keep out room air.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">SRAM
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Static Random Access Memory. A type of volatile memory
product that is used in electronic systems to store data
and program instructions. Unlike the more common DRAM, it
does not need to be refreshed.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">STB
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Set top box. A device to differentiate signals from
television and multimedia service providers.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">SXGA
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Super Extended Graphics Array. An enhanced set of Video
Graphics Array standards that is capable of displaying an
image ranging from 768 x 1024 pixels to 1024 x 1280
pixels.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Transistor
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">An individual circuit that can amplify or switch electric
current. This is the building block of all integrated
circuits and semiconductors.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">VCD
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Video Compact Disk.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Volatile memory
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Memory products which lose their data content when the
power supply is switched off.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Wafer
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Thin, round, flat piece of silicon that is the base of
most integrated circuits.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">A-4
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="130"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><FONT style="font-variant: SMALL-CAPS"><B>Signatures</B></FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The registrant hereby certifies that it meets all the requirements for filing on Form 20-F and
that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left"><B>MACRONIX INTERNATIONAL CO., LTD.</B></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left"><B>(Registrant)</B></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Date:
July 17, 2006
</DIV></TD>
    <TD>&nbsp;</TD>

<TD align="left" valign="top">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;By:</TD>
    <TD align="left" valign="top" colspan="2">&nbsp;&nbsp;/s/
Miin Wu</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" colspan="3">Name: Miin Wu<BR></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" valign="top" align="left">Title: President</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="131"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>EXHIBIT INDEX</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Description</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">2b.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The Company hereby agrees to furnish to the Securities and
Exchange Commission, upon request, copies of instruments defining
the rights of holders of long-term debt of the Company and its
subsidiaries.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Articles of Incorporation of the Company (English translation)*.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">8.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">List of subsidiaries of the Company*.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">12.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certifications of our President pursuant to Section&nbsp;302 of the
Sarbanes-Oxley Act of 2002.*</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">12.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certifications of our Associate Vice President, Finance
Department, pursuant to Section&nbsp;302 of the Sarbanes-Oxley Act of
2002.*</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">13.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certifications of our President pursuant to 18 U.S.C. Section&nbsp;1350
as adopted pursuant to Section&nbsp;906 of the Sarbanes-Oxley Act of
2002.*</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">13.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certifications of our Associate Vice President, Finance
Department, pursuant to 18 U.S.C. Section&nbsp;1350 as adopted pursuant
to Section&nbsp;906 of the Sarbanes-Oxley Act of 2002.*</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">14.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Deposit Agreement, dated as of February&nbsp;7,
2002, among the Company, The Bank of New York, as depositary, and
Holders from time to time of American Depositary Receipts issued
thereunder, including the form of American Depositary Receipt(1).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">14.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Indenture, dated as of February&nbsp;10, 2003, by and between the
Company and The Bank of New York, as trustee(2).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">14.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Land Lease Agreement, dated as of March&nbsp;3, 1990, by and between
the Company and the Hsinchu Science-Based Industrial Park
Administration, in relation to Office Building and Fab I Site(3).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">14.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Land Lease Agreement, dated as of August&nbsp;1, 1994, by and between
the Company and the Hsinchu Science-Based Industrial Park
Administration, in relation to Auxiliary Vehicular Facilities(4).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">14.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Land Lease Agreement, dated as of January&nbsp;1, 1994, by and between
the Company and the Hsinchu Science-Based Industrial Park
Administration, in relation to Back-End Operation Plant(5).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">14.6
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Land Lease Agreement, dated as of June&nbsp;1, 1995, by and between the
Company and the Hsinchu Science-Based Industrial Park
Administration, in relation to Fab II and Fab III Site (6).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">14.7
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Deposit Agreement, dated as of April&nbsp;5, 2004, among the Company,
Citibank, N.A., as depositary, and Holders from time to time of
Global Depositary Receipts issued thereunder, including the form
of Global Depositary Receipt(8).</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="93%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Description</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">*</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Filed with this Form 20-F.</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">(1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Incorporated by reference to Exhibit 3.1 to the Company&#146;s Form 20-F filed with the Commission on June 29, 2004.</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">(2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Incorporated by reference to Exhibit 3(a) to the Company&#146;s Registration Statement on Form F-6 (File No. 333-8602) filed with the Commission on February 7, 2002.</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">(3)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Incorporated by reference to Exhibit 10.2 to the Company&#146;s Form 20-F filed with the Commission on July 1, 2003.</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">(4)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Incorporated by reference to Exhibit 10.6 to the Company&#146;s Registration Statement on Form F-1 (File No. 333-1870) filed with the Commission on March 1, 1996.</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">(5)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Incorporated by reference to Exhibit 10.7 to the Company&#146;s Registration Statement on Form F-1 (File No. 333-1870) filed with the Commission on March 1, 1996.</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">(6)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Incorporated by reference to Exhibit 10.8 to the Company&#146;s Registration Statement on Form F-1 (File No. 333-1870) filed with the Commission on March 1, 1996.</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">(7)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Incorporated by reference to Exhibit 10.9 to the Company&#146;s Registration Statement on Form F-1 (File No. 333-1870) filed with the Commission on March 1, 1996.</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">(8)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Incorporated by reference to Exhibit 14.9 to the Company&#146;s Form 20-F filed with the Commission on June 29, 2004.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">100
</DIV>

</BODY>
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{"company-data": {"conformed-name": "MACRONIX INTERNATIONAL CO LTD", "cik": "0001009680", "assigned-sic": "3674", "irs-number": "000000000", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "20-F", "act": "34", "file-number": "000-27884", "film-number": "06965746"}, "business-address": {"street1": "NO16 LI - HSING ROAD,", "street2": "SCIENCE-BASED INDUSTRIAL PARK", "city": "HSIN-CHU", "state": "F5", "zip": "300", "phone": "886-3-5786688"}, "mail-address": {"street1": "NO16 LI - HSING ROAD,", "street2": "SCIENCE - BASED INDUSTRIAL PARK", "city": "HSIN- CHU", "state": "F5", "zip": "300"}}
MACRONIX INTERNATIONAL CO., LTD.
Table of Contents
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
o
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF
THE SECURITIES EXCHANGE ACT OF 1934
OR
þ
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
for the fiscal year ended
DECEMBER 31, 2005
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
o
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report
Commission file number 0-27884
(CHINESE CHARACTER)
(Exact name of Registrant as specified in its charter)
MACRONIX INTERNATIONAL CO., LTD.
(Translation of Registrant's name into English)
Republic of China
(Jurisdiction of incorporation or organization)
No. 16 Li-Hsin Road
Science Park
Hsinchu, Taiwan, Republic of China
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class
Name of each exchange on which registered
None
None
Securities registered or to be registered pursuant to Section 12(g) of the Act.
American Depositary Shares representing Common Shares
Common Shares, par value NT$10 per share*
(Title of Class)
*    Not for trading in the United States, but only in connection with the registration of the American Depositary Shares.
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer's classes of capital or common
stock as of the close of the period covered by the annual report.
As of December 31, 2005, 2,912,305,991 Common Shares were outstanding.
Indicate
by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities
Act.  Yes
o
No
þ
If
this report is an annual or transition report, indicate by check mark
if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes
o
No
þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes
þ
No
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
þ
Indicate by check mark which financial statement item the registrant has elected to follow.
Item 17
o
Item 18
þ
If this is an annual report, indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes
o
No
þ
TABLE OF CONTENTS
Supplemental Information and Exchange Rates
3
Cautionary Statement
3
PART I
Item 1. Identity of Directors, Senior Management and Advisers
4
Item 2. Offer Statistics and Expected Timetable
4
Item 3. Key Information
4
Item 4. Information on the Company
20
Item 5. Operating and Financial Review and Prospects
35
Item 6. Directors, Senior Management and Employees
61
Item 7. Major Shareholders and Related Party Transactions
69
Item 8. Financial Information
71
Item 9. The Offer and Listing
75
Item 10. Additional Information
79
Item 11. Quantitative and Qualitative Disclosure About Market Risk
95
Item 12. Description of Securities Other than Equity Securities
97
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies
97
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
97
Item 15. Disclosure Controls and Procedures
97
Item 16A. Audit Committee Financial Expert
98
Item 16B. Code of Ethics
98
Item 16C. Principal Accountant Fees and Services
98
Item 16D. Exemptions from the Listing Standards for Audit Committees
99
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
99
PART III
Item 17. Financial Statements
99
Item 18. Financial Statements
99
Item 19. Exhibits
99
Appendix A — Glossary of Technical Terms
A-1
Signatures
EX-3.1 ARTICLES OF INCORPORATION
EX-8.1 LIST OF SUBSIDIARIES
EX-12.1 CERTIFICATIONS OF PRESIDENT PURSUANT TO SEC.302
EX-12.2 CERTIFICATIONS OF ASSOCIATE VICE PRESIDENT, FINANCE DEPT., PURSUANT TO SEC. 302
EX-13.1 CERTIFICATIONS OF PRESIDENT PURSUANT TO SEC.1350
EX-13.2 CERTIFICATIONS OF ASSOCIATE VICE PRESIDENT, FINANCE DEPT., PURSUANT TO SEC. 1350
2
Table of Contents
SUPPLEMENTAL INFORMATION AND EXCHANGE RATES
As used herein, except as the context otherwise requires, "we", "us", "our" or the "Company"
refers to Macronix International Co., Ltd. and our subsidiaries.
All references herein to "Taiwan" or the "R.O.C." are to the island of Taiwan and other areas
under the effective control of the Republic of China. All references herein to the "R.O.C.
Government" and the "R.O.C. Company Law" are references to the government of the Republic of China
and the Company Law of the Republic of China, respectively. All references herein to "R.O.C. GAAP"
and "U.S. GAAP" are to accounting principles generally accepted in the R.O.C. and the United
States, respectively. Any discrepancies in any table between totals and sums of the amounts listed
are due to rounding.
We publish our financial statements in New Taiwan dollars, the lawful currency of Taiwan. All
references herein to "United States dollars", "U.S. dollars" and "US$" are to United States dollars
and references to "New Taiwan dollars", "N.T. dollars" and "NT$" are to New Taiwan dollars. All
translations from New Taiwan dollars to United States dollars were made, unless otherwise
indicated, on the basis of the noon buying rate in The City of New York for cable transfers in N.T.
dollars per U.S. dollar as certified for customs purposes by the Federal Reserve Bank of New York
on December 31, 2005 of NT$32.80 = US$1.00. On June 20, 2006, the noon buying rate between New
Taiwan dollars and United States dollars was NT$32.56 = US$1.00. See "Item 10. Additional
Information — D. Exchange Controls". All amounts translated into United States dollars as described
above are provided solely for the convenience of the reader, and no representation is made that the
New Taiwan dollar or United States dollar amounts referred to herein could have been or could be
converted into United States dollars or New Taiwan dollars, as the case may be, at any particular
rate, the above rates or at all.
CAUTIONARY STATEMENT
This annual report contains various forward-looking statements. These include statements
about:
•
industry and product pricing trends;
•
developments in technology affecting the market acceptance and competitiveness of our products;
•
applications for our products;
•
competition from other industry participants;
•
pricing levels of our and our competitors' products;
•
our development and marketing of new products;
•
our development and maintenance of relationships with our customers and strategic partners;
•
the expansion and enhancement of our manufacturing capacity;
•
our development of new process technologies;
•
our ability to obtain funding for our capital expenditure plans;
•
economic, political and financial developments in the markets for our products;
•
our ability to obtain the necessary raw materials and the prices for these materials; and
•
our ability to attract and retain qualified personnel.
These forward-looking statements are based on current expectations, estimates and projections about
our industry, our management's beliefs and assumptions made by them. Words such as "anticipates",
"expects", "intends", "plans", "believes", "seeks", "estimates" and similar expressions are
intended to identify these forward-looking statements. Although we believe that these expectations
and projections are reasonable, such forward-looking statements are not guarantees of future
performance or actual results and are inherently subject to risks, uncertainties and assumptions
about us, including, among other things:
3
Table of Contents
•
our dependence on frequent introduction of new services and technologies based on the latest developments;
•
the intensely competitive semiconductor industry;
•
risks associated with international business activities;
•
our dependence on key personnel;
•
natural disasters, such as earthquakes, which are beyond our control;
•
general economic and political conditions, including those related to the semiconductor industry;
•
possible disruptions in commercial activities caused by natural and human-induced
disasters, including terrorist activity and armed conflict, that may reduce end-user
purchases relative to expectations and orders;
•
fluctuations in foreign currency exchange rates;
•
additional disclosures we make in our previous and future Form 20-F annual reports and
Form 6-K periodic reports to the Securities and Exchange Commission; and
•
those other risks identified in "Item 3. Key Information — D. Risk Factors" of this
annual report.
We undertake no obligation to update or revise any forward-looking statements whether as a
result of new information, future events or otherwise. In light of these risks, uncertainties and
assumptions, the forward-looking events discussed in this annual report might not occur and our
actual results could differ materially from those anticipated in these forward-looking statements.
PART I
Item 1.
Identity of Directors, Senior Management and Advisers
Not applicable.
Item 2.
Offer Statistics and Expected Timetable
Not applicable.
Item 3.
Key Information
A. Selected Financial Data
The selected income statement data for the years ended December 31, 2003, 2004 and 2005 and
the selected balance sheet data as of December 31, 2004 and 2005 presented below are derived from
our audited financial statements included in this annual report, which were prepared on a
consolidated basis. The selected income statement data for the years ended December 31, 2001 and
2002 and the selected balance sheet data as of December 31, 2001, 2002 and 2003 presented below are
derived from our audited financial statements not included in this annual report, which were also
prepared on a consolidated basis. Certain accounts in the selected balance sheet data as of
December 31, 2001, 2002, 2003 and 2004 have been reclassified to conform with the presentation of
the current period as of December 31, 2005.
The financial data set forth below should be read in conjunction with, and are qualified in
their entirety by reference to, our consolidated financial statements for the years ended December
31, 2003, 2004 and 2005 and the related notes included in this annual report, "Item 8. Financial
Information" and "Item 5. Operating and Financial Review and Prospects". Our consolidated financial
statements are prepared and presented in accordance with R.O.C. GAAP and R.O.C. reporting
practices. For a discussion of certain differences between R.O.C. GAAP and U.S. GAAP, see note 28
to our consolidated financial statements for the years ended December 31, 2003, 2004 and 2005
included in this annual report and "Item 5. Operating and Financial Review and Prospects — A.
Operating Results — U.S. GAAP Reconciliation".
4
Table of Contents
Year ended, and as of, December 31,
2001
2002(Note)
2003(Note)
2004(Note)
2005
2005
(NT$)
(NT$)
(NT$)
(NT$)
(NT$)
(US$)
(in millions except per share and ADS data)
Consolidated Income Statement Data:
R.O.C. GAAP
Net sales revenue
21,747
16,492
17,712
23,380
18,908
576.5
Cost of goods sold
(11,674
)
(17,105
)
(20,657
)
(18,990
)
(18,666
)
(569.1
)
Less: Unrealized profit as of December 31,
—
(2
)
3
(1
)
—
—
Realized gross profit (loss)
10,073
(615
)
(2,942
)
4,388
242
7.4
Operating expenses
(6,557
)
(6,212
)
(4,742
)
(4,737
)
(5,116
)
(156.0
)
Operating income (loss)
3,516
(6,827
)
(7,684
)
(349
)
(4,875
)
(148.6
)
Total other income
1,356
466
1,877
1,619
1,197
36.5
Total other expenses
(4,795
)
(4,976
)
(2,370
)
(1,023
)
(3,205
)
(97.7
)
Income (loss) before taxes and minority interest
77
(11,337
)
(8,177
)
247
(6,882
)
(210.0
)
Income tax benefit (expense)
(943
)
(20
)
(21
)
(35
)
(215
)
(6.6
)
Income (loss) before minority interest
(866
)
(11,357
)
(8,198
)
212
(7,098
)
(216.4
)
Minority interest loss
—
0.4
0.3
5
70
2.1
Net Income (loss)
(866
)
(11,357
)
(8,198
)
218
(7,027
)
(214.2
)
Net income (loss) per share — basic (1)
(0.40
)
(5.32
)
(3.65
)
0.08
(2.41
)
(0.07
)
Net income (loss) per share — diluted (1)
(0.40
)
(5.32
)
(3.65
)
0.08
(2.41
)
(0.07
)
U.S. GAAP
Gross profit (loss)
6,598
(4,018
)
(1,576
)
5,052
688
21.0
Operating income (loss)
(2,263
)
(10,186
)
(6,614
)
335
(4,356
)
(132.8
)
Net income (loss) before cumulative effect of
change in accounting principle in accordance with
U.S. GAAP
(3,842
)
(13,674
)
(8,027
)
(469
)
(4,636
)
(141.3
)
Basic net income (loss) per share before
cumulative effect of change in accounting principle
in accordance with U.S. GAAP
(1.79
)
(6.39
)
(3.53
)
(0.17
)
(1.59
)
(0.05
)
Diluted net income (loss) per share before
cumulative effect of change in accounting principle
in accordance with U.S. GAAP
(1.79
)
(6.39
)
(3.53
)
(0.17
)
(1.59
)
(0.05
)
Net income (loss) (2)
(4,463
)
(13,674
)
(8,027
)
(469
)
(4,636
)
(141.3
)
Net income
(loss) per share—basic (3)
(2.07
)
(6.39
)
(3.53
)
(0.17
)
(1.59
)
(0.05
)
Net income (loss) per share –diluted (3)
(2.07
)
(6.39
)
(3.53
)
(0.17
)
(1.59
)
(0.05
)
Balance Sheet Data:
R.O.C. GAAP
Total current assets
25,358
21,301
21,002
21,706
20,027
610.6
Net property, plant and equipment
39,562
40,029
32,600
27,993
16,202
494.0
Total assets
71,693
67,450
59,919
54,396
45,604
1,390.4
Total current liabilities
9,016
17,687
18,717
9,449
10,664
325.1
Long-term liabilities
19,533
19,549
11,954
10,602
6,180
188.4
Total liabilities
28,549
37,236
30,671
20,051
16,844
513.5
Total shareholders' equity
43,144
30,214
29,248
34,344
28,558
870.7
U.S. GAAP
Total current assets
26,646
21,037
21,398
21,716
19,832
604.6
Total assets
72,979
65,509
59,200
52,807
46,220
1,409.1
Total current liabilities
10,152
18,127
18,986
9,445
10,699
326.2
Total liabilities
29,679
36,991
31,051
20,052
16,877
514.5
Total shareholders' equity
43,300
28,518
28,149
32,755
29,264
892.2
Other Data:
R.O.C. GAAP
Capital expenditures
9,078
8,975
1,606
2,554
1,595
48.6
Depreciation and amortization
8,006
8,742
9,287
7,562
7,253
221.1
Net cash provided by operating activities
9,209
217
1,484
5,987
4,397
134.1
Net income (loss) per ADS — basic
(4.0
)
(53.2
)
(36.5
)
0.80
(24.1
)
(0.70
)
Net income (loss) per ADS — diluted
(4.0
)
(53.2
)
(36.5
)
0.80
(24.1
)
(0.70
)
Number of common shares outstanding (weighted,
as adjusted) (4)
2,157
2,140
2,272
2,822
2,912
2,912
Stock dividend per common share (5)
30
%
10
%
—
—
—
—
Note =
2002, 2003 and 2004 US GAAP data were restated.
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(1)
Retroactively adjusted for our capital reduction in 2006 and all subsequent stock dividends
and employee bonuses declared.
(2)
The difference between net income under R.O.C. GAAP and U.S. GAAP was largely derived from
different treatments under these two accounting principles with respect to employee bonus
shares, derivative contracts, plant capacity loss, other-than-temporary decline in value on
marketable securities, and convertible debt securities with beneficial conversion features.
The difference in accounting treatment with respect to employee bonus shares under the two
accounting principles resulted in an additional expense of NT$4,273 million in 2001, no
additional expense or income in 2002 and 2003, 2004 and 2005. The differences of accounting
treatment with respect to derivative contracts under the two accounting principles resulted in
additional income of NT$228 million in 2001, additional income of NT$616 million in 2002,
additional expense of NT$379 million in 2003, additional income of NT$34 million
in 2004 and additional expense of NT$32 million (US$1.0 million) in 2005. The
difference in accounting treatment with respect to plant capacity loss under the two
accounting principles resulted in an additional income of NT$528 million in 2001, an
additional expense of NT$528 million in 2002, and additional income of NT$269 million in 2003,
an additional expense of NT$258 million in 2004 and additional income of NT$0.4 million (US$0.01 million) in 2005.
The difference in accounting treatment with respect to other-than-temporary decline in value
on marketable securities under the two accounting principles resulted in an additional expense
of NT$646 million in 2001, an additional expense of NT$538 million in 2002, no additional
expense or income in 2003, an additional expense of
NT$448 million in 2004 and additional income of
NT$1,326 million (US$40.4 million) in 2005.
(3)
Retroactively adjusted for our capital reduction in 2006, all subsequent stock dividends and
employee bonuses declared. See note 22 to our consolidated financial statements for the years
ended December 31, 2003, 2004 and 2005 included in this annual report and "Item 5. Operating
and Financial Review and Prospects — A. Operating Results — U.S. GAAP Reconciliation".
(4)
Common shares outstanding weighted, as adjusted for our capital reduction in 2006, any
employee share bonus and any subsequent stock dividends declared.
(5)
The percentage of our stock dividend is determined by the number of common shares we
distributed to existing shareholders divided by the common shares outstanding immediately
prior to the share issuance. We did not distribute any cash dividends in any of the periods
presented.
B. Capitalization and Indebtedness
Not applicable.
C. Reason for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
Holders of our securities should note that investment in our securities involves risks and
uncertainties that could affect our future business success or financial results. The following
important factors, and those important factors described in other reports submitted to, or filed
with, the Securities and Exchange Commission by our company, among other factors, could adversely
affect our results of operations and could cause our results of operations to differ materially
from those expressed in any forward-looking statements made by, or on behalf of, our company:
Risks Relating to Our Company
We recorded gross, operating and net losses in 2003 and 2005. Future losses could materially
adversely affect the value of your investment.
The semiconductor industry was in a severe and protracted downturn that began in the second
half of 2000 and continued through the first half of 2003, resulting in a drop in demand and
general decline in the average selling prices of our products. For 2003, we recorded
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a gross loss of NT$2,942 million, an operating loss of NT$7,684 million and a net loss of
NT$8,198 million. Although conditions in the semiconductor industry improved between the third
quarter of 2003 and the first half of 2004, the industry experienced another downturn that began in
the second half of 2004 and continued throughout 2005. For 2004, we recorded a gross profit of
NT$4,388 million, an operating loss of NT$349 million and net income of NT$218 million. For 2005,
we recorded a gross profit of NT$242 million (US$7.4 million), an operating loss of NT$4,875
million (US$148.6 million) and net loss of NT$7,027 million (US$214.2 million). However, under U.S.
GAAP, we recorded net losses of NT$7,148 million, NT$469 million and NT$4,636 million (US$141.3
million) in 2003, 2004 and 2005, respectively. We cannot assure you that we will not incur gross,
operating and net losses for the full year 2006.
Primarily as a result of the net loss in 2003 and 2005, as well as the net income in 2004, we
incurred interest expense of NT$974 million, NT$582 million and NT$277 million (US$8.4 million) in
2003, 2004 and 2005, respectively. The net investment loss was NT$717million in 2003 and NT$1,237
million (US$37.7 million) in 2005, as well as net investment gain was NT$230 million in 2004,
respectively. The shareholders' equity declined by 3.2% in 2003 to NT$29,248 million, increased by
17.4% in 2004 to NT$34,344 million in 2004, and decreased by 16.9% to NT$28,558 million in 2005.
In addition, we cannot assure you that these losses will not occur again or increase. If we
record losses in the future, the value of your investment may be materially and adversely affected.
Any delay or reduction in orders by Nintendo or the loss of Nintendo as a customer could result in
the loss of a significant portion of our revenue.
In 2003, 2004 and 2005 our net sales to Megachips Corporation ("Megachips"), which resells our
products to Nintendo, aggregated NT$4,257 million, NT$5,240 million and NT$5,511 million (US$168
million), respectively, or 24.0%, 22.4% and 29.2%, respectively, of our net sales revenue in those
periods. Unit sales volumes or prices of Mask ROMs and other products sold through Megachips to
Nintendo may fluctuate significantly depending on the products offered by Nintendo and its need for
our products. Nintendo faces competitive pressure in the electronics entertainment market, which
is characterized by frequent new product introductions and rapidly shifting consumer preferences.
In particular, Nintendo's Dual Screen handheld gaming devices ("DSD") platform (which uses or Mask
ROM products) faces competition from Sony's PSP portable gaming device. Nintendo may not continue
to place orders with us in the future at the same levels as in prior periods or at all. The loss
of Nintendo as a customer, delayed or reduced orders by Nintendo, decreases in product prices or
significant changes in delivery schedules to Nintendo could materially and adversely affect our
business, financial condition and results of operations. In addition, any negative development in
the relationship between us and Megachips or the relationship between Nintendo and Megachips could
harm our sales to Nintendo.
We have limited liquidity and may be unable to repurchase our outstanding debt securities when
requested by holders, pay certain other obligations as they become due or otherwise meet our
working capital needs.
We have a substantial amount of obligations that will or may come due within the next year,
and we may not have sufficient funds to pay these obligations. These obligations include the
maturing of a portion of our long-term debt, payment of our short-term debt, payment of the current
portion of our long-term debt, expenditures required under contractual obligations and the payment
of the costs of the day-to-day operation of our business. See "Item 5. Operating and Financial
Review and Prospects — Liquidity and Capital Resources".
In 2006, we have been or will also be required to pay short-term debt and notes in the
aggregate principal amount of approximately NT$1,894 million (US$57.7 million) and repay the
principal and current portion of long-term debt and capital lease obligations in the aggregate
principal amount of NT$4,635 million (US$141.3 million). In addition, we also have obligations
under contracts, which we have entered into for goods and services and for other purposes, which
require us to make minimum payments for our day-to-day business operations of approximately
NT$4,135 million (US$126.1 million) in 2006.
If our cash flow from operations are not sufficient, we may not be able to meet these payment
obligations when due. At December 31, 2005, we had NT$11,134 million (US$339.4 million) of
unrestricted cash and cash equivalents. We cannot assure you that we will be able to finance any of
these payment obligations by using our current loan facilities or other means of financing. We have
available to use short-term and medium-term loans under which we may drawdown up to an additional
principal amount of NT$4,089 million (US$124.9 million) as of May 31, 2006. We cannot assure you
that any alternate means of financing, if necessary, will be available to us on acceptable terms or
at all. Further, our ability to repurchase the outstanding debt securities may also be limited by
applicable law as well as the terms of our other outstanding indebtedness. See "— Restrictive
covenants and broad default provisions in the agreements governing our existing debt may materially
restrict our operations as well as adversely affect our liquidity, financial condition and results
of operations".
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Insufficient liquidity could materially restrict our operations, require us to reduce our
budgeted capital expenditures and otherwise adversely affect our financial condition and results of
operations. Borrowing funds, raising additional equity capital or converting long-term investments
to liquid funds to meet our payment obligations and/or working capital requirements could adversely
affect our financial condition or cause our shareholders to suffer dilution, and thereby adversely
affect the price of our common shares, ADSs or GDSs. In addition, if we are or appear to be unable
to make payments when due, we may be unable to continue operating, bankruptcy or insolvency
proceedings could be commenced against us and, if this occurs, the value of our common shares, ADSs
and GDSs would be materially impaired.
Restrictive covenants and broad default provisions in the agreements governing our existing debt
may materially restrict our operations as well as adversely affect our liquidity, financial
condition and results of operations.
We are a party to numerous loan and other agreements relating to the incurrence of debt, many
of which include restrictive covenants and broad default provisions. Our loan agreements contain
covenants that require us to maintain specified debt to equity ratio and ratio of current assets to
current liabilities. In November 2003, we sold 475,000,000 new common shares for cash to increase
shareholders' equity pursuant to a share offering in Taiwan, and in April 2004, we issued
13,125,000 GDS representing 525,000,000 new common shares. Had we not conducted the share and GDS
offerings, we would have had difficulty in meeting the debt to equity ratio contained in our loan
covenants as of the end of 2003 and 2004. In February 2006, we cancelled 2,079,474,542 common
shares at the book value of NT$20,794 million to offset accumulated deficits in order to improve
our financial structure.
We may need to issue additional shares, ADSs or GDSs to increase shareholders' equity, and we
cannot assure you that we will be successful in selling all or any of such common shares, ADSs or
GDSs. If we continue to incur losses, resulting in an erosion of our shareholders' equity, and are
unable to raise additional equity funding or renegotiate the terms of our loan agreements, we may
be in default of financial covenants in the future. Such a default or defaults would seriously
impair our ability to secure debt financing, and could require us to delay or cancel capital
expansion plans, dispose of assets or take other steps to meet the financial ratios. Defaults or
potential defaults in our financial covenants could also impair our ability to raise additional
equity capital.
In general, covenants in the agreements governing our existing debt, and debt we may incur in
the future, may materially restrict our operations, including our ability to incur debt, repurchase
our outstanding debt securities, pay dividends, make certain investments and payments and encumber
or dispose of assets. A default under one agreement may also trigger cross-defaults under our other
agreements. In the event of default, we may not be able to cure the default or obtain a waiver on a
timely basis, and our operations could be significantly disrupted or harmed. An event of default
under any agreement governing our existing or future debt, if not cured or waived, could have a
material adverse effect on our liquidity, financial condition and results of operations and could
seriously impair our ability to secure debt financing.
Our revenues and operating results may decline if we are unable to obtain adequate supplies of raw
materials in a timely manner and at a reasonable price.
Our manufacturing operations require that we obtain adequate supplies of raw materials on a
timely basis. Our primary raw materials include six-inch and eight-inch wafers, chemicals and gases
and other inputs, which we purchase from a limited number of suppliers. In particular, wafer
manufacturing capacity and supply in the Taiwan semiconductor industry have from time to time been,
and in the future may be, in short supply, and our future growth will depend in large part on
securing a continuous supply of six-inch and eight-inch wafers. We cannot assure you that we will
be able to obtain adequate supplies of raw materials in a timely manner and at a reasonable price.
Our revenue and operating results could decline if we are unable to obtain adequate supplies of
high quality raw materials in a timely manner or if there are significant increases in the costs of
raw materials that we could not pass on to our customers.
We are vulnerable to cyclical downturns in the semiconductor industry, and our business, financial
condition and results of operations may suffer in future downturns.
The semiconductor industry is highly cyclical. Economic downturns historically have caused
reduced product demand, rapid declines in product prices, low capacity utilization and production
over-capacity. Between the second half of 2000 and the first half of 2003, the semiconductor
industry was adversely affected by the sudden and rapid decline in worldwide demand for electronic
products such as personal computers, computer peripherals, consumer electronics and other
communications devices. As such, electronics systems and applications companies drastically reduced
their orders for semiconductor devices to avoid further inventory accumulation. The severe and
protracted downturn throughout 2001, 2002 and the first half of 2003 resulted in a serious
deterioration in the average selling prices of, as well as demand for, most of our products and
materially adversely affected our operating results and financial
8
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condition. Although conditions in the semiconductor industry improved between the third
quarter of 2003 and the first half of 2004, the industry experienced another downturn that began in
the second half of 2004 and continued through 2005. While conditions in the semi-conductor industry
have improved in 2006, we cannot predict when or whether the industry will recover. Even if the
industry recovers, our product prices, sales volumes and margins may continue to be adversely
affected during future cyclical downturns and our business, financial condition and results of
operations may suffer accordingly.
Our results of operations fluctuate significantly, which may affect the value of your investment
Our historical net sales revenue and other results of operations have varied, at times
significantly, from quarter–to–quarter and from year –to–year. For example, we had a net loss under
R.O.C. GAAP of NT$8,198 million in 2003, a net income of NT$218 million in 2004 and net losses of
NT$7,027 million (US$214 million) in 2005. Our future net sales revenue, gross profit (loss),
operating income, net income (loss) and more generally, our business and results of operations, may
vary significantly due to a combination of many factors, including:
•
changes in general economic and business conditions;
•
the cyclical nature of both the semiconductor industry and the markets served by our customers;
•
seasonality in demand for our customers' products;
•
changes in demand for our products and our customers' products;
•
technology development of our products and competing products;
•
changes in the average selling prices of our products;
•
inventory obsolescence;
•
our customers' adjustments in their inventory;
•
the loss of or reduction of sales to a key customer or the postponement or cancellation of an order from a key customer;
•
our ability to obtain adequate labor, equipment, components, raw materials, electricity,
water and other required production inputs on a timely and cost-efficient basis;
•
capital expenditures and production uncertainties relating to the roll-out of new facilities;
•
our ability to achieve target production yields, especially for new products;
•
our ability to accurately predict customer demand, as we must commit to significant
capital expenditures in anticipation of future orders;
•
changes in our business strategy or technology roadmap;
•
natural disasters, such as fires, droughts, floods and earthquakes, or industrial accidents;
•
the long lead times in securing a qualification from our customers;
•
currency and interest rate fluctuations that may not be fully hedged; and
•
technological changes.
Due to these factors and other risks, many of which are beyond our control, you should not
rely on quarter-to-quarter or year-to-year comparisons to predict our future performance.
Unfavorable changes in any of the above factors may materially and adversely affect our business
and results of operations. In addition, it is possible that in some future periods our operating
results may be below the expectations of public market analysts and investors, which may in turn
cause the prices of our securities to fall.
9
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If we continue to experience significant investment losses from our investments, our financial
condition and results of operations may be adversely affected.
We have made and expect to continue to make a series of equity joint venture and strategic
investments in companies located in Taiwan and elsewhere principally related to the semiconductor
industry. As a result of market downturns, many of our invested companies experienced significant
declines in their operating results. This in turn caused us to incur substantial investment losses
as well as a reduction in the value of our equity interests in these companies. We incurred a net
investment loss (which include losses under our equity derivative contract which had our common
shares as the underlying reference securities) and net loss from equity investments of NT$825
million in 2003, NT$155 million in 2004 and NT$1,626 (US$49.6 million) in 2005. Any further
significant losses from our investments in the future may materially and adversely affect our
financial condition and results of operations.
As we depend on Mask ROM and Flash sales for a substantial portion of our revenue, a significant
decrease in Mask ROM or Flash sales or average selling prices could result in the loss of a
significant portion of our revenue.
In 2003, 2004 and 2005 our Mask ROM net sales were NT$7,464 million, NT$8,373 million and
NT$8,712 million (US$265.6 million), respectively, or 42.1%, 35.8% and 46.1% respectively, of our
net sales revenue in those periods. In 2003, 2004 and 2005 our Flash net sales were NT$5,810
million, NT$10,715 million and NT$6,870 million (US$209.5 million), respectively, or 32.8%, 45.8%
and 36.3%, respectively, of our net sales revenue in those periods.
Historically, most of our Mask ROM products have been used in video game cartridges. Competing
technological alternatives, such as CD-ROMs, DVD-ROMs, magnetic disks and telephone-linked and
internet databases, have been adopted by some video game machine producers for some applications.
For example, Nintendo, which is our largest customer, migrated in 2001 to a game platform that
utilized a DVD-ROM-based storage system. Nintendo is one of our major customers and accounted for
48.8%, 56.2% and 61.8% of our net Mask ROM sales in 2003, 2004 and 2005 respectively. We are
seeking to sustain our Mask ROM sales volume by diversifying our customer base to include
telecommunications, handheld computing and information devices and office automation equipment
manufacturers and expanding the base of devices that may use Mask ROM. We cannot assure you,
however, that these initiatives will be successful. Further, there has been an overall shrinkage of
the Mask ROM market as products move away from using Mask ROM technologies to competing
technologies, in particular Flash. We also expect that our Mask ROM sales will continue to decline
for the foreseeable future, although we believe that due to our market position we will continue to
be one of the major providers of Mask ROM products.
The Code Flash products market, in which our Flash products compete, is dominated by large
players, including Spansion LLC. ("Spansion", which is owned by AMD and Fujitsu), Intel Corporation
("Intel"), Sharp Corporation ("Sharp") and STMicroelectronics NV ("STMicroelectronics"), all of
which may have greater financial and other resources than our company. If we are unable to compete
effectively in the Code Flash products market, our business and operating results will suffer. In
addition, due to market conditions, average selling prices for our Flash products declined sharply
beginning in the third quarter of 2004 and continuing into the first half of 2005. Although the
average selling prices for our Flash products remained at the same level since the second half of
2005, we cannot guarantee that the average selling prices for our Flash products will increase in
the future. We also do not produce NAND Flash products and thus do not benefit from the growth in
the NAND Flash market.
Any significant reduction in the use of Mask ROMs in the video game manufacturing industry and
generally, and in the use of Code Flash generally, will significantly reduce our revenue and
adversely affect our business, financial condition and results of operations.
A decrease in demand for consumer electronics, computer and computer peripheral and other
communications products may significantly decrease the average selling prices for our products and
reduce our revenue and operating results.
A significant percentage of our net sales revenue (our gross sales revenue less sales returns
and discounts) is derived from customers who use our products for consumer electronics, computers
and computer peripherals and other communications products. The industries in which the
manufacturers of these products operate are subject to rapid technological change, rapidly evolving
industry standards and downward pricing pressures. A significant decrease in the demand for
consumer electronics, computers and computer peripherals and other communications products due to
business cycles or the non-acceptance of our customers' products in the market, may decrease the
demand for our products and could adversely affect our results of operations. Declining prices of
these products also result in significant downward pressure on the prices of our products that are
used in these products, which may cause the average selling prices for our products to decrease and
our revenue and operating results to suffer.
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If we cannot compete successfully in our industry, we may lose customers and our revenue may
decrease.
The semiconductor industry is highly competitive. We compete with major international
semiconductor companies, including Intel, Atmel Corporation ("Atmel"), Sharp, Spansion,
STMicroelectronics, Renesas Technology Corporation ("Renesas"), Silicon Storage Technology, Inc.
("SST"), Hynix Semiconductor Inc. ("Hynix"), Toshiba Corporation ("Toshiba"), Oki Semiconductor Co.
("Oki") and various other industry participants. Many of our competitors have greater access to
capital and technology and have substantially greater production, research and development, sales
and marketing and other resources than we do. As a result, these companies may be able to compete
more aggressively over a longer period of time than our company.
The principal elements of competition in our industry include:
•
technological expertise and technical competence;
•
time-to-market;
•
ability to obtain raw materials and components on a timely and cost-effective basis;
•
research and development capabilities and plans;
•
available capacity;
•
manufacturing capabilities and yields;
•
customer service; and
•
price.
Moreover, since the basic manufacturing processes for the production of volatile and
nonvolatile memory chips are similar, manufacturers of volatile memory products may migrate into
our nonvolatile memory markets, which would create additional competition. Many of our competitors
have shown a willingness to quickly and sharply reduce prices in order to maintain high capacity
utilization in their facilities during periods of reduced demand. Any renewed erosion in the prices
for our products could cause our profits to decrease and have a material adverse effect on our
financial condition and results of operations.
Due to our high percentage of fixed costs, we will not be profitable if we are unable to achieve
relatively high capacity utilization rates.
Our operations are characterized by relatively high fixed costs, such as depreciation, and we
expect this to continue. Our profitability depends not only on absolute pricing levels for our
products, but also on utilization rates for our equipment, commonly referred to as "capacity
utilization rates". In particular, increases or decreases in our capacity utilization rates can
have a significant effect on gross margins since per-unit costs generally decrease as fixed costs
are allocated over a larger number of units. In periods of low demand, we experience relatively low
capacity utilization rates in our operations, which lead to reduced margins during such periods.
This occurred in 2001, 2002, the first half of 2003 and the first quarter of 2005. Although our
capacity utilization rates improved in 2004 and 2005, except in the first quarter of 2005, we
cannot assure you that we will be able to achieve or maintain profitability if we cannot
consistently achieve or maintain relatively high capacity utilization rates. Furthermore, high
capacity utilization rates in the absence of high demand could result in inventory buildup and
obsolescence, which may result in write-downs of inventory.
Our customers generally do not place purchase orders in advance, which makes it difficult for us to
predict our future revenues, adjust production costs and allocate capacity efficiently and on a
timely basis.
Our customers generally place purchase orders between one to two months before the desired
shipment date, and our contracts with customers generally do not require minimum purchases of our
products. Due to the cyclical nature of the semiconductor industry, our customers' purchase orders
have varied significantly from period to period, and it is difficult to forecast future order
quantities. As a result, we do not typically operate with any significant backlog. The lack of
significant backlog makes it difficult for us to forecast our revenues, plan our production and
allocate resources for future periods. Moreover, our expense levels are based in part on our
expectations of future revenue and we may be unable to adjust costs in a timely manner to
compensate for revenue shortfalls. We cannot
11
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assure you that any of our customers will continue to place orders with us in the future and
at the same level as in prior periods. We also cannot assure you that the volume of our customers'
orders will be consistent with our expectations when we plan our expenditures for raw materials,
components, labor and equipment.
We depend on select personnel and could be affected by the loss of their services.
We depend on the continued service of our executive officers and skilled technical and other
personnel. Our business could suffer if we lose the services of any of these personnel and cannot
adequately replace them. At present, there is a shortage in Taiwan of persons with the special
technical skill set we require. Further, although some of these personnel have entered into
employment agreements with us, most of these employment agreements do not specify the duration of
employment. Therefore, the relevant personnel may, subject to the terms of the relevant agreements,
terminate such agreements at any time. We are not insured against the loss of any of our personnel.
We may not be able to either retain our present personnel or attract additional qualified personnel
as and when needed. In addition, we may need to increase employee compensation levels in order to
attract and retain our existing officers and employees and the additional personnel that we may
require in the future. Moreover, in order to attract and retain personnel, we must devote
significant resources to training and benefits. These benefits have historically and may in the
future include bonuses in the form of our common shares or otherwise based on the performance of
our stock.
Because of the highly cyclical nature of our industry, our capital requirements are difficult to
plan. If we cannot obtain additional capital when we need it, our growth prospects and future
operating results may be adversely affected.
Our capital requirements are difficult to plan in our highly cyclical and rapidly changing
industry. We will need capital to fund the expansion of our facilities as well as research and
development activities in order to remain competitive. We believe that our existing cash and cash
equivalents, short-term investments, expected cash flow from operations and existing credit lines
under our short-term loan facilities will be sufficient to meet our capital expenditures, working
capital, cash obligations under our existing debt and lease arrangements, and other requirements
for at least the next twelve months. However, future capacity expansions or market or other
developments may cause us to require additional funds. Our ability to obtain external financing in
the future is subject to a variety of uncertainties, including:
•
our future financial condition, results of operations and cash flows;
•
our stock price and credit rating;
•
general market conditions for financing activities by semiconductor companies; and
•
economic, political and other conditions in Taiwan and elsewhere.
If we are unable to obtain external financing in a timely manner, on acceptable terms or at
all, we may be unable to implement our expansion plans or conduct planned research and development
and develop new products and our growth prospects and future operating results may decline.
If we are unable to manage our expansion effectively, our growth prospects may be limited and our
future operating results may be affected.
We have significantly expanded our operations in recent years. Rapid expansion puts strain on
our managerial, technical, financial, operational and other resources. As a result of our
expansion, we have implemented and may continue to need to implement additional operational and
financial controls and hire and train additional personnel. Any failure to manage our expansion
effectively could lead to inefficiencies and redundancies and result in reduced growth prospects
and operating results.
If we are unable to effectively manage seasonal fluctuations in the demand for our products, our
business and operating results may be adversely affected.
We have in the past experienced, and we expect to continue to experience, seasonal
fluctuations in the demand for our products. In particular, we typically generate higher sales
during the third and fourth quarters of the year. In anticipation of the higher demand in these
quarters and to smooth out and manage rationally the use of our capacity over the course of the
full year, we typically build up inventory in the first and second quarters of the year. However,
if we are unable to increase our manufacturing capacity or build up inventory ahead of demand to
meet seasonal or additional future demand on a timely basis, our customers may seek other
manufacturing
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sources to meet their needs and our business and operating results may be adversely affected.
In addition, if we are unable to effectively manage our manufacturing capacity during a seasonal
downturn in demand or if we build up inventory in anticipation of demand that does not materialize,
our results of operations would also be adversely affected.
If we are unable to obtain additional equipment in a timely manner and at reasonable cost, our
competitiveness and future operating results may be adversely affected.
We expect to purchase a significant amount of additional equipment from time to time to
continue to improve our technology and manufacturing processes. The market for our equipment is
characterized, from time to time, by intense demand, limited supply and long delivery cycles. In
addition, we do not have binding supply agreements with any of our suppliers and acquire our
equipment on a purchase order basis, which exposes us to substantial risks when market conditions
change. As a result, if we are unable to obtain equipment and upgrade our technology in a timely
manner and at a reasonable cost, we may not be able to compete effectively and fulfill our
customers' requirements, which could adversely affect our growth prospects as well as our financial
condition and results of operations.
Derivative contracts may expose us to risks that may adversely affect our financial condition and
results of operations.
We enter into a variety of derivative transactions from time to time for both hedging and
trading purposes. These derivative contracts may expose us to or increase our exposure to financial
market risks, including foreign currency exchange rates, marketable securities prices (including
those of our common shares and bonds) and changes in interest rates. Even when we enter into
derivative contracts for hedging purposes, there may be imperfect correlation or even no
correlation, between price movements of a derivative instrument and price movements of the
underlying item being hedged, which will result in a less effective or ineffective hedge. Moreover,
although successful hedging strategies could reduce our risk of loss by wholly or partially
offsetting the negative effect of unfavorable price movements in the hedged item, hedging
strategies could also reduce our opportunity for gain by offsetting the positive effect of
favorable price movements in the hedged item.
We may also be required to pledge assets as collateral security, maintain segregated accounts
or make margin payments when we take positions in derivative instruments involving obligations to
third parties (i.e., derivative instruments other than purchased options). If we were to be unable
to close out our positions in these derivative instruments, we may be required to continue to
pledge such assets, maintain such accounts or make such payments until the positions expire or
mature. Our ability to close out a position in a derivative instrument prior to its expiration or
maturity depends on the existence of a liquid secondary market or, in the absence of such a market,
the ability and willingness of a counterparty to enter into a transaction closing out the position.
We cannot assure you that we will be able to close out a derivative position at a time and price
that is favorable to us.
We are also exposed to the credit risk of the counterparties to our derivatives contracts. In
particular, any failure by a counterparty to honor the terms of its derivatives contracts with us
may adversely affect our financial condition and results of operations.
If needed cash resources are unavailable to us, we will be unable to implement successfully our
research and development plans.
To keep up with the rapid pace of technological change and to develop attractive and
cost-effective products, we need to invest significantly in research and development. We may not be
able to generate cash flow from operations in sufficient amounts to allow us to maintain our
planned level of spending on research and development. Any failure to maintain adequate research
and development spending could reduce our competitiveness and jeopardize our long-term prospects.
We are vulnerable to natural disasters and other events beyond our control, which could severely
disrupt the normal operation of our business and adversely affect our
operating results.
All of our existing manufacturing operations are in Hsinchu, Taiwan, which is vulnerable to
natural disasters. Disruption of operations at our manufacturing facilities for any reason,
including earthquakes, droughts, power outages, typhoons or other events beyond our control, would
cause delays in shipments of our products, which could result in the loss of revenue and/or
customers.
Taiwan is also susceptible to earthquakes and has experienced severe earthquakes that caused
significant property damage and loss of life, particularly in the central and eastern parts of
Taiwan. These earthquakes damaged production facilities and equipment and adversely affected the
operations of many companies involved in the semiconductor and other industries, including our
company. Moreover, there were interruptions to our production schedule primarily as a result of
power outages caused by these earthquakes.
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As a result of the rapid growth of the Taiwan semiconductor industry, which is primarily based
in Hsinchu, there has been increased demand for water and electricity in that region. Any shortage
of water or electricity could have a material and adverse effect on our operations. Many areas in
Taiwan experienced a severe drought in 2002 causing Taiwan authorities to announce water-rationing
measures in the northern parts of Taiwan. If a drought occurs again and authorities are unable to
source water from alternative sources in sufficient quantities, we may be required to temporarily
shut down or substantially reduce production at our facilities in the affected areas, which would
seriously affect our operations.
Many of our suppliers and customers and providers of semiconductor manufacturing services,
including foundries, are located in Taiwan. If our customers are affected by an earthquake, a
drought or other natural disasters, it could result in a decline in the demand for our products and
services. If our suppliers and providers of semiconductor manufacturing services are affected, our
production schedule could be interrupted or delayed. As a result, a major earthquake, drought or
other natural disaster in Taiwan could severely disrupt the normal operation of business and have a
material adverse effect on our financial condition and results of operations.
While we maintain several insurance policies relating to our business, including business
interruption insurance, we cannot assure you that the insurance coverage will be sufficient to
protect us from potential losses resulting from natural disasters and other events beyond our
control. In addition, we cannot assure you that the premium payable for these insurance policies
upon renewal will not increase substantially, which may adversely affect our financial condition
and results of operations. Furthermore, any failure or inability to obtain the necessary insurance
coverage on a timely basis, or at all, may severely increase our operating risk.
We are subject to stringent environmental regulations and any violation could require us to pay
significant fines, or result in a delay or interruption of our operations.
We are subject to environmental regulations relating to our manufacturing processes, including
the use, storage, discharge and disposal of chemical by-products of, and water used in, our
production process. A failure or a claim that we have failed, to comply with these environmental
regulations could result in the assessment of damages or imposition of significant fines, delays in
our production and capacity expansion and negative publicity, all of which could harm our business.
New regulations could also require us to acquire costly equipment or to incur other significant
expenses. In addition, any failure by us to control the use of, or adequately restrict the
discharge of, hazardous substances could subject us to future liabilities that may have a material
adverse effect on our financial condition and results of operations.
The differences between R.O.C. GAAP and U.S. GAAP result in different amounts of net income under
those standards, which makes evaluating our financial performance difficult.
Our consolidated financial statements are prepared under R.O.C. GAAP, which differ in many
significant respects from U.S. GAAP. For example, R.O.C. GAAP does not require the recognition of
the value of shares distributed as bonuses to employees when calculating net income, and R.O.C.
GAAP and U.S. GAAP differ in some important respects in accounting for gains and losses on
derivative financial instruments. Largely as a result of the differences in accounting for employee
bonuses in the form of our common shares, derivative instruments and convertible debt securities
with beneficial conversion features, we reported under U.S. GAAP net loss of NT$7,148 million in
2003, NT$469 million in 2004 and NT$4,636 million (US$141.3 million) in 2005, as compared to, under
R.O.C. GAAP, net loss of NT$8,198 million in 2003, net income of NT$218 million in 2004 and net
loss of NT$7,027 million (US$214.2 million) in 2005. See note 28 to our consolidated financial
statements for the years ended December 31, 2003, 2004 and 2005 included in this annual report.
Risks Relating to Technology and Intellectual Property
Our return to profitability depends on our ability to respond to rapid technological changes in the
semiconductor industry.
The markets for semiconductors and electronic systems that use semiconductor products are
subject to rapid technological change. This rapid change results in:
•
introduction of new and increasingly complex and powerful products;
•
rapidly evolving industry standards;
•
rapid and significant product price declines;
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•
rapid product obsolescence; and
•
introduction of competing technologies and solutions.
Our success depends on our ability to improve and develop our core technologies in a rapidly
changing technological environment. In particular, we expect that we will need to constantly offer
more sophisticated technologies and processes in order to respond to competitive industry
conditions and customer requirements. We cannot assure you, however, that we will be able to
identify new product opportunities or to timely develop and successfully market new products. We
may also experience delays in developing or achieving volume production of new products. Moreover,
our new products may fail to gain market acceptance, and existing products may become obsolete. For
example, our sales of Mask ROM products fell when Nintendo shifted to DVD-ROM technology in its
newer gaming console products, and may continue to fall further as products move to competing
technologies. If we fail to develop, or obtain access to, advances to technologies and processes,
we may become less competitive and be unable to return to profitability.
We depend on our technology partners to advance our portfolio of process technologies, and we may
not be able to advance our portfolio of process technologies if our technology partners fail to
advance their technology, if we fail to maintain our existing arrangements with our technology
partners or if we are unable to enter into new arrangements with other technology providers.
Enhancing our product design and manufacturing process technologies is critical to our ability
to provide products and services for our customers. In particular, we have an internal research and
development team focusing on developing new semiconductor manufacturing process technologies. We
also depend on our technology arrangements with leading integrated device manufacturers and fabless
semiconductor companies, consumer electronics and communications companies and other technology
providers to advance our portfolio of process technologies. We believe these arrangements help
reduce our development costs and capital expenditures and increase the capacity utilization rates
in our fabrication plants. If we are unable to maintain successful technology arrangements on
mutually beneficial economic terms, or are unable to enter into new technology arrangements with
other leading semiconductor companies, electronics companies and other technology providers, we may
not be able to continue providing our customers with leading-edge process technologies, which may
adversely affect our competitiveness as well as our business and prospects.
Our manufacturing processes are highly complex, costly and potentially vulnerable to impurities and
other disruptions that can significantly increase our costs and delay product shipments to our
customers.
Our manufacturing processes are highly complex, require advanced and costly equipment and are
continuously being modified to improve manufacturing yields and product performance. Impurities or
other difficulties in the manufacturing process or defects with respect to equipment or supporting
facilities can lower manufacturing yields, interrupt production or result in losses of products in
process. As system complexity has increased and process technology has become more sophisticated,
requirements for precision have become even more stringent. In particular, defective production can
result from a number of factors, including:
•
the cleanliness of the manufacturing environment;
•
human error;
•
equipment malfunction;
•
use of defective raw materials; and
•
inadequate testing.
From time to time, we experience lower than anticipated production yields as a result of these
factors, particularly in connection with the expansion of our capacity or changes in our processing
methods. Our yield on new products is often lower as time is required for us to develop expertise
and experience in producing these products. We typically sell our products on a per-die basis and
lower yields can reduce the number of units we can sell, which causes our revenues and profits to
suffer. If we fail to maintain high quality production standards and yields, our business and
operating results may suffer and our customers may cancel their orders or return our products.
Our business depends in part on our ability to obtain and preserve intellectual property rights.
Our ability to compete successfully and achieve future growth will depend, in part, on our
ability to protect our proprietary technology. We rely on patents, copyrights and trade secret
protection rights to protect some of our proprietary technologies and
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products. We cannot assure you that these measures will provide meaningful protection of our
intellectual property or commercial advantage. For example, our competitors may be able to use our
technologies to develop similar or superior products, and we may not have sufficient financial
resources to protect and enforce our rights. We intend to continue to file patent applications when
appropriate to protect our proprietary technologies, but the process of seeking patent protection
can be lengthy and expensive. In addition, patents may not be issued for pending or future
applications. Furthermore, if patents are issued, they may be challenged, invalidated or
circumvented. Moreover, the various countries in which we market our products may not protect our
intellectual property rights to the same extent as does the United States. See "Item 5. Operating
and Financial Review and Prospects — Research and Development, Patents and Licenses, etc. —
Research and Development" and "— Intellectual Property".
We may be subject to intellectual property rights disputes that could expose us to serious
liabilities.
The semiconductor industry is characterized by frequent litigation regarding patent and other
intellectual property rights. Our ability to compete successfully depends on our ability to operate
without infringing the proprietary rights of others. We have no means of knowing what patent
applications have been filed in the United States or elsewhere until the applications or resulting
patent (if one is granted) are made available to the public. Because of the complexity of the
technologies used and the multitude of patents, copyrights and other overlapping intellectual
property rights, it is often difficult for semiconductor companies to determine infringement. We
are currently involved in certain litigation matters involving patent infringement.
See "Business — Legal Proceedings". As is typical in the semiconductor industry, from time to time
we receive communications from third parties asserting patents that cover certain of our
technologies and alleging infringement of intellectual property rights. We expect to receive
similar communications in the future. If a valid claim is made against us or our customers, we may
be required to:
•
discontinue using process technologies which could cause us to stop manufacturing particular semiconductors;
•
pay substantial monetary damages:
•
seek to develop non-infringing technologies, which may not be feasible; or
•
seek to acquire licenses to the infringed technology which may not be available on reasonable commercial terms, or at all.
We could be seriously harmed by any of these developments. Litigation, which could result in
substantial costs to us and divert our resources, may also be necessary to enforce our patents or
other intellectual property rights or to defend against claimed infringement of the rights of
others. Our failure to obtain necessary licenses, the occurrence of patent infringement or other
intellectual property litigation could seriously harm our company. In addition, although we have
from time to time made a reserve in anticipation of royalty payments we may potentially be required
to make in relation to any possible claims or allegations, we cannot assure you that we have made,
or will continue to make, sufficient reserve for all claims and allegations against our company for
any patent infringement. See "Item 8. Financial Information — A. Consolidated Statements and Other
Financial Information — Legal Proceedings".
Political and Economic Risks
Strained relations between the R.O.C. and the P.R.C. could adversely affect our business and the
market value of your investment.
Our principal executive offices and most of our assets are located in, and most of our revenue
is derived from, our operations in Taiwan. The R.O.C. has a unique international political status.
The People's Republic of China ("P.R.C.") asserts sovereignty over all of China, including Taiwan.
The P.R.C. government does not recognize the legitimacy of the R.O.C. government. Although
significant economic and cultural relations have been established in recent years between the
R.O.C. and the P.R.C., relations have often been strained and the P.R.C. government has indicated
that it may use military force to gain control over Taiwan in some circumstances, such as the
declaration of independence by the R.O.C. Relations between the R.O.C. and the P.R.C. have been
particularly strained in recent years. Occasional speeches and statements by President Chen
Shui-Bian hinting at independence issues and reactions of Chinese officials to these
speeches and statements have increased tensions between the R.O.C. and the P.R.C.. In March 2005,
the P.R.C. passed an anti-secession law which sanctions the use of force against the R.O.C. if the
R.O.C. formally declares its independence. Past developments in relations between the R.O.C. and
the P.R.C. have on occasion depressed the market price of the securities of R.O.C. companies.
Relations between the R.O.C. and the P.R.C. and other factors affecting the political or economic
conditions in Taiwan could have a material adverse effect on our financial condition and results of
operations, as well as the market price and the liquidity of our securities.
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Fluctuations in exchange rates could result in foreign exchange losses.
The majority of our revenue is denominated in U.S. dollars and Japanese yen. Our costs of
revenues and operating expenses, on the other hand, are incurred in several currencies, including
N.T. dollars and U.S. dollars. In addition, a substantial portion of our capital expenditures has
been and is expected to continue to be, primarily denominated in U.S. dollars and Japanese yen.
Fluctuations in exchange rates, primarily among the U.S. dollar, the N.T. dollar and the Japanese
yen, will affect our costs and operating margins. In addition, these fluctuations could result in
exchange losses and increased costs in N.T. dollar and other local currency terms. Despite hedging
and mitigating techniques implemented by us from time to time, fluctuations in exchange rates have
affected, and may continue to affect, our financial condition and results of operations. See "Item
11. Quantitative and Qualitative Disclosures About Market Risk — Foreign Currencies".
Disruptions in the international trading environment may significantly reduce our international
sales and revenue.
A substantial portion of our net sales revenue is derived from sales from Taiwan to customers
located outside Taiwan. In 2003, 2004 and 2005 export sales from Taiwan to our customers outside
Taiwan accounted for 67.9%, 66.5% and 70.2% respectively, of our net sales revenue. We expect sales
to customers outside Taiwan to continue to represent a significant portion of our net sales
revenue. Accordingly, our financial condition and results of operations and the market price of our
securities may be affected by changes in governmental policies, inflation, increasing interest
rates, social instability and other political, economic or social developments in or affecting the
countries in which we sell our products that are not within our control. As a result, our business
will continue to be vulnerable to disruptions in the international trading environment, including
adverse changes in foreign government regulations, political unrest and international economic
downturns. These disruptions in the international trading environment affect the demand for our
products and the terms upon which we sell our products overseas, which may significantly reduce our
international sales and revenue.
The trading price of our common shares may be adversely affected by the general activities of the
Taiwan Stock Exchange and the economic performance of Taiwan.
Our common shares are listed on the Taiwan Stock Exchange. The trading price of our common
shares may be affected by the general activities of the Taiwan Stock Exchange and the economic
performance of Taiwan. The Taiwan Stock Exchange is smaller and, as a market, more volatile than
the securities markets in the United States and a number of European countries. The Taiwan Stock
Exchange has experienced substantial fluctuations in the prices and volumes of sales of listed
securities, and there are currently limits on the range of daily price movements on the Taiwan
Stock Exchange. In the past decade, the Taiwan Stock Exchange Index peaked at 10,202 in February
2000 and subsequently fell to a low of 3,446 in October 2001. During 2005, the Taiwan Stock
Exchange Index peaked at 6,575.53 on December 29, 2005 and
reached a low of 5,632.97 on October 28,
2005. During 2005, daily closing prices of our common shares ranged
from NT$5.19 per share on
September 22, 2005 to NT$12.33 per share on January 3, 2005. On June 9, 2006, the Taiwan Stock
Exchange Index closed at 6,444.63 and the daily closing value of our common shares was NT$7.39 per
share. The Taiwan Stock Exchange is particularly volatile during times of political instability,
such as when relations between Taiwan and the P.R.C. are strained. Moreover, the Taiwan Stock
Exchange has experienced problems such as market manipulation, insider trading and payment
defaults. The recurrence of these or similar problems could decrease the market prices and
liquidity of our common shares, ADSs and GDSs.
In response to past declines and volatility in the securities markets in Taiwan, and in line
with similar activities by other countries in Asia, the government of the R.O.C. formed the
Stabilization Fund, which has purchased and may from time to time purchase shares of Taiwan
companies to support these markets. In addition, other funds associated with the R.O.C. government
have in the past purchased, and may from time to time purchase, shares of Taiwan companies on the
Taiwan Stock Exchange or other markets. In the future, market activity by government entities, or
the perception that such activity is taking place, may take place or has ceased, may cause
fluctuations in the market prices of our common shares, ADSs and GDSs.
Risks Relating to our Common Shares, ADSs and GDSs
We cannot assure you that the market for our common shares and ADSs will be active and liquid, and
trading of our GDSs has been extremely illiquid.
The average daily trading volumes for our common shares and ADSs have fluctuated greatly in
the past. During 2005, the daily trading volume of our common shares ranged from approximately
8,664,000 to approximately 139,694,000 shares. During the same period, the average daily trading
volume of our ADSs ranged from approximately 58,000 units to approximately 51,027 units. Since our
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GDSs began trading in April 2004, trading of our GDSs has been extremely illiquid, and
underlying common shares have been withdrawn with respect to a very substantial majority of our
GDSs. As of May 31, 2006, GDS holders representing over 99.64% of our GDSs issued in April 2004
have withdrawn from our GDS program and converted their GDSs to common shares. We cannot assure you
that the liquidity of our common shares or ADSs will be maintained or enhanced and expect that
trading in our GDSs will continue to be extremely illiquid. Market prices of technology companies'
shares have been and continue to be extremely volatile. As a result, volatility in the price of our
common shares, ADSs and GDSs may be caused by factors outside of our control and may be unrelated
or disproportionate to our operating results.
In addition, the EU Transparency Obligations Directive is currently being finalized and may be
implemented in Luxembourg, where our GDSs are listed, in a manner that is unduly burdensome for our
company. In particular, we may be required to publish financial statements in the EU prepared in
accordance with, or reconciled to, International Financial Reporting Standards. In such
circumstances we may decide to seek an alternative listing for the GDSs on a stock exchange outside
the European Union.
Future sales of securities by our company or existing shareholders or future issuances of
securities by our company may have a dilutive effect and decrease the value of your investment.
The market price of our common shares and ADSs and GDSs could decline as a result of future
sales of a large number of common shares, ADSs or GDSs or the perception that such sales could
occur. If we or the holders of our common shares, ADSs or GDSs sell a large number of common
shares, ADSs or GDSs, or the perception develops that such an event may occur, the market price for
the common shares, ADSs or GDSs could be depressed. In particular, if cash flow from operations is
insufficient to allow us to conduct our day-to-day operations or to redeem or otherwise repay our
debt or if net losses reduce our equity near or below the minimum level stipulated in covenants
under our bank loans, we may need to issue more common shares, ADSs or GDSs in the future, or the
perception may arise that we need to do so.
In addition, we plan to issue, from time to time, additional common shares in connection with
employee compensation as well as to finance possible future investments or acquisitions. The
issuance of additional shares may have a dilutive effect on other shareholders and may cause the
price of our common shares, ADSs and GDSs to decrease. The conversion of our convertible bonds into
common shares (and, where applicable, exercise of the right to deposit those common shares in
exchange for ADSs or GDSs) may also have a dilutive effect. See "Item 6. Directors, Senior
Management and Employees — E. Share Ownership — Share Option Plans" for a discussion of the share
option plan that we have adopted for the benefit of all of our officers and employees and those of
our subsidiaries.
ADS and GDS holders do not have the same voting rights as our common shareholders, which may affect
the value of the ADSs and GDSs.
The voting rights of ADS and GDS holders as to the common shares represented by the ADSs or
GDSs are limited to the extent set forth in the relevant deposit agreement. With respect to matters
other than the election of our directors or supervisors, ADS and GDS holders generally are not able
to exercise voting rights on an individual basis. With respect to matters other than the election
of our directors or supervisors, if holders representing 51% of the outstanding ADSs or GDSs, as
the case may be, instruct the depositary to vote in a particular manner, the depositary will cause
all common shares represented by the ADSs or GDSs to be voted in that manner. If the depositary
does not receive instructions representing at least 51% of the outstanding ADSs or GDSs, as the
case may be, to vote in a particular manner, ADS or GDS holders, as the case may be, will be deemed
to have instructed the depositary to authorize all the common shares represented by their ADSs or
GDSs to be voted at the discretion of our designated representative, which may not be in the
interest of all ADS or GDSs holders.
The R.O.C. Company Law and our articles of incorporation provide that a shareholder has one
vote for each common share. There is also cumulative voting for the election of directors and
supervisors.
The rights of holders of our ADSs and GDSs to participate in our rights offerings may be limited,
which may cause dilution to their holdings.
We may from time to time distribute rights to our shareholders, including rights to acquire
our securities. Under the ADS deposit agreement, the depositary will not offer those rights to
holders of ADSs unless both the rights and the underlying securities to be distributed to holders
of ADSs are either registered under the U.S. Securities Act of 1933 (the "Securities Act") or
exempt from registration under the Securities Act. Under the GDS deposit agreement, the depositary
will not offer those rights to holders of GDSs if it deems the distribution of rights to holders of
GDSs not to be lawful and reasonably practicable. We are under no obligation to file a registration
statement with respect to any such rights or underlying securities or to endeavor to cause such a
registration statement to be
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declared effective. Accordingly, holders of our ADSs and GDSs may be unable to participate in
our rights offerings and may experience dilution in their holdings.
Our public shareholders may have more difficulty protecting their interests than they would as
shareholders of a U.S. corporation.
Our corporate affairs are governed by our articles of incorporation and by the laws governing
Taiwanese corporations. The rights and responsibilities of our shareholders and members of our
board of directors under Taiwan law are different from those that apply to a U.S. corporation.
Therefore, our public shareholders may have more difficulty protecting their interests against
certain actions of our management, members of our board of directors or controlling shareholders
than they would as shareholders of a U.S. corporation.
ADS and GDS holders may be required to appoint agents in Taiwan to handle various tax and
administrative matters if they withdraw common shares from our ADS or GDS program and become
shareholders, which may make share ownership burdensome.
Non-R.O.C. persons wishing to withdraw their common shares from our ADS or GDS program and
become shareholders are required under current R.O.C. laws and regulations to appoint a local agent
or representative (a "Tax Guarantor") in Taiwan for making tax payments on their behalf. A Tax
Guarantor must meet certain qualifications set by the R.O.C. Ministry of Finance and, upon
appointment, becomes a guarantor of the holder's R.O.C. tax obligations. Holders wishing to
repatriate profits derived from the sale of common shares or cash dividends or interest derived
from any such common shares, will be generally required to submit evidence of appointment of a Tax
Guarantor and the approval of the appointment by the R.O.C. tax authorities. We cannot assure you
that you will be able to appoint and obtain approval for a Tax Guarantor in a timely manner.
Under R.O.C. law and regulations, citizens of the P.R.C. are not permitted to hold our common
shares.
In addition, under current R.O.C. law, such ADS or GDS holders will be required to appoint a
local agent in Taiwan to, among other things, open a securities trading account with a local
securities brokerage firm, remit funds and exercise shareholders' rights. They must also appoint a
local bank to act as custodian for handling confirmation and settlement of trades, safekeeping of
securities and cash proceeds and reporting and declaration of information. In addition, they will
be required to register with the Taiwan Stock Exchange for making investments in the R.O.C.
securities market (and if you are an offshore foreign institutional investor, to obtain the prior
approval of the Central Bank of China) prior to withdrawing common shares. Without meeting these
requirements, non-R.O.C. persons will not be able to hold, subsequently sell or otherwise transfer
our common shares on the Taiwan Stock Exchange.
Changes in exchange controls which restrict your ability to convert proceeds received from your
ownership of ADSs or GDSs may have an adverse effect on the value of your investment.
Under current R.O.C. law, a holder of our ADSs or GDSs who withdraws and becomes a holder of
our common shares may be required to obtain foreign exchange approval from the Central Bank of
China on a payment-by-payment basis for conversion from N.T. dollars into foreign currencies of the
proceeds from the sale of subscription rights for new common shares. Although it is expected that
the Central Bank of China will grant this approval as a routine matter, we cannot assure you that
in the future any approval will be obtained in a timely manner, or at all.
Furthermore, pursuant to the R.O.C. Foreign Exchange Control Law, the Executive Su of the
R.O.C. government may, without prior notice but subject to subsequent legislative approval, impose
foreign exchange controls in the event of, among others, a material change in international
economic conditions. We cannot assure you that foreign exchange controls or other restrictions will
not be introduced in the future.
When withdrawing the underlying common shares of the ADSs or GDSs, you may be required to provide
certain information to us or the Depositary, and failure to provide such information may result in
a delay of the withdrawal.
When withdrawing the underlying common shares of ADSs or GDSs, you may be required to provide
certain information to us or the depositary, including the name and nationality of the person to be
registered as the shareholder, the number of common shares to be acquired by such person and the
number of common shares acquired by such person in the past through the date of the withdrawal of
the underlying common shares. Under applicable R.O.C. laws, we are required to report to the R.O.C.
Securities and Futures Commission (the "R.O.C. SFC") if the person to be registered as a
shareholder (i) is a "related party" of ours as defined in the R.O.C. Statement of Financial
Accounting Standard No. 6 or (ii) will hold, immediately following such withdrawal, more than 10%
of the underlying common shares of the ADSs or GDSs. Failure to provide such information may cause
the delay of such withdrawal of the underlying common shares.
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Item 4.
Information on the Company
A. History and Development of the Company
We are an independent semiconductor designer, producer and supplier. Our product portfolio
includes Mask ROM, Flash, EPROM, strategic manufacturing services, or SMS, and system logic center,
or SLC, products. We view ourselves as an integrated provider and treat our principal clients as
strategic partners. We work closely with them starting from early stages of product development to
design silicon chip solutions that meet their specific needs. These partners include Nintendo and
Hewlett-Packard, with whom we have had relationships for over ten years. We differentiate ourselves
by our ability to offer a full range of in-house design, product and process engineering
capabilities.
We organize our operations into two main strategic business groups:
•
our Microelectronics and Memory Solution Group, which encompasses Mask ROM, Flash, EPROM
products and strategic manufacturing services; and
•
our Integrated Solution Group, which focuses largely on SLC products for the audio,
video, communications and microcontroller markets.
Our products are primarily used in applications for the consumer electronics, computer and
communications industries.
We were founded and incorporated on December 9, 1989 by engineers who returned to Taiwan from
Silicon Valley in the United States. Our founders chose to form our company in Taiwan to take
advantage of the availability of capital and Taiwan's manufacturing strengths. Today, many of the
world's largest semiconductor companies are located in Taiwan. Many companies outside Taiwan
outsource some or all of their semiconductor manufacturing needs to Taiwan's semiconductor
manufacturing service providers. In addition, Taiwan is a center for the design and manufacture of
electronic systems that have semiconductor devices as their primary components.
We believe that we were the first in Taiwan, in August 1992, to develop a digital signal
processor, and that we were the world's first manufacturer to announce the commercial availability
of a 4Mb Flash chip in October 1992. Additionally, in 1997, we became one of the first companies in
Taiwan to produce an embedded Flash microcontroller.
In March 1995, our common shares were listed on the Taiwan Stock Exchange and we became the
first company to be listed under that stock exchange's "High Technology" category of companies. In
May 1996, our ADSs were accepted for quotation on the Nasdaq National Market and we became the
first Taiwanese company with securities listed in the United States. In April 2004, we issued GDSs
which were listed on the Luxembourg Stock Exchange.
In order to improve our financial structure and to offset accumulated deficits, at a
Provisional Meeting of Shareholders held on November 16, 2005, our shareholders approved the
cancellation of 2,079,474,542 shares amounting to NT$20,794,745. The effective date of the
cancellation was February 16, 2006. On February 17, 2006, we issued 100,000 new shares in a
private placement at NT$8.07 per share.
Our contact information is:
•
Business address:
No. 16 Li –Hsin Road, Science Park
Hsinchu, Taiwan, Republic of China
•
Telephone number:
(8863) 578-6688
•
Website:
www.macronix.com
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Capital Expenditures
We operate our own fabrication facilities and therefore require significant amounts of capital
to build, expand, modernize and maintain our facilities and equipment. Increases in property, plant
and equipment amounted to NT$1,606 million, NT$2,554 million and NT$1,595 million (US$48.6 million)
in 2003, 2004 and 2005, respectively. The following table sets forth our capital expenditures for
2003, 2004 and 2005.
Year ended December 31,
2003
2004
2005
(NT$ million)
(NT$ million)
(NT$ million)
Fab I
88
358
134
Fab II
228
92
875
Fab III
834
1,652
0
Others
456
452
586
Total
1,606
2,554
1,595
These amounts include the expansion and upgrade of Fab I and Fab II, the construction of Fab
III and the development of trainee and/or employee facilities and other areas. See "Item 4.
Information on the Company – D. Property, Plant and Equipment".
In 2005, our capital expenditures consisted primarily of residual payments following the
completion of the construction of the shell of Fab III and investments to expand the SLC capacity
of Fab I under our "Evergreen plan". We believe that we will have sufficient resources available
to meet our planned capital expenditure requirements in 2006. In April 2006, we sold Fab III,
along with a clean room and certain adjunctive facilities and equipment, to Powerchip Semiconductor
Corporation, as we did not have immediate plans to utilize Fab III. As part of the sale, Powerchip
agreed to supply sufficient 12-inch wafer production capacity. We purchase these wafers for our
advanced process technology development.
B. Business Overview
Our Strategy
We aim to be a global leader in the non-volatile memory market by offering our customers a
total non-volatile memory solution for their electronic system requirements. We seek to distinguish
ourselves from traditional integrated device manufacturers and wafer foundries by forging strategic
partnerships with our key customers from an early stage of their product development to ensure our
products meet their present and future requirements.
The components of our strategic initiatives are as follows:
Maintain our leadership in Mask ROM and develop the market for one-time programmable memory
products
Although the Mask ROM market has been declining, it remains the preferred low-cost,
high-volume solution for certain applications (such as portable game devices) and hence continues
to be an important segment of our business. We have been able to increase our market share in the
Mask ROM segment over time while maintaining relatively strong margins in spite of declining
average selling prices.
We have developed, and began to ship from the end of 2004, one-time programmable memory
products based on 2 bit per cell NBit technology, which we term as XtraROM. Our XtraROM can be
electrically programmed in a similar manner to EPROMs, which allows our customer turnaround time to
be reduced from weeks for Mask ROM to a few days for XtraROM. At the same time, the cost of XtraROM
is fairly similar to Mask ROM. We believe that this ability to reduce customer turnaround times
with minimal difference in cost provides us with a significant competitive advantage. We are also
developing 4 bit per cell NBit technology. If we are successful, we believe that one-time
programmable memory products based on 4 bit per cell NBit technology may become equal or lower in
cost than equivalent Mask ROM products.
In the future, we expect Mask ROM and/or one-time programmable memory products, to continue to
play an important role in our business, and that XtraROM will progressively replace Mask ROM if we
are successful in developing one-time programmable memory products based on 4 bit per cell NBit
technology. We plan to continue to focus on maintaining our competitiveness in the ROM segment by
improving our technology capabilities as well as introducing new applications for Mask ROM and
XtraROM, including, in particular, digitally stored content for mobile and handheld devices.
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Invest in Flash technologies to develop cost-competitive solutions, particularly for the handheld
device and wireless markets
We believe Flash will be the dominant non-volatile memory product in the future and are
committed to expanding our capabilities and market share in Flash technologies. We believe that our
ability to develop expertise in advanced Flash technologies is critical to our long-term
competitiveness and success.
In the near term, we plan to focus on medium-density Code Flash products using advanced
manufacturing processes, and reduce line widths and die sizes, to develop cost-effective solutions.
Our research efforts currently include the development of 0.13 micron process technology for Code
Flash products. We are also seeking to shrink die sizes through redesigning our 0.15 micron Flash
products.
Leverage our competitive position in the non-volatile memory market to effectively cross-sell and
diversify our product mix and customer base
As one of the world's leading manufacturers of Mask ROMs, we are able to provide our customers
with a cost-effective means to procure large volumes of capacity in a relatively short time frame.
Our Mask ROM business has therefore been critical to our efforts in developing relationships with,
and eventually cross-selling other products to, some of our key customers. For example, we have
successfully sold Flash, SLC and SOC products to Nintendo, which originally began as a customer for
our Mask ROM products only.
We plan to continue to leverage our Mask ROM business with our existing and potential
customers, thereby expanding our ability to cross-sell and diversify product mix and customer base.
Continue to upgrade our process technology and in-house manufacturing capabilities
Our manufacturing facilities enable us to provide a full range of services and timely delivery
to our key clients. We will continue to maintain in-house manufacturing capacities and stress
quality control and operational discipline to enhance production yield at our manufacturing
facilities. Where necessary to enhance our competitive position, we intend to continue migrating
our production to more advanced process technologies by making prudent investments in equipment and
leveraging on our strategic partners' expertise.
However, in light of the capital-intensive nature of semiconductor manufacturing, we plan to
continue to explore ways to align our product portfolio with our manufacturing capabilities. For
example, while we have already migrated Fab I to 0.32 micron process technology for certain chips,
in order to maintain profitability at Fab I and minimize the amount of new investment required, we
have initiated an "Evergreen plan". This allocates to Fab I manufacturing of products that do not
require leading edge technologies, such as certain of our SLC and SMS products, including high
voltage, microelectronic-mechanical system, or MEMS, LCD driver IC chipsets and embedded ROM
products.
As an example of our efforts in managing capacity constraints, we outsource some of our wafer
production requirements to Taiwan Semiconductor Manufacturing Company Limited ("TSMC") in Taiwan
and Tower Semiconductor Limited ("Tower Semiconductor") in Israel.
Our Business Groups
We currently organize our operations into two strategic business units, namely, our
Microelectronics and Memory Solution Group and our Integrated Solution Group. Our Microelectronics
and Memory Solution Group is primarily responsible for the management and operation of our business
relating to our non-volatile memory products, such as Mask ROM, Flash and EPROM products, and for
SMS products. Our Integrated Solution Group is responsible for the management and operation of our
business relating to SLC products. We intend to spin-off our Integrated Solution Group, initially
into four wholly-owned subsidiaries, by the end of the year, focusing on Mobile Audio, Base Band,
Mobile Payment and Design Service, respectively.
Our Microelectronics and Memory Solution Group supports the technologies that enable us to
provide semiconductor products and design services. It focuses primarily on the research and
development of the advanced process technologies that we require for our business and on advancing
our design capabilities, as well as the operation and capacity planning of our manufacturing
facilities. It is also responsible for managing our process technologies and reinforcing our
relationships with our strategic manufacturing partners through technology arrangements.
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Our Integrated Solution Group is responsible for providing value-added design services and
system-level platform solutions to our based on the requirements of the end-market application. In
addition, it is responsible for developing strategic partnerships with our key customers and
leveraging on our platform partners to provide integrated solutions for our key customers. Our
Integrated Solution Group is also our marketing channel for cross-selling our products and services
to key customers.
Our Products and Services
The following table sets forth our main products, their characteristics and applications, and
the percentage of net sales revenue represented by these products and services in 2003, 2004 and
2005:
% of net sales revenue
Year ended December 31,
Product
Characteristics
Applications
2003
2004
2005
Microelectronics and Memory Solution Group:
Mask ROM
Not re-programmable
Games, PDAs, word processors, printers, fax modems, VCDs, cellular phones, STBs
42.1
35.8
46.1
Flash
Re-programmable within the application system
PDAs, digital cameras, STBs, Web TVs, DVD players, optical disk drive products Fax modems, VCDs
32.8
45.8
36.3
EPROM
Re-programmable outside the application system using industrial processors
STBs, Internet applications, CDs
1.7
0.7
0.1
SMS
Value-added services
DVDs, microcontrollers with embedded Flash technology
13.3
7.4
8.8
Integrated Solution Group:
SLC
Highly integrated system- on-a-chip solutions featuring embedded Flash technology
Cellular phones, flat panel displays, digital still cameras, smart cards, PDAs, electronic
dictionaries, digital audio products
7.3
7.6
6.3
Microelectronics and Memory Solution Group
Mask ROMs
We believe that we are currently the largest Mask ROM manufacturer in the world. Although the
global Mask ROM market has been shrinking, we have increased our market share in recent years as
certain key competitors have exited the market. We differentiate ourselves by providing customized
solutions, faster turnaround times and higher volume capacity. We continue to focus on the Mask ROM
market because it provides higher margins than our other memory products as well as the opportunity
for us to cross-sell other products to our customers.
Applications.
Mask ROMs are used for applications in a wide range of electronic products,
including the storage of software for video games and data storage for office automation equipment,
such as fonts for laser printers and dictionary data for word processors, as well as applications
for pre-recorded MP3 music, mobile telecommunications, pachinko machines and multimedia devices.
We manufacture Mask ROMs using 0.45 micron and 0.15 micron patented process technology in
densities ranging from 1Mb to 512Mb and in a variety of configurations. We believe that our
patented technology allows us to produce Mask ROM products that are smaller in size and with higher
densities than the Mask ROM products from our competitors. We migrated our process technology to
0.18 micron in the second half of 2000 and successfully migrated our process technology to 0.15
micron for both Flash and Mask ROM in the fourth quarter of 2002.
Although the majority of the circuitry in a Mask ROM chip is based on a relatively standard
design, we often incorporate customer design specifications into application-specific portions of
the circuitry during the manufacturing process. For example, we have delivered Mask ROM products
with densities ranging from 4 Mb to 32 Mb for use in memory cards of different form factors for use
in a variety of consumer electronic devices.
We also manufacture a range of Mask ROM products that are compatible with Flash products. This
provides our customers with the benefit of compatibility and the flexibility of using our Flash
devices during their design and development stages where software
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modifications are required, while
using our Mask ROM devices in the mass production of their products without the need for software
modification.
We have developed, and began to ship from the end of 2004, 64Mb, 128Mb and 256 Mb one-time
programmable memory products based on 2 bit per cell NBit technology, which we term as XtraROM. In
addition, we have lunched pilot programs for 512Mb and 1Gb one-time programmable memory products.
Our XtraROM can be electrically programmed in a similar manner to EPROMs, which allows our customer
turnaround time to be reduced from weeks for Mask ROM to a few days for XtraROM. In the future, we
expect that XtraROM will progressively replace Mask ROM if we are successful in developing one-time
programmable memory products based on 4 bit per cell NBit technology.
The following table provides an overview of our principal Mask ROM and XtraROM products, and
the percentage of net Mask ROM and XtraROM sales revenue represented by these products in 2003,
2004 and 2005:
% of our net Mask ROM and
XtraROM sales
Year ended December 31,
Density
Sample applications
2003
2004
2005
512 Mb(1)
Games, entertainment
0.7
3.9
17.0
256 Mb(1)
Games, memory cards
4.7
15.4
23.6
128 Mb(1)
Games, PDAs
28.7
32.7
19.0
64Mb
Word processors, games, PDAs, STBs, databanks, printers
38.5
21.4
23.3
32 Mb
Games, DVDs, data communications
15.3
13.0
9.0
16 Mb
Games, word processors
6.7
9.0
5.1
8 Mb
Sound cards, data banks, BIOS, games, sound cards
4.2
3.9
2.3
4 Mb
PHSs, data banks, games
0.9
0.4
0.6
Other
Pages, data banks, STBs, BIOS, games, word processors, networking
0.3
0.1
0.1
(1)
Includes XtraROM products.
Competition.
The Mask ROM industry is highly competitive. Our major competitors include Oki,
NEC and Hynix.
We believe that with our relative flexibility in adjusting our product mix and allocating our
capacity in Fab II and pursuant to our agreement with Powerchip to purchase 12-inch wafers, we
should be well positioned in the Mask ROM market over the next few years. In the future, we plan to
increase our emphasis on high-density Mask ROM products for use in the games industry, as well as
to explore the demand for applications in other industries to increase demand for our Mask ROM
products.
We plan to maintain our leadership in the Mask ROM market by participating in the product
design process of our existing and prospective customers at an early stage to ensure that our Mask
ROM products meet the requirements in their high-end mobile consumer goods, such as cellular phones
and MP3 players. We also plan to diversify our customer base to increase the variety of
applications of our Mask ROM products in the markets for telecommunications products, toys and
entertainment products, personal digital assistants and office automation equipment.
Competing technologies to Mask ROM include CD-ROMs, DVD-ROMs, magnetic disks and on-demand
software available through telephone-linked and Internet databases.
Flash
We currently focus on medium-density Flash products to take advantage of cost efficiencies. We
seek to increase the cost-effectiveness and our focus on higher density Flash products in the near
future in order to increase our market share and to improve our gross margins.
Applications.
Applications for Flash products range from a wide variety of portable, home and
industrial electronic devices. Flash is particularly suited for applications in handheld devices,
as it has the combined benefits of portability, high-density and lower power consumption. Flash
products are also used in various audio products, such as digital answering machines, mobile
telephone systems, MP3 players, networking devices, digital cameras and personal computer
motherboards.
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The two current major architectural standards for Flash products are the NOR and NAND
standards. These standards are differentiated largely by the manner in which the Flash products
write and erase data. The NOR design architecture, commonly known as Code Flash, produces faster
devices but does not support high-density products at a competitive price. NAND design
architecture, commonly known as Data Flash, can support higher density Flash products at lower
cost, but cannot be used for random access code storage purposes and thus has a higher latency
time.
We produce our proprietary PAC-AND design architecture for 0.15micron process technology, and
focus our resources on the development of products based on NBit technology and the mainstream ETOX
(EPROM tunnel oxide) design. Our research efforts currently include the development of 0.13micron
process technology for NOR Flash products based on mainstream ETOX technology, and we seek to
achieve this in 2006.
To support massive content storage as required by the handheld game or portable devices
like e-dictionary and portable multimedia players, we have successfully developed a core technology
to achieve two-bit-per-cell operation based on a novel technology licensed from Saifun
Semiconductor Ltd. ("Saifun"), known as the NROM technology. Such technology has the advantage of simple process steps and reduced cell size that result in high-yielding and low cost
products. We have established "XtraROM" as the unique trade
mark of the NROM product family
and it has been well accepted by major customers like Nintendo and Pachinko.
See "Item 5. Operating and Financial Review and Prospects — Intellectual Property". This
technology enjoys significant advantages over conventional "floating gate" devices, requiring
simpler masking steps and allowing smaller bit size and die size and production cost efficiencies.
We achieved Flash standard specifications and introduced 64Mb Code Flash products based on two bit
per cell and 0.25 micron process technology in the second half of 2004.
The following table provides an overview of our principal Flash products and the percentage of
Flash memory net sales revenue represented by these products in 2003, 2004 and 2005:
% of our net Flash memory sales
Year ended December 31,
Density
Sample applications
2003
2004
2005
256 Mb
Games
—
—
0.3
128 Mb
Games
0.3
0.5
0.7
64 Mb
Games, printers, STBs
14.9
5.3
11.1
32 Mb
Printers, PDAs, digital still cameras, ADSL products
14.2
18.7
24.1
16 Mb
STBs, communication boxes, printers, musical devices, games, web TVs, cellular phones
22.3
29.1
31.2
8 Mb
DVD Players, STBs, ISDN boxes
14.4
25.3
17.4
4 Mb
BIOS, CD R/W drives, cable modems
21.3
17.1
11.8
2 Mb
BIOS, HDDs, CD R/W drives, communication boxes
4.5
1.5
2.0
1 Mb
BIOS, HDDs, games, DVD-ROM drives
7.3
2.1
1.1
Other
BIOS, HDDs, games
0.9
0.3
0.3
Competition.
The Flash market has been characterized by long production cycles, complex
processes, competing technologies and intense overall competition. Currently, the market for Code
Flash products, in which our Flash products compete, is dominated by Spansion, Intel, Sharp and
STMicroelectronics. We believe our global market share for Code Flash products has been increasing
in recent years. However, due to market conditions, average selling prices for our Flash products
declined sharply beginning in the third quarter of 2004 and continuing into 2005. This decline
stabilized in the first quarter of 2006. We plan to focus on higher density Flash products in the
future in order to further increase our market share and to improve our gross margins.
EPROM
Applications.
Applications using EPROM include disk drives, video games, fax machines, modems,
cellular phones, pagers and notebook computers, among others. We believe our EPROM devices are
among the least expensive EPROM memory solutions currently available. However, with the continued
decline in prices for Flash products, the price advantage of our EPROM products has eroded.
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We produce a range of EPROM products with densities ranging from 256Kb to 8Mb. The majority of
our EPROM products have 2Mb density and are used in VCD players and cellular phones.
Competition.
While EPROMs remain viable mainly for applications requiring low-cost solutions,
Flash products have begun to replace EPROM in certain applications as the prices of Flash products
have declined. In addition, over the last few years, as the long-term outlook for the EPROM market
has weakened, industry production has declined. For example, Advanced Micro Devices, Intel,
National Semiconductor Corporation and Texas Instruments Incorporated have all reduced EPROM
production during the last few years. Our revenues from EPROM have been declining for more than the
past five years.
Strategic Manufacturing Services
We focus on providing value-added foundry services, which center on providing
application-specific solutions to our strategic customers. We use our strategic manufacturing
services to develop customer relationships with these strategic customers.
Competition.
We do not plan to compete with foundries with respect to these services, and
provide strategic manufacturing services to selected strategic customers primarily to complement
our other services.
Integrated Solution Group
The principal products of our integrated solution group are SLC and multimedia products. In
2001, we extended our expertise from the non-volatile memory market into the logic area by
combining SLC products with embedded memory to offer comprehensive system solutions to our
customers. Unlike with memory products, our emphasis on SLC and multimedia products is centered
more on product design than on fabrication. One of the responsibilities of our integrated solution
group is to coordinate and integrate our development efforts of our integrated solution group with
those of our subsidiaries and strategic investment entities by which enable use to focus on
identified platforms such as cellular phones. Some of our solutions have therefore been primarily
or jointly developed by our subsidiaries or strategic investments entities. For example, Magic
Pixel, our previous subsidiary, in which we still hold a 44.9% interest, developed some of our
multimedia-related solutions, such as digital still camera controllers, LCD controllers and camera
phone controllers, and Biomorphic Microsystems Corporation, one of our subsidiaries, developed some
of the integrated circuit components in our CMOS sensor camera module used in cellular phones.
We intend to spin-off our Integrated Solution Group, initially into four wholly-owned
subsidiaries, by the end of the year, focusing on Mobile Audio (which will include speech
processors, sound generator chips and audio processors for cellular phones and other audio
applications), Base Band (which will offer GSM and GPRS solutions for cellular phone-related
applications), Mobile Payment (which includes SIM Card IC, microcontroller and portable LCD
solutions) and Design Service (which will create and operate front and back-end design service
environments for IC product design customers) , respectively.
In the past, we focused on developing products based on our audio, video, communications and
microcontrollers technology platforms. Subsequent to our reorganization in 2003, we identified two
major application platforms with respect to which we focus development of our solutions:
•
cellular phones-related solutions; and
•
portable LCDs-related solutions.
Cellular Phone-related Solutions
Our cellular phone-related solutions include the following:
Sound Generator Chip.
We provide MIDI solutions for cellular handset customers, with
multi-voice polyphonic sound generators based on high-quality wavetable sound synthesizers that
provide enhanced ring-tone sound clarity. Our products include 32-voice and 64-voice polyphonic
sound generator chips for use in cellular phones. The MP3 decoders we began to ship in 2005 include
our 64-voice polyphonic sound generator chips. Under our new structure, this product will be
offered through our Mobile Audio subsidiary.
Digital Still Camera Controller.
In 2005, we provided to our customers a digital still camera
controller that supports up to 16 million pixels, for use in digital cameras, including cellular
phone digital cameras. In 2006, we stopped offering this product and the product is now offered
through Magic Pixel, a company in which we hold a 44.9% interest.
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CMOS Sensor Camera Module.
We provide to our customers highly integrated CMOS image sensors
and companion processor ICs for use in portable information appliances (such as cellular phones and
PDAs) and in digital cameras. We also offer compact modular solutions to our customers, including
support in hardware design and algorithm development for specific applications. In the second half
of 2005, we began to produce the entire 1.3 megapixel camera module for use in cellular phones. We
transferred the sale of this product to our subsidiary, Biomorphic Microsystems Corporation, in
2006.
SIM Card IC.
We ship SIM card ICs to SIM card manufacturers. Under our new structure, this
product will be offered through our Mobile Payment subsidiary.
Portable LCD-related Solutions
Our portable LCD-related solutions focus on small to medium size (up to around 10 inch)
displays. We produce LCD panel controllers, scalers or graphic controllers, and microcontrollers.
Under our new structure, these products will be offered through our Mobile Payment subsidiary.
Other Solutions
Other solutions that we had provided before the formation of our integrated solution group,
and continue to provide, include the following:
•
Digital Voice Recorder. Our digital voice recorder solution enables the integration of
digital voice recording functions in various devices such as electronic dictionaries,
language learning devices, electronic books and PDAs. Under our new structure, this product
will be offered through our Mobile Audio subsidiary.
•
Digital Answering Machine IC. Our solutions include integrated circuits for digital
answering machines. The most important technology in these integrated circuits is digital
signal processor technology, which is also necessary for applications in voice messaging,
cordless telephones and cellular telephones. Under our new structure, this product will be
offered through our Mobile Audio subsidiary.
•
Microcontrollers. In addition to microcontrollers for flat panel displays, our
microcontroller products also include microcontrollers for electronic dictionaries and PDAs,
smart cards and small displays. Under our new structure, this product will be offered
through our Mobile Payment subsidiary.
•
Others. Clock generators, joystick controllers and wireless game controllers for
Nintendo.
Customers
General
We emphasize customer relations as a key to our growth and profitability. As a key aspect of
our customer development strategy, we strive to have major global computer and electronics
companies accept our products for use in their devices, and seek to do this in part by
participating in the product design process of our existing and prospective customers at an early
stage to ensure that our products meet their present and future requirements. We also strive to
supply products to original equipment manufacturers and subcontractors, who in turn supply these
products to computer, communications and consumer electronics companies. We also plan to continue
to leverage our Mask ROM business with our existing and potential customers, thereby expanding our
ability to cross-sell and diversify product mix and customer base.
Top Customers
The following table sets forth top customers (by sales) of our products by percentage of our
net sales revenue in 2003, 2004 and 2005 and the type of product purchased:
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% of net sales revenue
Year ended December 31
Customers
2003
2004
2005
Products purchased
(%)
NINTENDO
24.0
22.4
29.2
Mask ROM, Flash, SLC
LG
1.2
2.4
5.0
Mask ROM, Flash
HP
9.8
5.3
4.1
Mask ROM, Flash
HIMAX
0.0
0.2
3.7
SMS
SONY
4.0
1.0
2.2
Mask ROM, Flash
DAIICHI
1.4
1.7
2.0
Mask ROM, Flash
LF MACAO
0.8
0.9
1.9
Mask ROM, SLC
HONFFUJIN
0.1
0.7
1.8
Flash
NANAO
0.8
1.2
1.7
Flash
PHILIPS
1.6
1.6
1.6
SLC
(1)
Represents our sales to Megachips, which on-sells our products to Nintendo
Nintendo
The percentage of our total net sales revenue derived from Megachips, which on-sells our
products to Nintendo, was 24.0% in 2003, 22.4% in 2004 and 29.2%in 2005. Nintendo is one of the
world's largest users of Mask ROMs, which are used in Nintendo hand-held gaming devices, including
Game Boy Advance and Nintendo Dual Screen. We have historically, since the beginning of our
relationship, sold our products to Nintendo through Megachips, although we work directly with
Nintendo with regard to technical matters. We believe that our long-term relationship with Nintendo
is based on trust, as evidenced by the fact that Nintendo supplies sensitive game codes to us as
part of the design and production process. Our relationship is also predicated on our ability to
supply quality products in a timely manner at competitive prices.
We primarily produce Mask ROMs used in game cartridges for Nintendo's handheld gaming devices,
including Game Boy Advance, which was released in the spring of 2001, Game Boy Advance Super, which
was released in 2003, and Nintendo Dual Screen, which was released in December 2004. We expect that
demand for Mask ROMs for handheld gaming devices will continue to increase. See "Item 3. Key
Information — D. Risk Factors — Risks Relating to Our Company — Any delay or reduction in orders by
Nintendo or the loss of Nintendo as a customer could result in the loss of a significant portion of
our revenue".
In the third quarter of 2001, we entered into a capital lease agreement with Nintendo for the
use of manufacturing equipment with a cost of NT$1,751 million payable over a thirty-six month
period in monthly installments from July 31, 2002 to
June 30, 2005. We have now acquired title to the manufacturing
equipment.
Hewlett Packard
We are the main supplier of Mask ROMs to Hewlett-Packard, world's largest manufacturer of
laser and inkjet printers, which require Mask ROMs to store fonts in its laser and inkjet printers.
We have had a relationship with Hewlett-Packard for over 10 years. We also supply Flash to
Hewlett-Packard. The percentage of our total net sales revenue derived from Hewlett Packard was
9.8% in 2003, 5.3% in 2004 and 4.1% in 2005.
LG Electronics Inc.
We have been increasing our focus on the market in South Korea and developing our business
relationship with LG in recent years. We supply Mask ROM and Flash products to LG. The percentage
of our total net sales revenue from LG was 1.2% in 2003, 2.4% in 2004 and 5.0% in 2005.
Sales and Marketing
We distribute our products on a global basis. The following table sets forth percentages of
net sales revenue based on the geographic regions of our customers:
Year ended December 31,
Area
2003
2004
2005
(%)
Japan
41.0
35.8
40.8
Taiwan
32.1
33.5
29.8
Hong Kong, the P.R.C., Singapore and South Korea
19.7
21.9
21.6
United States
4.6
4.2
3.3
Europe and other
2.6
4.6
4.5
100.0
100.0
100.0
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We have relationships with over 199 distributors and manufacturers' representatives to market
our products worldwide. The distributors purchase our products at a discount while the
manufacturers' representatives generally receive a commission of 5% of the goods sold. We maintain
sales offices in Taipei, San Jose, Chicago, Brussels, Tokyo, Osaka, Singapore and Hong Kong. These
offices conduct sales efforts and monitor the effectiveness of distributors and manufacturers'
representatives.
We originate sales for our products within Taiwan either directly from our Taipei sales office
or through non-exclusive distributorships. Sales to Asia excluding Taiwan and Japan are also
conducted through non-exclusive distributorships. Sales to Nintendo are made indirectly through
Megachips. Megachips receives a discount on all products purchased from us.
We sell our products in Japan (with the exception of sales to Nintendo, which is conducted
solely through Megachips) through third-party distributors with marketing and technical support
from our sales offices in Tokyo and Osaka. These distributors usually maintain small inventories
and they distribute our products in Japan on a non-exclusive basis. Our customers in Japan include
major Japanese semiconductor and consumer electronics product producers.
We sell and distribute our products in North America and Europe through our wholly-owned
subsidiaries, Macronix America and Macronix Europe N.V., which sell the products through
manufacturers' representatives and distributors. Representatives generally do not maintain a
product inventory; instead, their customers place orders directly with us. Distributors generally
handle smaller volume orders and they usually maintain small inventories but also carry
competitors' products. Our agreements with our representatives and domestic and international
distributors are generally terminable by either party on short notice.
Manufacturing and Quality Control
Manufacturing
We use complementary metal oxide silicon process technology to manufacture our semiconductor
products. This manufacturing technology involves a sequence of numerous complex processes in which
200 to 500 different steps are taken in the manufacture of a single chip. These steps include a
series of cleaning, patterning, etching, deposition and implantation processes. At the end of these
processes, the chips are tested for functionality and assembled. Depending on the product line, we
either sub-contract this "back-end" work to companies in Taiwan and Hong Kong, including Advanced
Semiconductor Engineering Inc., Siliconware Precision Industries Co., Ltd. and other R.O.C.
assembly subcontractors, or perform the work ourselves. In 2005, we sub-contracted over 29.2% of
the testing and assembly of our SLC products, while testing most of our Mask ROM products
internally.
The following table sets forth our wafer fabrication capacity, in terms of wafers per month,
at Fab I and Fab II as of December 31, 2003, 2004 and 2005, and our expected capacity as of
December 31, 2006, which is subject to adjustment depending on market conditions and product mix:
2003
2004
2005
2006
Fab I (six-inch wafers)
35,000
34,000
32,000
30,000
Fab II (eight-inch wafers)
37,000
44,000
44,000
49,000
In order to maintain utilization rate at Fab I, which uses 0.32 micron and above process
technology, and minimize the amount of new investment required, we have allocated to Fab I
manufacturing of products that do not require leading edge technologies, such as low-density Flash
and ROM products and certain of our SLC and SMS products, including high voltage, MEMS and embedded
ROM products.
We began to manufacture Mask ROMs at Fab II at line widths of 0.18 micron from the second half
of 2000 and successfully migrated to 0.15 micron process technology for both Flash and Mask ROM in
the fourth quarter of 2002. We also converted a significant part of our Mask ROM manufacturing
capacity in Fab II to Flash manufacturing capacity in 2005.
Our sales and capacity utilization tend to follow seasonal trends, particular with respect to
Mask ROM, and typically peak around the end of the third quarter and the beginning of the fourth
quarter of each year. In order to maximize our capacity utilization rate during the low season and
to cope with demands during the high season, we typically use our excess capacity during the low
season to build up an
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inventory of partially manufactured Mask ROMs and store them in Mask ROM
banks. This then allows us to complete the manufacture of Mask ROMs, incorporating our customers'
software codes, in a shorter time during the high season. See "Item 5. Operating and Financial
Review and Prospects — Overview — General" for quarterly capacity utilization rates for the past
three years and "Item 5. Operating and Financial Review and Prospects — Capital Resources and
Capital Expenditures" for our capital expenditure plans.
In April 2006, we sold Fab III, along with a clean room and certain adjunctive facilities and
equipment, to Powerchip Semiconductor Corporation, as we did not have immediate plans to utilize
Fab III. As part of the sale, Powerchip agreed to supply sufficient 12-inch wafer production
capacity. We purchase these wafers for our advanced process technology development.
Tower Semiconductor
In August 2000, we entered into a five-year manufacturing and technology cooperation agreement
with Tower Semiconductor whereby Tower Semiconductor will provide silicon wafer manufacturing
processing services to us that can employ its microFLASH(r) technology. This technology is based on
the proprietary N-ROM technology licensed from Saifun. Under the agreement with Tower
Semiconductor, Tower Semiconductor will be obligated to manufacture for us up to an agreed number
of six-inch wafers per month upon receiving our orders. To date, due to adverse market conditions,
we have placed orders for less wafers than we could have required Tower Semiconductor to
manufacture for us, and have used Tower's manufacturing services to manufacture only our EPROM and
SLC products.
In December 2000, we entered into a foundry agreement with Tower Semiconductor. Until the
agreement expires in 2011 or if we cease to own a minimum number of shares in Tower Semiconductor,
Tower Semiconductor is obligated to make available to us, and in the event we decide to provide
foundry services using NBit technology, we are obligated to purchase, certain minimum numbers of
wafers based on percentages of the manufacturing capacity of a specified production line in Tower
Semiconductor's manufacturing facility, up to certain limits. Tower Semiconductor's Fab II
fabrication facility began production in December 2003. So long as we own a minimum number of
shares in Tower Semiconductor, Tower Semiconductor is also obliged to grant us favorable pricing
treatment for up to a designated amount of wafers per month. We continue to own at least the
specified minimum number of shares in Tower Semiconductor. See "Item 7. Major Shareholders and
Related Party Transactions — B. Related Party Transactions".
Quality Control
All of our products undergo final testing before shipment. In most cases, externally packaged
chips are returned to us for final testing before shipment. We occasionally sub-contract final
testing work, which allows us to use the sub-contractors' drop shipment services.
Fab I and Fab II operate 360 days a year on a two shift, twelve hours per shift basis, which
minimizes downtime between shift changes as compared to operation on a three shift, eight hours per
shift basis. Operators at Fab I and Fab II work on a two-day-on, two-day-off rotation. We believe
that these production arrangements, together with our operator discipline, quality of maintenance
and level of equipment utilization, have resulted in a high level of productivity.
In order to minimize the introduction of particles into the manufacturing process, Fab I
operates a Class 1 clean room, with less than one particle of 0.1 micron or greater per cubic foot,
and Fab II uses the SMIF Box system, an advanced system whereby we isolate and keep clean the
localized manufacturing environment surrounding the integrated circuits, rather than the entire
plant. Although the manufacturer guarantees our SMIF Box system to have less than one particle of
0.1 micron or greater per cubic foot, we believe that our system is cleaner than the guaranteed
amount based on our manufacturing experience. Both Fab I and Fab II use advanced systems to filter
our chemical, gas and water supplies.
As part of our quality assurance program, we conduct three tests during the production
process:
•
the wafer acceptance test, which detects faults from the manufacturing process;
•
the wafer sort test, which probes defaults in circuitry; and
•
the final test, which reviews the operation of each integrated circuit.
We also offer "burn-in" testing of our products when necessary. Burn-in is the process of
electrically stressing a device, usually at high temperature and voltage, for a period of time long
enough to cause the failure of marginal devices. We have experienced customer returns of less than
10 pieces per one million pieces shipped, which is in line with industry standards.
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We operate a matrix system of quality assurance under which we maintain a single, company-wide
quality engineering center. At the same time, quality control personnel in each strategic business
unit monitor design and production processes to ensure high quality products, and are involved from
initial design to production.
We received the International Standards Organization ("ISO") 9001 certification in January
1994 from the Lloyd's Register Quality Assurance for our quality management system. In August 1997,
we received the ISO 14001 certification for our environmental management system. In September 2001,
we received the Quality System 9000 certification from the Lloyd's Register Quality Assurance for
our quality system. In March 2002, we received the Occupation Health and Safety Assessment Series
("OHSAS") 18001
certification for our occupational health and safety assessment. In January 2004, we received
the ISO/TS 16949 certification from the Lloyd's Register Quality Assurance for our quality system.
The certification process involves subjecting our production processes and the quality management
systems at our factories to review and surveillance for various periods. The ISO certifications
also provide independent verification to our customers as to the quality control in our
manufacturing processes. We also received the SONY Green Partner certification in June 2004 for
Environmental Quality Management.
Raw Materials
Our primary raw materials are silicon wafers, certain chemicals and gases. To date, all of
these raw materials have generally been available to us from a limited number of sources, at
competitive prices, in adequate quantities and on reasonable delivery terms. We typically order our
target metals, specialty gases and chemicals on a just-in-time basis to minimize the cost of
inventory.
The prices of most of the raw materials used by us have been relatively stable during the
period of our operation. Raw material costs as a percentage of our net sales revenue was 5.2% in
2003, 4.5% in 2004 and 5.3% in 2005. We currently believe that if we were to lose access to one or
more of our suppliers, we would be able to obtain substitute quantities from other suppliers
without any material interruption of our operations and without any material adverse effect on the
price we would pay for the relevant supplies.
Silicon Wafers
Our future growth will depend in large part on securing a continuous supply of both six-inch
and eight-inch wafers. Wafer capacity in the semiconductor industry has from time to time been, and
in the future may be, insufficient. However, in anticipation of possible shortages, we maintain a
one and one-half month inventory of six-inch wafers and a two-month inventory of eight-inch wafers.
Between December 31, 2003 and December 31, 2004, prices for six-inch wafers and for eight-inch
wafers both decreased on average by approximately 7.5%. Between December 31, 2004 and December 31,
2005, prices for six-inch wafers and for eight-inch wafers both decreased on average by
approximately 8.3%.
We obtain our wafer supplies principally from four suppliers, namely Toshiba Ceramics Co.,
Ltd., Sumitomo Corporation, Tokyo office, and Siltronic Japan Corporation, which are overseas
suppliers, and Taisil Electronic Materials Corp., an R.O.C. company. We settle all our wafer
purchases in U.S. dollars.
Chemicals
We obtain our supplies of industrial chemicals principally from a Taiwan joint venture entity
formed by Merck Group of Germany and Kanto Kagaku (K.K.) of Japan. We obtain our supplies of bulk
gases, such as nitrogen, oxygen and hydrogen, principally from our investee, United Industry Gas
Co., Ltd., an affiliate of Lian Hwa Gas Co., Ltd., and our specialty gases from several overseas
suppliers. Other raw materials used in the production process include target metals and photo
resist. These materials are also principally obtained from several overseas suppliers.
Water
Water is critical in the production of semiconductors. We obtain our water supplies from a
state-owned water company. The R.O.C. government also operates a purified water supply system by
which we clean our integrated circuits during the fabrication process. Fab I and Fab II both have
advanced water recycling systems that allow us to reclaim approximately 73% of the water used in
our fabrication process. Although we have experienced several water shortages in the past, we are
not currently experiencing any water shortages. In the event of any short-term water shortage, we
have our own 5,000-ton water reserve that is capable of supplying two and a half days of water for
Fab I and 21,000-ton water reserve that is capable of supplying seven days of water for Fab
II.
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Since the beginning of 2002, Taiwan has experienced a serious water shortage, particularly in
the northern Taiwan region. The R.O.C. government has taken a series of measures to alleviate the
impact of the water shortage, including restricting agricultural water usage. However, if the water
shortage occurs again, the government may further restrict industrial water usage and our
production may be materially adversely affected. See "Item 3. Key Information — D. Risk Factors —
Risks Relating to Our Company — We are vulnerable to natural disasters and other events beyond our
control, which could severely disrupt the normal operation of our business and adversely affect our
earnings". To alleviate long-term water shortages, the government has constructed a major pipeline
connecting the Science Park to a reservoir in Miao-li County. The government has also indicated
that it intends to construct a dam in Hsinchu in 2005 or 2006 to meet the water supply requirements
of the Hsinchu Science Park. (The status remained the same).
Electricity
Electricity is our main source of energy and we receive all of our electricity supplies from
the Taiwan Power Company, the national power utility. As a resident of the Science Park, we have
priority in obtaining our supply of electricity from the Taiwan Power Company over businesses
outside the Science Park. Although we experience power supply reductions scheduled by the Taiwan
Power Company from time to time during the summer season, we receive advance notice of the timing
of these reductions and can rely on our own internal emergency generators during these periods.
In order to obtain and maintain reliable electric power supplies, we are connected to the
national grid through a 69 kilovolt and a 161 kilovolt double loop electric supply system located
within the Science Park. We maintain several back-up electricity generators to ensure continuous
Fab I operation in the event of interruptions to the external power supply. We also maintain
back-up power supply systems at Fab II capable of supplying close to 100% of the power normally
used to run Fab II. Fab II is one of the first semiconductor facilities in Taiwan to use a dynamic
uninterrupted power supply system utilizing emergency power back-up generators that operate with no
time delay.
Backlog and Order Process
Our business is characterized by short-term order and shipment schedules. The majority of our
sales are made primarily by way of standard purchase orders instead of long-term contracts. We
foster customer relationships by focusing on timely delivery of product, competitive pricing,
product performance and reliability, continuing customer service (including technical support),
responsiveness to customer requirements and advanced technology.
We produce a portion of our products in advance of the receipt of a formal purchase order
based on anticipated purchase schedules discussed between us and our significant customers. In
addition, since the yield of dies in the production process varies, we must manufacture a slightly
greater number of dies, usually up to 2% higher than the actual number of dies our customers order.
To the extent we improve our yield during the manufacturing process, we may produce additional dies
beyond the number ordered by customers. These additional dies are kept in inventory to fill any
additional purchase orders for the product involved.
Environmental Matters
Our manufacturing operations use a variety of chemicals and gases, and our use, storage,
discharge and disposal of these chemicals and gases and other emissions and waste are regulated by
R.O.C. environmental authorities. Over the course of our operating history, we have consistently
invested in equipment and processes designed to comply fully with our environmental
responsibilities.
We spent an aggregate of NT$267 million in installing pollution prevention equipment,
operation, waste treatment and pollutant composition in 2003, NT$110 million in 2004 and NT$139
million (US$4.2 million) in 2005. We dispatch some of our industrial waste solvents for disposal
by outside waste treatment companies approved by the R.O.C. Environmental Protection
Administration. Certain common waste gases are processed and disposed of by the Science Park
environmental cleaning team. In addition, we have also established environmental protection
policies and have put in place environmental management teams trained by the R.O.C. Environmental
Protection Administration. Fab II was designed as an environmentally friendly facility and includes
a modern waste water treatment and recycling system. We received ISO 14001 certification for our
environment management system in August 1997.
We believe that our current and proposed operations comply in all material respects with all
presently applicable environmental laws and regulations.
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Insurance
Our insurance coverage as of December 31, 2005 includes:
•
property damage all-risk insurance on our fixed assets, equipment and inventory;
•
business interruption insurance;
•
third-party liability insurance to cover claims in respect of personal injury or property damage arising from accidents;
•
directors' and officers' liability insurance;
•
fidelity bond insurance on all employees, providing coverage against losses due to employee fraud or dishonesty;
•
marine cargo insurance;
•
employee group insurance;
•
employer liability insurance; and
•
construction all-risk coverage.
We believe our insurance is adequate and in conformity with industry standards prevailing in
Taiwan.
Strategic Investments
We have made and expect to continue to make a series of equity joint venture and strategic
investments in companies located in Taiwan and elsewhere. We believe that our participation in
these companies allows us to enhance and complement our product offerings, expand our capacity,
secure access to raw materials and services and keep up-to-date with technological changes in the
semiconductor industry. As of December 31, 2005, these participations included:
•
Tower Semiconductor, Ltd. ("Tower Semiconductor") — A 13.1% indirect interest in Tower
Semiconductor. Tower Semiconductor is an independent foundry manufacturer of semiconductor
integrated circuits on silicon wafers. As at December 31, 2005, Tower Semiconductor had a
capital of US$538.8 million, net assets of US$30.1 million and accumulated deficits of
US$559.8 million. For the year ended December 31, 2005, Tower Semiconductor recorded a net
loss of US$203.1 million. As of December 31, 2005, we held the shares of Tower Semiconductor
at a value of NT$541 million (US$16.5 million). The shares of Tower Semiconductor held
by us are fully paid-up. For the year ended December 31, 2005, we did not receive any
dividend on the shares of Tower Semiconductor. For the year ended December 31, 2005 there
were no inter-company loans between us and Tower Semiconductor.
•
ProComm Inc. — A 38.4% direct equity interest in ProComm Inc. ProComm Inc. designs and
sells integrated chipsets and application-specific integrated circuits for applications used
in the wireless communications industry. We acquired our equity interest in Prominent
Communications Inc. in late 1999 as part of an arrangement to jointly develop integrated
circuits for 900MHz cordless telephones. Pursuant to a share swap transaction agreed among
Prominent Communications Inc., its shareholders and ProComm Inc. on September 1, 2004,
Procomm Inc. issued its own stock to shareholders of Prominent Communications Inc. in
exchange for shares of Prominent Communications Inc. Accordingly, we received. 7,300,000
shares of Prominent Communications Inc. in exchange for 10,132,513 shares of ProComm Inc.
•
Magic Pixel Inc. — A 44.9% direct and indirect equity interest in Magic Pixel Inc., which
focuses on IC design of video and related products. Our shareholding was diluted in 2003
from 100% as a result of a private placement of shares by Magic Pixel Inc. to its employees.
C. Organizational Structure
The following table sets forth the identity of our subsidiaries and their jurisdictions of
incorporation as of December 31, 2005.
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Direct or
Total Paid-in
Indirect
Jurisdiction of
Capital of such
Equity
Name of subsidiary
Main business
incorporation
Entity
Interest
Hui Ying Investment Ltd.
Investment
Taiwan, R.O.C.
NT$500,000,000
100
%
Run Hong Investment Ltd.
Investment
Taiwan, R.O.C.
NT$500,000,000
100
%
Kang Bao Investment Ltd.
Investment
Taiwan, R.O.C.
NT$500,000,000
100
%
Joyteck Co., Ltd.
Systems Solutions
Taiwan, R.O.C.
NT$96,775,000
87.98
%
Macronix America, Inc.
Sales and marketing
California, U.S.A.
EUR62,000
100
%
Macronix Europe N.V.
Sales and marketing
Belgium
US$63,984
100
%
Macronix (B.V.I.) Co., Ltd.
Investment
British Virgin Islands
US$174,147,826
100
%
New Trend Technology Inc.
IC design
California, U.S.A.
US$23,850,000
100
%
Wedgewood International Ltd.
Investment
British Virgin Islands
—
—
Macronix Pte Ltd.
Sales and marketing
Singapore
US$100,000
100
%
MaxNova Inc.
IC design
Taiwan, R.O.C.
NT$85,500,000
85.5
%
Macronix Japan (Cayman Islands)
Investment
Cayman Islands
US$500,000
100
%
Macronix (Hong Kong) Co., Ltd.
Sales and marketing
Hong Kong
US$2,500,000
100
%
Macronix Microelectronics (Suzhou)
Co., Ltd
System Solution
Suzhou China
US$2,000,000
100
%
Biomorphic Microsystems Corporation
IC design
Taiwan, R.O.C
NT$542,921,739
54.77
%
Macronix (BVI) Co., Ltd. ("Macronix BVI")
Macronix BVI is an investment holding company. As at December 31, 2005, we beneficially owned
100% of the issued share capital of Macronix BVI. As at December 31, 2005, Macronix BVI had a
capital of US$174.1 million, net assets of US$(7.1) million and accumulated deficits of US$185.5
million. For the year ended December 31, 2005, Macronix BVI recorded a net loss of US$71.4 million.
As at December 31, 2005, we held the shares of Macronix BVI at a value of US$(7.1) million.
The shares of Macronix BVI held by us are fully paid-up. For the year ended December 31, 2005, we
did not receive any dividend on the shares of Macronix BVI. For the year ended December 31, 2005
there were no inter-company loans between us and Macronix BVI.
Wedgewood International Ltd. ("Wedgewood")
Macronix (B.V.I.) Co., Ltd (the "Surviving Company") merged with Wedgewood International
Limited (the "Merging Company") on June 15, 2005.
Biomorphic Microsystems Corporation ("BMC")
BMC develops and markets intelligent imaging sensors for digital cameras, automobiles and
industrial applications. Pursuant to a share swap transaction agreed among Biomorphic VLSI, Inc.,
its shareholders, and BMC on May 14, 2004, BMC issued its own stock to shareholders of Biomorphic
VLSI, Inc. in exchange of Biomorphic VLSI, Inc.'s stock. Accordingly, we received 14,900,531 shares
of BMC in exchange for 18,160,252 shares of Biomorphic VLSI, Inc. We injected a further NT$65
million in capital into BMC through Rui Hon Investment Ltd. and NT$43 million in capital into BMC
through Hui Ying Investment Ltd on June 25, 2004. In addition,
we disposed of 6,420,000 shares of
BMC to other venture capital investors in the second half of 2004.
D. Property, Plant and Equipment
Our headquarters and Fabs I and II are located in Hsinchu, Taiwan. Currently, all of our
internal wafer fabrication is carried out at Fabs I and II. Our location in the Science Park in
Hsinchu provides certain advantages, including preferential tax treatment, streamlined customs
administration and government-subsidized development grants.
Fab I commenced commercial operations in 1992. Fab I occupies approximately 172,000 square
feet on land that is leased from the Science Park Administration. The lease expires in March 2010
but is renewable at our option. The facility has a production area
of approximately 67,888 square
feet. Fab I's test operations are located in a building adjacent to Fab I, which sits on a lot of
approximately 80,000 square feet.
Fab II commenced commercial operations in October 1997. Fab II occupies approximately 883,000
square feet on land that is leased from the Science Park Administration. The lease expires in June
2015 but is renewable at our option. The facility has a production area
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of approximately 84,000 square feet and a production support area of approximately 32,000
square feet. Space has also been reserved for testing facilities in Fab II, although Fab II
currently shares Fab I's test operations plant for all of Fab II's eight-inch wafers. Fab II has
modernized production equipment, incorporates computer automated production systems and will be
able to support 0.13 micron process technology without the need for major upgrades. Fab II is
equipped with a total energy management system and an advanced waste treatment system. We own all
the facilities comprising Fab I and Fab II.
The Science Park Administration has granted us a parcel of land adjacent to our Fab II under a
lease that is renewable annually for a maximum of 20 years. This land is to be used to build
research and development laboratories.
Item 5.
Operating and Financial Review and Prospects
The following discussion and analysis should be read in conjunction with our audited
consolidated financial statements and the related notes included in this annual report. These
financial statements have been prepared in accordance with R.O.C. GAAP, which differ in certain
material respects from U.S. GAAP. See note 28 to our consolidated financial statements for the
years ended December 31, 2003, 2004 and 2005 included in this annual report and "A. Operating
Results – U.S. GAAP Reconciliation".
Overview
General
The semiconductor industry has been cyclical, with periods of growth being followed by downturns
due to global economic growth trends, inventory adjustments as well as periodic mismatches between
semiconductor demand and manufacturing capacity. From mid-1999 through mid-2000, we experienced
significant growth in net sales revenue and operating income. The severe and protracted
semiconductor industry downturn began in the second half of 2000 and continued throughout 2001,
2002 and the first half of 2003, with continued erosion of the average selling prices of our
products. In 2002, net sales revenues declined by 24.2% compared to 2001, and our cost of goods
sold, a substantial portion of which consists of depreciation and amortization, exceeded our net
sales revenue, resulting in a realized gross loss of NT$615 million and an operating loss of
NT$6,827 million. Due primarily to price erosion and related inventory losses, we recorded a net
loss of NT$11,357 million in 2002.
The semiconductor industry began to show signs of recovery at the end of the second quarter of
2003. In particular, we recorded a reversal of inventory and spare parts loss provision of NT$1,185
million in 2003. In 2003, net sales revenue increased by 7.4% compared to the 2002, but our cost of
goods sold continued to exceed our net sales revenue, resulting in a realized gross loss of
NT$2,942 million and an operating loss of NT$7,684 million. In 2003, we recorded a net loss of
NT$8,198 million.
Although conditions in the semiconductor industry improved between the third quarter of 2003
and the first half of 2004, the industry experienced another downturn that began in the second half
of 2004 and continued throughout 2005. Industry conditions have improved in 2006. We recorded a
reversal of inventory and spare parts loss provision of NT$919 million in 2004
and our net sales revenue increased by 32.0% in 2004 compared to the 2003, reflecting the recovery
that continued during the first half of 2004. For 2005, we recorded a gross profit of NT$242
million (US$7.4 million), an operating loss of NT$4,875 million (US$148.6 million) and net loss of
NT$7,027 million (US$214.2 million). However, under U.S. GAAP, we recorded net losses of
NT$4,636million (US$141.3 million) in 2005.
Our capacity utilization rate is calculated using our actual production in the respective
period divided by total production capacity. Our quarterly capacity utilization rates were,
respectively, approximately 49%, 64%, 89% and 89% in 2003, approximately 91%, 100%, 103% and 88% in
2004 and approximately 53%, 81%, 107% and 106% in 2005. Our capacity utilization for the first
quarter of 2006 was 89%. We cannot assure you that our capacity utilization rates will not decline
in the future.
Nintendo continued to be our single largest customer in 2003, 2004 and 2005. We primarily
produce Mask ROMs used in game cartridges for Nintendo's handheld gaming devices, including Game
Boy Advance, which was released in the spring of 2001, Game Boy Advance Super, which was released
in 2003, and Nintendo Dual Screen, which was released in December 2004. In addition, we currently
supply other accessories for the Game Cube video game platform. Our sales of Mask ROMs to Nintendo
in 2003, 2004 and 2005 for use in Game Boy Advance software cartridges accounted for a large
portion of our total sales of Mask ROMs. See "Item 3. Key Information — D. Risk Factors — Risks
Relating to Our Company — Any delay or reduction in orders by Nintendo or the loss of Nintendo as a
customer could result in the loss of a significant portion of our revenue".
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We continue to make adjustments in our product mix and in our customer profile on an on-going
basis. See "Item 4. Information on the Company — B. Business Overview — Our Strategy".
For certain material developments of our company with respect to our financial condition and
results of operations since December 31, 2005, please refer to the discussion set forth in "Item 4.
Information on the Company — B. History and Development of the Company — Recent Developments"
included elsewhere in this annual report.
Sales Revenue
We derive our sales revenue primarily from the provision and sale of five categories of
semiconductor products and services: Mask ROM, Flash, SMS, SLC and other products. We earn
additional revenues primarily from royalty income, masking charges and profit sharing arrangements.
The majority of our products are used in consumer electronics applications. We have
experienced in the past, and we expect to continue to experience, seasonal fluctuations in the
demand for our products. In particular, we generally earn higher sales revenues during the third
and fourth quarters of the year.
Product Pricing Trends
The global semiconductor industry is highly competitive, and average selling prices typically
decrease over the life of a semiconductor product. Average selling prices for our ROM and Flash
memory products have generally declined on an annual basis since 1995, with the exception of 2000
and Mask ROM products in 2003, as discussed below. We seek to offset this general decline in
average selling prices by constantly improving the density, sophistication and performance of our
products and by customizing our products to suit the needs of our strategic partners and other
customers. In addition, we rely on our leadership, market share and technology in the Mask ROM
market to minimize the impact of a general decline in average selling prices. When this approach is
successful, particularly in the Mask ROM market, we may be able to minimize declines in the average
selling prices of our products and maintain our gross profit margins despite general industry-wide
declines.
In 2001, we experienced a decrease in the average selling prices for almost all of our memory
products, particularly Flash products, as compared to 2000. These price declines continued
throughout 2001 and 2002. In 2003, prices for Flash products continued to decline while prices for
Mask ROM products increased slightly due to more shipments of higher density Mask ROM products. For
the full year 2004, average selling prices for Mask ROM products decreased slightly while prices
for Flash products increased, although due to market conditions, average selling prices for our
Flash products declined sharply beginning in the third quarter of 2004 and continuing into 2005.
The following table sets forth the average selling prices per die for our Mask ROM and Flash
products for the periods indicated:
Year ended December 31
2003
2004
2005
(NT$ per die)
Mask ROM
56.9
54.2
50.3
Flash
40.8
45.8
25.7
The following table sets forth the average megabit (Mb) per die for our Mask ROM and Flash
memory products for the periods indicated:
Year ended December 31
2003
2004
2005
(Mb per die)
Mask ROM (1)
61.5
75.3
114.3
Flash
11.4
11.7
14.4
(1)
The significant increase in megabit per die for Mask ROM products from 2003 to 2005 resulted
from the increase in demand for high-density Mask ROM products in 2004 and 2005.
36
Table of Contents
Cost of Goods Sold
Our cost of goods sold consists principally of:
•
overhead, including depreciation of property, plant and equipment and amortization of intangible assets;
•
costs of raw materials, including wafers, chemicals and other inputs, for semiconductor fabrication;
•
costs of outsourcing production to third parties;
•
direct labor costs; and
•
service charges paid for testing and packaging services.
As a result of the price trend discussed above, beginning in 2002 our cost of goods sold, a
substantial portion of which consists of depreciation and amortization, was higher than our net
sales revenue. For this reason, in 2003, our cost of goods sold remained higher than our net sales
revenue, which resulted in a realized a gross loss of NT$2,942 million and an operating loss of
NT$7,684 million. In 2004, our cost of goods sold was lower than our net sales revenue, which
resulted in a realized a gross profit of NT$4,388 million and an operating loss of NT$349 million.
In 2005, our cost of goods sold was lower than our net sales revenue, which resulted in a realized
gross profit of NT$242 million (US$7.4 million) and an operating loss of NT$4,875 million (US$148.6
million).
Capital Expenditures and Depreciation
The semiconductor industry is capital intensive. This requires us to invest in plant and
equipment on an on-going basis in order to increase capacity and upgrade technology. In particular,
fixed costs, primarily depreciation expenses, are a major component of our cost of goods sold. As a
result, increases or decreases in capacity utilization rates can have a significant effect on gross
profit or loss margins. Higher capacity utilization results in lower fixed costs per-unit as fixed
costs, such as equipment depreciation expenses, are allocated over a larger number of units. Our
ability to maintain or improve our margins will continue to depend to a large extent on our ability
to effectively manage capacity utilization levels.
An additional element affecting our overall profitability is the impact of our capital
expenditure program, which will result in higher depreciation costs, as well as interest charges
accruing from the debt incurred to finance our capital expansion. In 2003, depreciation and
amortization increased by 6.2% from NT$8,742 million in 2002 to NT$9,287 million due to the capital
expansion program at Fab II and the commencement of depreciation at Fab III. The level of our
depreciation expense peaked in 2003. In 2004, depreciation and amortization decreased by 18.6% from
NT$9,287 million in 2003 to NT$7,562 million. In 2005, depreciation and amortization decreased by
4.1% from NT$7,562 million to NT$7,253 (US$221.1 million). Although we anticipate that our
depreciation expense will continue to decrease in 2006 since we sold Fab III to Powerchip in 2006,
our future depreciation expense will depend on our capital expenditure program.
In 2003, 2004 and 2005, our depreciation expense was NT$8,615 million, NT$7,092 million, and
NT$6,741 (US$205.5 million), and represented 48.6%, 30.3% and 35.7% of net sales revenue,
respectively. In 2003, the decrease in depreciation expense as a percentage of net sales revenue
despite the increase in depreciation expenses reflected the increase in net sales revenue. In 2004,
the decrease in depreciation expense as a percentage of net sales revenue reflected the decrease in
depreciation expenses and the increase in net sales revenue. In 2005, the increase in depreciation
expense as a percentage of net sales revenue resulted from the decrease in net sales revenue.
We begin depreciating our equipment when it is placed into service. There may sometimes be a
time lag between when our equipment is placed into service and when it achieves commercial levels
of utilization. In periods of depressed industry conditions, such as those that have prevailed in
2001, 2002, the first half of 2003 and the second half of 2004 through 2005, we may experience
lower than expected demand from customers and a sharp decline in average selling prices, resulting
in an increase in depreciation expense relative to net sales revenue.
Inventory
Due to seasonal fluctuations in the demand for our products, we choose to build up inventory
during low demand periods to decrease customer turnaround time and to minimize fluctuations in
levels of production during the year. This seasonal buildup in our inventory increases our risk of
inventory loss due to obsolescence.
37
Table of Contents
Adverse market conditions in the semiconductor industry between the second half of 2000 and
the first half of 2003 resulted in a decline in average selling prices for our products generally
and a corresponding decrease in the stated value of our inventories. We make provisions for
inventory and spare parts loss based on product age and our evaluation of historical data and
projected sales price and volume to determine current trends so as to identify products or product
classes that are at risk of obsolescence or are slow moving. We recorded a reversal of inventory
and spare parts loss provision of NT$477 million (US$14.5 million) in 2005, NT$919 million in 2004
and NT$1,185 million in 2003 due to improving market conditions.
Research and Development
We believe that research and development is critical to our future success. We incurred
expenses of NT$2,738 million in 2003, NT$2,577 million in 2004 and NT$3,110 million (US$94.8
million) in 2005 on research and development, or 15.5%, 11.0% and 16.5% of net sales revenue in
those periods, respectively. See "— Results of Operations" for a more detailed discussion of our
research and development expenditures.
Our reorganization in 2003 enabled us to consolidate our research and development efforts and
reduce the total number of projects by approximately two-thirds. As a result, we have reduced our
level of research and development expenditures. See "Item 5. Operating and Financial Review and
Prospects — Research and Development, Patents and Licenses, etc. — Research and Development".
Cost Reduction Initiatives
Our average selling prices for our products have generally declined over time. As a result, we
need to reduce our costs continuously in order to maintain the margins on our products. The need
for such measures will increase following our strategy to increase our production of Flash
products, which have a higher per unit cost. We seek to reduce our unit fixed costs by focusing on
technology migration and product development, as well as improving manufacturing capabilities and
maximizing sales volumes and capacity utilization. In addition, we seek to leverage our memory
products capabilities for strategic manufacturing services for certain key customers in order to
minimize capacity loss during slow demand periods. For example, we have been able to obtain cost
reductions through our continuing efforts to improve yields of functional dies per wafer, decrease
line widths by improving die-size technology and increase economies of scale. We currently employ
0.4 micron process technology, 0.35 micron process technology and, to a limited extent, 0.32 micron
process technology for certain chips at Fab I. We originally employed 0.25 micron process
technology at Fab II for our primary Mask ROM products. We migrated to 0.18 micron process
technology for our Mask ROM products produced at Fab II in the second half of 2000, and
successfully migrated to 0.15 micron process technology for both Flash and Mask ROM in the fourth
quarter of 2002. We began mass production using 0.15 micron process technology for Flash in the
second quarter of 2003. We expect to migrate to 0.13 micron process technology for Flash, and later
Mask ROM products, produced at Fab II in 2006.
Production Capacity
In 2003, our wafer production in terms of eight-inch wafer equivalents increased 4.8% to
444,915 wafers. In 2004, our wafer production increased 43.97% to 640,548 wafers. In 2005, our wafer
production decreased 1.4% to 631,463 wafers.
In order to decrease customer turnaround time and to utilize greater economies of scale in the
future, we have supplemented and increased our manufacturing capacity. We have supplemented our
logic process manufacturing capacity by contracting for wafer fabrication on a foundry basis by
third parties, including TSMC and Tower Semiconductor. We also have increased our overall
manufacturing capacity through the enhancement of Fab I and Fab II.
The following table sets forth our wafer production (eight-inch equivalents) by product for
each of the periods indicated:
Year ended December 31,
2003
2004
2005
(number of
(% of total
(number of
(% of total
(number of
(% of total
wafers)
production)
wafers)
production)
wafers)
production)
Mask ROM
166,627
37.5
236,722
37.0
303,605
48.1
Flash
247,730
55.7
288,747
45.0
192,536
30.5
EPROM
2,737
0.6
1,013
0.2
1,319
0.2
SMS
—
—
69,734
10.9
114,149
18.1
SLC (1)
27,821
6.2
44,332
6.9
19,855
3.1
Total
44,915
100.0
640,548
100.0
631,464
100.0
38
Table of Contents
(1)
Yields of dies per wafer vary with each type of logic product manufactured by us and a change
in product mix may cause variations in both wafer production and dies per wafer.
Geographic Markets
We distribute our products to a wide variety of customers in a number of geographical markets,
including:
•
Japan;
•
Taiwan;
•
Singapore and Hong Kong;
•
the United States; and
•
Europe.
The following table sets forth the breakdown of our net sales revenue and percentages of net
sales revenue by geographic regions, based on sales generated by our sales branches located in such
regions:
Year ended December 31 (1)
2003
2004
2005
(millions
(% of total net sales
(millions
(% of total net
(millions
(% of total net
in NT$)
revenue)
in NT$)
sales revenue)
in NT$)
sales revenue)
Japan
7,269
41.0
8,364
35.8
7,707
40.8
Taiwan
5,679
32.1
7,839
33.5
5,636
29.8
Singapore and Hong Kong
3,487
19.7
5,119
21.9
4,076
21.6
United States
823
4.6
981
4.2
629
3.3
Europe
454
2.6
1,077
4.6
860
4.5
Total
17,712
100.0
23,380
100.0
18,908
100.0
(1)
See note 26 to our consolidated financial statements for the years ended December 31, 2003,
2004 and 2005 for a discussion of our export sales. The numbers in this table do not represent
sales by shipping destination or by end customer origin.
Our sales to Japan are generally denominated in U.S. dollars and Japanese yen, our sales to
Taiwan are generally denominated in U.S. dollars and N.T. dollars, and our sales to other countries
are generally denominated in U.S. dollars. In 2003, 2004 and 2005, 96.3%, 96.2% and 97.1%,
respectively, of our net sales revenue was denominated in currencies other than N.T. dollars,
primarily U.S. dollars and Japanese yen.
We use hedging techniques such as foreign currency borrowings, forward exchange rate contracts
and foreign currency swaps to mitigate our currency exposure risks.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon our
consolidated financial statements, which have been prepared in accordance with R.O.C. GAAP. We also
provide a reconciliation from our R.O.C. GAAP financial statements to U.S. GAAP in note 28 to our
consolidated financial statements for the years ended December 31, 2003, 2004 and 2005. The
preparation of our consolidated financial statements requires management to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and
related disclosure of contingent assets and liabilities. We record estimates based on historical
experience and on various other assumptions that we believe to be reasonable under the
circumstances, the results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily available from other sources. Actual results may
differ from these estimates under different assumptions or conditions.
We believe that the following critical accounting policies are the more significant policies
used in the preparation of our consolidated financial statements.
39
Table of Contents
Inventories
A principal risk in our industry is the rapid rate of obsolescence of products due to changes
in technology or other economic factors. Our financial and production management evaluates
historical experience, current trends and projected sales prices and volumes to identify products
or classes of products that are at risk for obsolescence or are slow moving, and accordingly, we
record a provision for this potential obsolescence. Our projected sales volumes are based on
projected demand information provided by our customers and our estimates of general market
conditions. We recorded a reversal of inventory and spare parts loss provision of NT$1,185 million
in 2003 and NT$919 million in 2004 and NT$477 million (US$14.5 million) in 2005 due to improving
market conditions.
Stock Appreciation Right Program
We entered into a derivative contract to hedge our risk related to our stock appreciation
right ("SAR") program. This derivative contract, as amended, expired and was fully settled on May
5, 2005. We received or paid the benefit or obligation represented by the fair market value of our
share price in N.T. dollars divided by the then prevailing exchange rates between the N.T. dollar
and the U.S. dollar compared with the strike price in the contract. We could settle portions of the
contract at our discretion up to the expiration date. Under R.O.C. GAAP, we allocated a portion of
the gains or losses from the derivative contract to SAR expense by correlating the number of rights
in the SAR plan that had vested with the same number of shares referenced in the derivative
contract. We recorded gains or losses on the portion of the derivative contract related to the SAR
based on the difference between the strike price in the derivative contract and the employees'
exercise price. We recorded as investment gains or losses changes in the value of the derivative
contract that did not correlate with vested rights. Therefore, to the extent the employees'
exercise price on vested rights exceeded the fair market value of our shares, a portion of the
derivative obligation was not recorded. To the extent that employees vested in rights for which the
exercise price exceeded the fair market value of our shares, the obligation recorded related to the
derivative contract may be reduced, having a positive impact on our earnings. Due to the expiration
of the SAR program, there were no unrecorded obligations relating to the derivative contract as of
December 31, 2005. Furthermore, since the strike price of the derivative contract is in U.S.
dollars, changes in the value of the contract may not correlate with changes in our obligations
under the SAR program.
Net Deferred Tax Assets
Under R.O.C. GAAP, our income tax expense is recorded based on calculations using the
statutory tax rate of each entity's jurisdiction of incorporation. As of December 31, 2005, our
deferred tax assets consisted principally of investment credits that expire between 2006 and 2008
and loss carry-forwards that expire in 2006 and 2007. See note 18 to our consolidated financial
statements for the years ended December 31, 2003, 2004 and 2005. The realization of these assets is
based upon estimates of future taxable income. In preparing estimates of future taxable income, we
have used the same assumptions and projections utilized in our internal forecasts. Based on these
projections, we estimate that a portion, but not all, of these tax credits will be utilized prior
to their expiration. We expect to achieve future earnings through the expansion of our business.
However, we may not be able to generate sufficient additional income to fully utilize our deferred
tax assets. In particular, an additional valuation allowance may be required to the extent we are
not able to fully utilize our deferred tax assets. As of December 31, 2005, our deferred tax assets
exceeded our deferred tax liabilities by NT$10,198 million (US$310.9 million), and we recorded a
valuation allowance of NT$8,500 million (US$259.1 million) against our tax assets resulting in net
deferred tax assets of NT$1,699 million (US$51.8 million).
Cost Method Investments
Under R.O.C. GAAP, unrealized losses on marketable equity securities held for short-term
investment are recorded as investment loss in the statement of operations, and unrealized gains are
not recognized. Unrealized losses on marketable equity securities held for long-term investment are
reported as a reduction of shareholders' equity, and the unrealized gains are not recorded.
Non-marketable equity securities are recorded at cost. In determining if and when a cost method
investee's decline in value below cost is not recoverable, we evaluate the market conditions,
offering prices, trends of earnings, price multiples and other key measures for our investments.
When such a decline in value is deemed to be a permanent diminution, we recognize an impairment
loss in the current period operating results to the extent of the decline. As of December 31, 2005,
we recorded a cumulative unrealized loss of NT$1,352 million
(US$41.2 million), which was primarily
attributable to our investment in Tower Semiconductor.
Results of Operations
The following table sets forth, for the periods indicated, certain financial data from our
statements of operations, expressed in each case as a percentage of net sales revenue:
40
Table of Contents
Year ended December 31,
2003
2004
2005
Sales revenue
102.0
100.5
100.4
Less: Sales returns
(1.8
)
(0.1
)
(0.3
)
Sales discounts
(0.2
)
(0.4
)
(0.1
)
Net sales revenue
100.0
100.0
100.0
MMSG:
Mask ROM
42.1
35.8
46.1
Flash
32.8
45.8
36.3
EPROM
1.7
0.7
0.1
SMS
13.3
7.4
8.8
ISG:
SLC
7.3
7.7
6.3
Other(1)
2.8
2.6
2.4
Cost of goods sold
(116.6
)
(81.2
)
(98.7
)
Gross profit (loss)
(16.6
)
18.8
1.3
Operating expenses
Selling expenses
(3.2
)
(3.1
)
(3.7
)
Administrative expenses
(8.1
)
(6.1
)
(6.9
)
Research and development expenses
(15.5
)
(11.0
)
(16.5
)
Total operating expenses
(26.8
)
(20.2
)
(27.1
)
Operating income (loss)
(43.4
)
(1.4
)
(25.8
)
Non-operating income
10.6
6.9
6.3
Non-operating expenses
(13.4
)
(4.4
)
(16.9
)
Income (loss) before taxes and minority interest
(46.2
)
1.1
(36.4
)
Income tax benefit (provision)
(0.1
)
(0.2
)
(1.1
)
Minority interest
*
*
*
Net income (loss)
(46.3
)
0.9
(37.1
)
(1)
Other sales revenue includes royalty revenues, masking charges, profit-sharing revenues and
other operating revenues.
*
Less than 0.1%.
Year Ended December 31, 2005 compared to Year Ended December 31, 2004
Net Sales Revenue.
Our total net sales revenue decreased 19.1% to NT$18,908 million (US$576.5
million) in 2005 from NT$23,380 million in 2004. This decrease was primarily due to lower average
sales prices for our Mask ROM, Flash and SLC products due to weaker industry conditions.
Our net sales revenue from Mask ROM products increased 4.1% to NT$8,712 million (US$265.6
million) in 2005 from NT$8,373 million in 2004. This increase was primarily due to an increase in
sales volumes of Mask ROM products in 2005 which was partially offset by a decrease in the average
selling prices for Mask ROM products. Sales volume increased to 172.9 million dies in 2005
compared to 152.4 million dies in 2004 as a result of improvement of production technology to
produce more dies. The average selling prices for Mask ROM products decreased to NT$50.3 per die
in 2005 from NT$54.2 per die in 2004, principally as a result of a general industry downturn. The
proportion of our net sales revenue from Mask ROM products increased to 46.1% in 2005 from 35.8% in
2004, primarily due to the general industry downturn.
Our net sales revenue from Flash products decreased 35.9% to NT$6,870 million (US$209.5
million) in 2005 from NT$10,715 million in 2004. This decrease was primarily due to the lower
average selling prices. Sales volume increased to 268.9 million dies in 2005 compared to 235.9
million dies in 2004 due to improvements in the technology processes for producing dies. The
proportion of our net sales revenue from Flash products decreased to 36.3% in 2005 from 45.8% in
2004.
Our net sales revenue from SMS products decreased 4.1% to NT$1,662 million (US$50.7 million)
in 2005 from NT$1,733 million in 2004. The proportion of our net sales revenue from our SMS
products increased to 8.8% in 2005 from 7.4% in 2004.
Our net sales revenue from SLC products decreased 33.3% to NT$1,192 million (US$36.3million)
in 2005 from NT$1,787 million in 2004. This decrease was principally due to lower average selling
prices of our LCD products and delays in the customer designs of our cellular phone products. The
proportion of our net sales revenue from our SLC products decreased to 6.3% in 2005 from 7.6% in
2004.
41
Table of Contents
Other sales revenue includes royalty revenues, masking charges, profit-sharing revenues and
other operating revenues. Other sales revenue decreased 20.7% to
NT$484 million (US$14.8 million)
in 2005 from NT$610 million in 2004. The proportion of our net sales revenue from others decreased
to 2.5% in 2005 from 2.6% in 2004.
Cost of Goods Sold and Gross Profit (Loss).
Cost of goods sold decreased 1.7% to NT$18,666
million (US$569.1million) in 2005 from NT$18,990 million in 2004.
As a result of the foregoing, our realized gross profit (loss) decreased to a realized gross
profit of NT$242 million (US$7.4 million) in 2005 from a
realized gross profit of NT$4,388 million
in 2004. We had a positive gross margin of 1.3% in 2005 compared to 18.8% in 2004.
Operating Expenses.
Total operating expenses increased by 8.0% to NT$5,116 million (US$156.0
million) in 2005 from NT$4,737 million in 2004. Research and development expenses increased 20.7%
to NT$3,110 million (US$94.8 million) in 2005 from NT$2,577 million in 2004. Administrative
expenses decreased slightly by 8.7% to NT$1,307 million (US$39.8 million) in 2005 from NT$1,431
million in 2004. Selling expenses decreased 4.1% to NT$699 million (US$21.3 million) in 2005
compared to NT$729 million in 2004.
Operating Loss.
As a result of the foregoing, our operating loss increased to NT$4,875 million
(US$148.6 million) in 2005 from NT$349 million in 2004.
Non-Operating Income.
Non-operating income decreased 26.1% to NT$1,197 million (US$36.5
million) in 2005 from NT$1,619 million in 2004. Reversal of inventory and spare parts loss
provision decreased 48.1% to NT$477 million (US$14.5 million) in 2005 from NT$919 million in 2004,
due to improved inventory management and unusually high inventory levels in 2004. The gain on
disposal of long-term investments decreased 93.6% in 2005 from NT$24 million (US$0.7 million) to
NT$375 million in 2004. Others decreased 25.8% to NT$121 million (US$3.7 million) in 2005 from
NT$163 million in 2004.
Non-Operating
Expenses.
Non-operating expenses increased 213.3% to NT$3,204 million (US$97.7
million) in 2005 from NT$1,023 million in 2004. Net investment loss increased to NT$1,536 million
(US$46.8 million) in 2005 from NT$56 million in 2004, because losses related to our investment in
Tower Semiconductor. Loss on allowance for prepaid expenses was
NT$142 million (US$4.4 million) in
2005, compared to nil in 2004 as a result of increased pre-payments for wafers to Tower
Semiconductor. Interest expense decreased 44.9% to NT$377.3 million (US$11.5 million) in 2005 from
NT$684 million in 2004, due to the redemption of our outstanding convertible bonds in 2005. Others
increased 116.7% to NT$65 million (US$2.0 million) in 2005 from NT$30 million in 2004. We recorded a
foreign exchange loss of NT$88 million (US$2.7 million) in 2005 compared to a foreign exchange loss
of NT$154 million in 2004.
Income Tax Expense.
Total income tax expense increased to NT$215 million (US$6.6 million) in
2005 from NT$35 million in 2004. This increase resulted primarily because of a reversal of tax
credits used in prior years, which we had to reverse because of our net loss in 2005.
Net Income (Loss).
As a result of the foregoing, we recorded net losses of NT$7,027 million
(US$214.2million) in 2005 compared to net income of NT$218 million in 2004.
Year Ended December 31, 2004 compared to Year Ended December 31, 2003
Net Sales Revenue.
Our total net sales revenue increased 32.0% to NT$23,380 million in 2004 from NT$17,712 million in 2003. This increase was primarily due to increases in
sales revenue of Mask ROM, Flash and SLC, which were partially offset by the decreases in sales
revenue of SMS and EPROM.
Our net sales revenue from Mask ROM products increased 12.2% to NT$8,373 million in 2004 from NT$7,464 million in 2003. This increase was primarily due to an increase in
sales volumes of Mask ROM products in 2004, which was partially offset by a decrease in the average
selling prices for Mask ROM products. Sales volume increased to 152.4 million dies in 2004 compared
to 128 million dies in 2003 as a result of a general industry upturn in the first half of 2004 as
well as shipments for game cartridges for Nintendo's new portable dual screen devices that began in
the fourth quarter of 2004. The average selling prices for Mask ROM products decreased to NT$54.2
per die in 2004 from NT$56.9 per die in 2003, principally as a result of decreasing prices per Mb
of Mask ROM products in line with general industry trends, partially offset by increased sales of
high-density Mask ROM products. The proportion of our net sales revenue from Mask ROM products
decreased to 35.8% in 2004 from 42.1% in 2003, primarily due to the increase in Flash sales.
42
Table of Contents
Our net sales revenue from Flash products increased 84.4% to NT$10,715 million in 2004 from NT$5,810 million in 2003. This increase was primarily due to an increase in
the sales volume of our Flash products as well as our average selling prices. Sales volume
increased to 235.9 million dies in 2004 compared to 115.1 million dies in 2003 due to an increased
demand for Flash products used in optical disk drives and DVD players which arose as a result of
our successful penetration into the markets for these products in 2004, as well increased demand
for Flash products used in printers, ADSL modems and other consumer applications. Average selling
prices for Flash products increased to NT$45.8 per die in 2004 from NT$40.8 per die in 2003,
principally as a result of strong demand for Flash products in the first half of 2004. The
proportion of our net sales revenue from Flash products increased to 45.8% in 2004 from 32.8% in
2003.
Our net sales revenue from SMS products decreased 25.6% to NT$1,733 million in 2004 from NT$2,328 million in 2003. This decrease was mainly due to the expiration of our
agreement to provide manufacturing services to Renesas. The proportion of our net sales revenue
from our SMS products decreased to 7.4% in 2004 from 13.1% in 2003.
Our net sales revenue from SLC products increased 35.6% to NT$1,787 million in 2004 from NT$1,318 million in 2003. This increase was principally due to the general industry
upturn in 2004. The proportion of our net sales revenue from our SLC products increased to 7.6% in
2004 from 7.4% in 2003.
Other sales revenue includes royalty revenues, masking charges, profit-sharing revenues and
other operating revenues. Other sales revenue increased 25.0% to NT$610 million in 2004 from NT$488 million in 2003. This increase was primarily due to increases in masking
charges and other operating revenue. The proportion of our net sales revenue from others decreased
to 2.6% in 2004 from 2.8% in 2003.
Cost of Goods Sold and Gross Profit (Loss).
Cost of goods sold decreased 8.1% to NT$18,990
million in 2004 from NT$20,657 million in 2003. This decrease was primarily due
to the technology migration to smaller line-widths which resulted in more dies per wafer and lower
manufacturing costs per unit, and a 17.7% decrease in depreciation expense.
As a result of the foregoing, our realized gross profit (loss) changed to a realized gross
profit of NT$4,388 million (US$138.3 million) in 2004 from a realized gross loss of NT$2,945
million in 2003. We had a positive gross margin of 18.8% in 2004 compared to a negative gross
margin of 16.6% in 2003.
Operating Expenses.
Total operating expenses decreased slightly by 0.1% to NT$4,737 million
in 2004 from NT$4,742 million in 2003. This decrease was primarily due to a
decrease in research and development expenses and a slight decrease in administrative expenses,
partially offset by an increase in selling expenses. Research and development expenses decreased
5.9% to NT$2,577 million in 2004 from NT$2,738 million in 2003, due to our
strategic policy of integrating our resources and streamlining the number of research and
development projects. Administrative expenses decreased slightly by 0.8% to NT$1,431 million
in 2004 from NT$1,443 million in 2003. Selling expenses increased 29.9% to NT$729
million in 2004 compared to NT$561 million in 2003, due to increased sales.
Operating Loss.
As a result of the foregoing, our operating loss decreased 95.4% to NT$349
million in 2004 from NT$7,684 million in 2003.
Non-Operating Income.
Non-operating income decreased 13.7% to NT$1,619 million in 2004 from NT$1,877 million in 2003. This decrease was primarily due to recording a
foreign exchange loss in 2004 compared to a foreign exchange gain in 2003 and a decrease in
reversal of inventory and spare parts loss provision, partially offset by an increase in gain on
disposal of long-term investments and others. We recorded a foreign exchange loss of NT$154 million in 2004, principally as a result of the appreciation of the NT$ against the U.S.
dollar and Japanese yen, compared to a foreign exchange gain of NT$375 million in 2003. Reversal of
inventory and spare parts loss provision decreased 22.4% to NT$919 million in
2004 from NT$1,185 million in 2003, due to decreased sales out of inventory that was written off
for obsolescence in prior periods. Gain on disposal of long-term investments increased 485.9% to
NT$375 million in 2004 from NT$64 million in 2003, primarily due to the disposal
of a portion of our investments in in Biomorphic and Chipbond in 2004, and in Powertech in 2004
following its IPO in 2003. Others increased 92.6% to NT$192 million in 2004 from
NT$100 million in 2003, primarily due to a NT$63 million debt extinguishment gain in connection
with our repurchase and cancellation in 2004 of US$169.1 million of our 0.5% convertible bonds due
February 7, 2007 and dividend income of NT$24 million in 2004 compared to nil in
2003.
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Non-Operating Expenses.
Non-operating expenses decreased 56.8% to NT$1,023 million in 2004 from NT$2,370 million in 2003. This decrease was primarily due to decreases in net
investment loss, loss on allowance for prepaid expenses, interest expense and others, partially
offset by recording a foreign exchange loss in 2004 compared to a foreign exchange gain in 2003.
Net investment loss decreased 92.4% to NT$56 million in 2004 from NT$737 million
in 2003, because we had no significant additional losses in 2004 under our equity derivative
contract which had our common shares as the underlying reference securities, as the trading price
of our common shares stabilized in 2004, whereas our net investment loss in 2003 was primarily due
to a loss under the same equity derivative contract, as a result of a significant decline in the
trading price of our common shares in 2003, offset by a NT$178 million reversal of estimated SAR
expenses that we had recognized previously. Loss on allowance for prepaid expenses decreased 100.0%
to nil in 2004 from NT$335 million in 2003, due to reserves for unused prepaid credit for wafer
production in 2003 compared to no loss in 2004. Interest expense decreased 36.5% to NT$684 million
in 2004 from NT$1,078 million in 2003, due to the decrease of our outstanding
convertible bonds in 2004. Others decreased 77.3% to NT$30 million in 2004 from
NT$132 million in 2003, primarily due to decreases in the depreciation of the idle assets and
losses from the obsolescence of the idle assets. We recorded a foreign exchange loss of NT$154
million in 2004, principally as a result of the appreciation of N.T. dollars to
U.S. dollars and Japanese Yen as well as because our average net assets in U.S. dollars and
Japanese Yen were greater than our liabilities in those foreign currencies, compared to a foreign
exchange gain of NT$375 million in 2003.
Income Tax Expense.
Total income tax expense increased 66.7% to NT$35 million in 2004 from NT$21 million in 2003. This increase resulted primarily from tax expenses paid by
Macronix (America) and Macronix HK, our subsidiaries, as a result of increased profits.
Net Income (Loss).
As a result of the foregoing, we recorded net income of NT$218 million
(US$6.9 million) in 2004 compared to net loss of NT$8,198 million in 2003.
Inflation
We do not believe that inflation in Taiwan has had a material impact on our results of
operations. The average annual rate of change in Taiwan's Wholesale Price Index was approximately
2.48% in 2003, 7.21% in 2004 and 0.67% in 2005.
Taxation
Our facilities, Fab I and II, and Fab III, which we sold in April 2006, are located in the
HsinChu Science Park. We enjoy preferential tax treatment in some respects under the R.O.C. Statute
for the Establishment and Administration of Science Park (referred to in this section as the
"Science Park regulations"). We are entitled to a temporary exemption from income taxes for our
income attributable to sales of our products manufactured at Fab I and Fab II after subtracting any
value-added amount to our products attributable to third-party contractors. We were entitled to
choose a tax exemption period of five years for Fab I and four years for Fab II. The tax exemption
period commences from the first date of sales, although we may defer the tax exemption for up to
four years. We chose the period from January 1, 1994 to December 31, 1998 as the five-year
exemption period for Fab I. Because we completed a substantial expansion of Fab II in 2001, we are
entitled to choose separate tax expansion periods for Phase I and Phase II of Fab II. For Phase I
of Fab II, we have chosen the period from January 1, 2001 to December 31, 2004 as the four-year tax
exemption period. We have not chosen the tax exemption period for Phase II of Fab II. Although this
tax exemption benefit has been rescinded under an amendment to the Science Park regulations
effective on January 20, 2000, we are still entitled to claim the tax exemption period for Phase II
of Fab II. After the expiration of the relevant exemption periods, we will apply for new tax
exemptions under the Statute of Upgrading Industries for the expansion of Fab II in the future. Due
to our net loss in 2002, 2003 and 2005, we did not receive a benefit from this exemption for such
years.
Under the Statute for Upgrading Industries, we are also entitled to other tax incentives
generally available to R.O.C. companies. We may take tax credits currently at rates ranging between
5% and 20% of the amount spent on qualifying machinery and equipment,
and at rates up to 35% for qualifying research and development costs and employee training
expenses. An additional tax credit is also available to us, equal to 50% of the amount by which the
qualifying research and development costs or employee training expenses in a given year exceed the
average qualifying research and development costs or employee training expenses for the previous
two years. The tax credit may be utilized within five years from the date of its occurrence. The
available tax credit in each year is limited to 50% of the corporate tax payable in that year,
except for the last of the five years, for which there is no limit.
We utilized no investment credits in 2003, none in 2004 and 2005. As of December 31, 2005,
unused investment credits available to reduce future tax payments amounted to NT$2,920 million
(US$89.0 million), which will expire between the period 2006 and 2009.
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Net operating losses may be carried forward for a period of five years. As of December 31,
2005, loss carry-forwards available to reduce future taxable income totaled NT$17,764 million
(US$541.6 million) of which NT$6,059 million (US$184.7 million) expire in 2007, NT$8,604 million
(US$262.3 million) expire in 2008, NT$338 million (US$10.3 million) expire in 2009 and NT$2,763
million (US$84.2 million) expire in 2010. See note 18 to our consolidated financial statements for
the years ended December 31, 2003, 2004 and 2005 included in this annual report.
We
recorded an income tax expense of NT$21 million in 2003, NT$35 million in 2004 and NT$215
million in 2005.
Equity Derivative Contracts
We entered into a derivative contract with our common shares as the underlying reference
securities in connection with our stock appreciation rights plan in order to provide liquidity.
This contract also included a reference to foreign currency exchange rates. This contract
significantly affected our net income or loss during the period 2002 through 2004. The portion of
the contract with a reference to foreign currency exchange rates expired in May 2003. We extended
the portion of the contract with a reference to our common shares as the underlying reference
securities until May 2005. As at December 31, 2004, the underlying reference securities was
53,253,964 of our common shares, the carrying amount of this contract was a receivable of
US$1.7 million (NT$54 million) and the fair value of this contract was a receivable of US$1.4
million (NT$44 million). Our additional loss under this contract in 2004 was US$0.3 million (NT$10
million), and total accumulated loss under this contract as of December 31, 2004 was US$60.6
million (NT$1,922 million). Between March 17, 2005 and April 28, 2005, we reduced the number of
common shares which formed the underlying reference securities for the contract to nil, and we
settled the contract on May 5, 2005. Our additional loss under the contract in 2005 up to the date
of settlement of the contract was US$4.4 million (NT$140 million). See "Item 11. Quantitative and
Qualitative Disclosures About Market Risk."
U.S. GAAP Reconciliation
General
Our consolidated financial statements are prepared in accordance with R.O.C. GAAP, which
differ in certain significant respects from U.S. GAAP. The following tables set forth comparisons
of our net income (loss) and shareholders' equity accounts in accordance with R.O.C. GAAP and U.S.
GAAP:
Year ended December 31,
2003
2004
2005
2005
(NT$)
(NT$)
(NT$)
(US$)
(in millions)
Net income (loss) in accordance with:
R.O.C. GAAP
(8,198
)
218
(7,027
)
(214.2
)
U.S. GAAP
(8,027
)
(469
)
(4,636
)
(141.3
)
Year ended December 31,
2003
2004
2005
2005
(NT$)
(NT$)
(NT$)
(US$)
(in millions)
Shareholders' equity in accordance with:
R.O.C. GAAP
29,248
34,345
28,558
870.7
U.S. GAAP
28,145
32,755
29,264
892.2
Note 28 to our consolidated financial statements for the years ended December 31, 2003, 2004
and 2005 included in this annual report provides a description of the principal differences between
R.O.C. GAAP and U.S. GAAP as they relate to us, and a reconciliation to U.S. GAAP of specific
items, including net income (loss) and shareholders' equity.
We had a gross loss in accordance with U.S. GAAP of NT$1,912 million in 2003, gross profit of
NT$5,052 million in 2004 and gross profit of NT$546 million (US$16.6 million) in 2005. Under U.S.
GAAP, we had negative gross margin of 8.9% in 2003, positive gross margin of 21.6% and 3.6% in 2004
and 2005, respectively. Under U.S. GAAP we had an operating loss of NT$6,649 million in 2003,
operating profit of NT$335 million in 2004 and operating loss of NT$4,356 million (US$132.8
million) in 2005.
Differences between R.O.C. GAAP and U.S. GAAP, which have an effect on our net income or loss
as reported under R.O.C. GAAP, relate to:
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•
plant capacity expense variances;
•
income taxes;
•
additional pension gain on an actuarial basis;
•
marketable securities;
•
amortization of goodwill;
•
derivative financial instruments;
•
compensation expense pertaining to stock performance-based employee bonuses; and
•
convertible debt securities with beneficial conversion features.
Gross Profit (Loss) and Operating Income (Loss)
R.O.C. GAAP permits government subsidies for research and development, inventory loss
provision, allowance for prepayments and long-lived assets to be abandoned and the reversal of bad
debt expense to be presented below the operating income subtotal in the statement of operations.
Under U.S. GAAP, the inventory loss provision is included in the determination of gross profit or
loss, while the government subsidies for research and development, allowance for prepayments and
long-lived assets to be abandoned and the reversal of bad debt expense are included in the
determination of operating income or loss.
Plant Capacity Expense Variances
Under R.O.C. GAAP, all plant capacity expense variances may either be charged to the statement
of operations or allocated between cost of goods sold and inventory using an appropriate allocation
method. Our policy is to expense such variances.
Under U.S. GAAP, such plant capacity variances may only be allocated between cost of goods
sold and inventory. This may result in additional inventory allowances by NT$740 million, NT$25
million and NT$28 million as of December 31, 2003, 2004 and 2005, respectively.
Income Taxes
Our undistributed earnings generated after 1997 are subject to a 10% tax in compliance with
the R.O.C. Income Tax Law. Under R.O.C. GAAP, the 10% tax on undistributed earnings is recorded as
an expense at the time our shareholders resolve that earnings be retained. Under U.S. GAAP, we
measure income tax expense, including the tax effects of temporary differences, using the tax rate
that includes the tax on undistributed earnings.
Under R.O.C. GAAP, the criteria used in the determination of the valuation allowance is less
stringent than under U.S. GAAP. Under U.S. GAAP, if a company has experienced cumulative losses in
recent years, it is not generally able to consider more subjective projections of future operating
profits for the purpose of determining the valuation allowance for deferred income tax assets. A
valuation allowance is provided on deferred tax assets to the extent that it is not "more likely
than not" that such deferred tax assets will be realized. The valuation allowance that we recorded
under U.S. GAAP as of December 31, 2003, 2004 and 2005 were
NT$8,305 million, NT$10,302 million and
NT$12,096 million (US$368.8 million), respectively.
Pension Expense
Prior to 1996, in accordance with R.O.C. GAAP, pension expense was recognized based on
contributions required under government regulations, while under U.S. GAAP, pension obligations and
expense are determined on an actuarial basis. Under the "Accounting for Pensions" guidelines issued
by the R.O.C. Accounting Research Development Foundation in 1991, which are substantially similar
to U.S. Statement of Financial Accounting Standards ("SFAS") No. 87 under U.S. GAAP, each R.O.C.
listed company, including our company, was required, beginning in 1996, to accrue its un-funded or
under-funded "accumulated pension obligations" as a liability in its balance sheet on an actuarial
basis and to expense amounts related to these obligations in its statement of operations
systematically
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over the estimated service lives of the employees covered by the pension plan. See note 3to
our consolidated financial statements for the years ended December 31, 2003, 2004 and 2005 included
in this annual report. For U.S. GAAP reconciliation purposes, we amortize our related pension
obligation differences in accordance with U.S. SFAS No. 87 over a period of 21 years, retroactive
from 1993. This adjustment reduced net loss before taxes under U.S. GAAP by NT$3 million in 2003,
NT$3 million in 2004 and NT$3 million (US$0.1 million) in 2005.
Marketable Securities
Under R.O.C. GAAP, marketable equity securities held as short-term investments are carried at
the lower of aggregate cost or market value. The unrealized losses of marketable equity securities
held as short-term investments are recorded as investment loss in the statement of operations,
while unrealized gains of marketable equity securities held as short-term investments are not
recognized. Marketable equity securities held as long-term investments are carried at cost, or
lower of aggregate cost or market value if the market price is available. The unrealized losses of
marketable equity securities held as long-term investments are reported as a reduction of
shareholders' equity, while the unrealized gains are not recognized. An other-than-temporary
decline in value is not required to be recognized under R.O.C. GAAP due to the less prescriptive
nature of the principles.
U.S. SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities",
requires that all applicable investments be classified as trading securities, available-for-sale
securities or held-to-maturity securities. We did not have any investments classified as trading
securities or held-to-maturity securities during the periods presented. SFAS No. 115 further
requires that available-for-sale securities be reported at fair value, with unrealized gains and
losses excluded from earnings but reported in a separate component of shareholders' equity until
they are sold. Under U.S. GAAP, if an other-than-temporary decline in value of a long-term
investment exists, the unrealized loss should be charged to the statement of operations.
Derivative Financial Instruments
Under R.O.C. GAAP, the Company is required to disclose certain information in the financial
statements regarding derivative financial instruments but there are no specific accounting
requirements for derivative financial instruments (except for outstanding put options and foreign
currency forward exchange contracts for which the accounting is documented in note 2a and for which
there is no significant difference in the accounting treatment with U.S. GAAP prior to January 1,
2001). In addition, R.O.C. GAAP has no specific regulations with respect to the accounting for
derivative financial instruments indexed to the Company's own stock.
Prior to January 1, 2001, under U.S. GAAP, generally, written options are marked to market
through earnings in all situations, unless they are part of a combination of options which also
includes a purchased option of equal or greater fair value. Purchased options are eligible for
hedge accounting and changes in the intrinsic value of the option are treated as an adjustment of
the basis of the hedged assets or liabilities. For derivative financial instruments indexed to the
Company's own stock, the Company is required to record those agreements which are required to be
settled in cash at their fair values, with changes in fair value reported in earnings (See note
21.f). Differences between R.O.C. GAAP and U.S. GAAP in accounting for derivative financial
instruments are detailed below:
(i)
Options contracts
Under R.O.C. GAAP, gains and losses on option contracts are recognized upon exercise. Unrealized
gains and losses are not required to be recorded in the financial statements. However, effective
the quarter ended December 31, 2004, in accordance with No. 32 ruling issued by Accounting
Research and Development Foundation in 2005, "The Accounting Treatment of Foreign Exchange Option
Contract Before the Effectiveness of Financial Accounting Standards No. 34", outstanding put
options at balance sheet date shall be accounted for at their fair values with the differences
included in the current net income. This change in accounting principles did not have significant
impact on the Company's financial statements.
For periods prior to January 1, 2001, U.S. GAAP requires that unrealized gains and losses on
option contracts that do not qualify as hedges be recorded in the statement of operations. The
majority of option contracts entered into by the Company for hedging purposes, did not qualify as
hedges for financial reporting purposes and accordingly have been carried in the financial
statements at fair value.
(ii)
Structured deposits
Under R.O.C. GAAP, the respective interest on the deposits is accrued. The gains and losses
arising from the settlement of the contracts are dealt with in the statement of operations.
Unrealized gains and losses are not recognized.
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For periods prior to January 1, 2001, under U.S. GAAP, the option element of these contracts is
measured at fair value and is recognized on the balance sheet, subsequent changes in the fair
value of the option are recognized in earnings in the period of change.
In June 1998, the U.S. Financial Accounting Standards Board ("U.S. FASB") issued Statement
133, "Accounting for Derivative Instruments and Hedging Activities". The Statement requires the
Company to recognize all derivatives on the balance sheet date at fair value. Derivatives that are
not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending
on the nature of the hedge, changes in the fair value of derivatives are either offset against the
change in fair value of assets, liabilities, or firm commitments through earnings or recognized in
other comprehensive income until the hedged item is recognized in earnings. The ineffective portion
of a derivatives' change in fair value will be immediately recognized in earnings. The adoption of
Statement No. 133 on January 1, 2001 resulted in the cumulative effect of an accounting change of
NT$620,503 being recognized in earnings in the consolidated statement of operations and a charge of
nil to other comprehensive income. Subsequent to December 31, 2000, none of the Company's
derivative positions qualified as hedges under U.S. GAAP. The Company has issued certain
convertible debt instruments that contain embedded derivatives because the currency in which the
instrument is denominated is different from the currency in which the underlying stock is
denominated. The Company has bifurcated such conversion options in accordance with FAS 133 and
accounted for the bifurcated derivative instrument in accordance with FAS 133 and the host
instrument in accordance with the applicable standards. In addition, as discussed in note 11, the
Company repurchased and redeemed certain convertible bonds that included such embedded derivatives.
For derivative financial instruments indexed to and potentially settled in our own common
shares, we are required to record those agreements which are required to be settled in cash at
their fair values, with changes in fair value reported in earnings. See notes 25 and 28 to our
consolidated financial statements for the years ended December 31, 2003, 2004 and 2005 included in
this annual report.
After application of these principles, our net loss for U.S. GAAP purposes increased by NT$545
million in 2003, decreased by NT$70 million in 2004 and increased by NT$34 million (US$1.0 million)
in 2005.
Stock Performance-Based Employee Bonus Plan
In April 1999, our board of directors approved a program similar to a stock appreciation
rights plan under which our employees who are eligible to participate would receive cash bonuses
based on increases in the market price of our common shares. Our board of directors has authorized
our chairman to use his discretion to alter the terms of this plan, including the vesting period
and the amount of the bonus allocated to our employees. We initially allocated 61,179,500 shares
upon the establishment of the plan. Rights to receive cash bonuses under the plan are scheduled to
vest with respect to 25% of the common shares allocated to the plan on August 1 of each year,
starting August 1, 2000 through 2002. In April 2002, our board of directors approved an amendment
of the plan, changing the vesting date for the final 25% to August 1, 2002 from March 31, 2003.
Employees who discontinue their employment before the scheduled vesting dates will forfeit the
rights to receive cash bonuses.
Between the establishment of the plan and December 31, 2002, rights to receive cash bonuses
with respect to a total of 6,197,600 shares have been forfeited, and rights to receive cash bonuses
with respect to a net additional 17,227,048 shares were allocated under the plan as a result of
stock dividends made on the shares allocated to the plan, exercise of rights under the plan and
allocation of additional rights. As of December 31, 2002, rights to receive cash bonuses with
respect to 72,208,948 shares were outstanding under the plan, of which all were vested. In April
2003, all remaining rights to receive cash bonuses under the plan, with respect to 72,208,948
shares, expired and were cancelled.
U.S. GAAP requires us to account for this plan in accordance with Accounting Principles Board
Opinion No. 25 ("APB No. 25"), "Accounting for Stock Issued to Employees". Under APB No. 25, we
recognize compensation expense for the plan based on the amount by which the quoted market value of
our shares covered by the grant exceeds the exercise price of the rights. Compensation determined
in accordance with the preceding sentence will be accrued as a charge to expense over the vesting
period during which the employee performs the related services. Due to the reversal of compensation
expense accrued on an R.O.C. GAAP basis, we recorded an increase in income adjustment of nil for
2003, 2004 and 2005 for this plan under U.S. GAAP. Unlike U.S. GAAP, R.O.C. GAAP has no specific
accounting provisions for stock appreciation rights plans. For R.O.C. GAAP reporting purposes, we
do not recognize compensation expense until the year in which these appreciation rights vest. When
the rights vest, we recognize compensation expense that is calculated based on the difference
between (i) the fair market value of our shares plus additional costs related to the rights vested
and (ii) the aggregate exercise price of the rights having vested in the period. We have entered
into a number of equity derivative contracts to
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cover the rights under the plan. We recognized a reversal of compensation expense for the
stock appreciation rights under R.O.C. GAAP of nil in 2003, 2004 and 2005.
Purchase and Sale of Our Own Shares
Under R.O.C. GAAP, the net gain or loss resulting from the purchase and sale of our own common
shares for trading purposes is recorded as non-operating income or loss in the consolidated
statement of operations. However, effective from January 1, 2002, purchases or sales of our own
shares are treated as a treasury stock transaction.
U.S. GAAP requires that if we or our affiliates acquire our own common shares for purposes
other than retirement, the cost of the acquired shares may be shown separately as a deduction from
the total of capital stock, additional paid-in capital and retained earnings, or may be accorded
the accounting treatment appropriate for retired stock. "Gains" on sales of the repurchased stock
not previously accounted for as constructively retired are credited to additional paid-in capital;
losses may be charged to additional paid-in capital to the extent that previous net "gains" from
sales or retirements of the same class of stock are included therein, otherwise to retained
earnings. We had nil gain or loss in 2003, 2004 and 2005 on the purchase and sale of our common
shares for R.O.C. GAAP purposes.
Investment in Equity Investees
Under R.O.C. GAAP, if an investee company issues new shares and the original shareholders do
not purchase new shares proportionally such that the investor increases its percentage of
ownership, the difference between the investment cost for the portion of the investee acquired and
the acquired net assets is charged to equity.
Under U.S. GAAP, if an investee company issues new shares and the original shareholders do not
purchase new shares proportionally such that the investor increases its percentage of ownership,
the difference between the investment cost for the portion of investee acquired and the acquired
net assets is recorded as part of the investment. The difference is assigned to individual assets
and liabilities acquired on the basis of the assets' and liabilities' fair values. Any remaining
difference between the cost of the investment and net assets acquired is allocated to goodwill.
Goodwill for equity method investments is not separable from the instruments.
Research and Development Expense
Under R.O.C. GAAP, our royalty expense is included in research and development expense. Under
U.S. GAAP, our royalty expense is included in selling expense or administrative expense depending
on the nature of the expense. Accordingly, on a U.S. GAAP basis, research and development expenses
were NT$2,535 million in 2003, NT$2,418 million in 2004 and NT$2,784 million (US$84.9 million) in
2005.
Rights Issues and Earnings Per Share
Under U.S. GAAP, a rights issue with exercise price less than the fair value of the shares
contains a bonus element that is similar to a stock dividend and is accounted for as such
accordingly. As a result, the basic and diluted earnings per share are adjusted retroactively for
the bonus element for all periods presented. There are no requirements under R.O.C. GAAP to adjust
earnings per share arising from the bonus element of a rights issue.
Under R.O.C. GAAP, earnings per share is retroactively adjusted for shares issued for employee
bonus. Under U.S. GAAP, shares issued for employee bonus will affect the current period's earnings
per share only.
Employee Stock Options
Under R.O.C. GAAP, there were no specific regulations with respect to the accounting for stock
options prior to 2004. Accordingly, we elected not to account for stock options in the financial
statements. Effective from January 1, 2004, companies are required to use either the fair value
method or the intrinsic value method to account for its stock options. Under the fair value method,
stock options are stated on the fair value calculated by pricing models such as Black-Scholes or
binomial model. Under the intrinsic value method, stock options are recorded by the excess of the
market price of the underlying shares at the grant date over the exercise price of the stock
option. The fair value method is encouraged but not required. If the intrinsic value is used,
companies are required to disclose pro-forma net income and earnings per share assuming the fair
value method is used.
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Under U.S. GAAP, we elected to follow Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" ("APB 25") and related interpretations in accounting for our
employee stock options because, as discussed below, the alternative fair value accounting provided
for under SFAS No. 123, "Accounting for Stock-Based Compensation," requires use of option valuation
models that were not developed for use in valuing employee stock options. Under APB No. 25. if the
exercise price of our employee stock options equals the market price of the underlying stock on the
date of grant, we are not required to recognize any compensation expense.
Reclassification of Capital Account to Accumulated Deficit
Under R.O.C. GAAP, under the approval of shareholders, a company may reclassify its additional
paid-in capital account to cover up its accumulated deficit. Under R.O.C. GAAP, we reclassified
NT$2,631 million and NT$315,704 of our additional paid-in capital to the accumulated deficit
account for 2003 and 2005, respectively.
Under
U.S. GAAP, according to SAB Topic 5S, the SEC staff believes a deficit reclassification
of any nature is considered to be quasi-reorganization. As such, a company may not reclassify or
eliminate a deficit in retained earnings unless all requisite conditions for a quasi-reorganization
are satisfied. Under U.S. GAAP, this reclassification is eliminated.
Convertible Debt Securities with Beneficial Conversion Feature
Under
R.O.C. GAAP, when convertible bonds are issued, the entire instrument is recorded as a
liability at an amount equal to the proceeds received. Any discount or premium to the par value of
the convertible bond is amortized to the statement of income by using the effective interest rate
method. If the convertible bonds contain a redemption premium above its par value amount, the
excess is accrued, using the effective interest rate method, over the period to redemption as a
charge to interest expense. Upon conversion, the carrying value of the bond is credited to common
stock at its par value and the difference between the carrying value of the bond and the par value
of stock is recorded to capital reserve. No gain or loss is recognized. Effective from January 1,
2006, ROC SFAS No. 34 and ROC SFAS No. 36, "Financial Statement Presentation and Disclosure of
Financial Instruments" ("ROC SFAS 36") require derivative embedded in hybrid instrument, if not
clearly and closely related to the host contract, to be bifurcated and accounted for at fair value.
The Company issued certain convertible debt instruments that contained embedded
derivatives based upon the features set in the convertible bond contracts. Under R.O.C. GAAP, there
is no accounting guidance specific to the embedded derivatives and beneficial conversion features.
The Company accounted for the convertible bonds with the aforementioned features in the manner
similar to the conventional bonds without the aforementioned features.
Under U.S. GAAP, the Company considered whether the convertible bonds contain the embedded
derivative features using the guidance provided in U.S. SFAS No. 133. Convertible bonds with
premium put options contain embedded derivatives subject to bifurcation in accordance with EITF
85-29. To the extent the embedded derivatives are determined to exist, the embedded derivatives are
bifurcated and accounted for in accordance with SFAS No. 133 and EITF 85-29. If there are no
embedded derivatives presented, the Company then considers whether there are beneficial conversion
features. To the extent the beneficial conversion features exist, the
Company would account for the
beneficial conversion features in accordance with EITF 98-5 and EITF 00-27.
Under U.S. GAAP, in accordance with EITF 00-27 "Application of EITF98-5 Accounting for
Convertible Securities with Beneficial Conversion Features" (EITF 00-27), convertible securities
with beneficial conversion features or contingently adjustable conversion ratios are recognized and
measured by allocating a portion of the proceeds equal to the intrinsic value of that feature to
additional paid-in capital. The amount to be allocated should be calculated at the commitment date
as the difference between the conversion price and the fair value of the common stock into which
the security is convertible, multiplied by the number of shares into which the security is
convertible. The resulting discount on the convertible security is accreted, as interest expense,
from the date the beneficial conversion feature is fixed to the stated redemption date.
All convertible bonds outstanding as of December 31, 2003, 2004 and 2005 contained
embedded derivative features that require bifurcation in accordance
with SFAS No. 133
and the Company bifurcated the embedded derivatives from the host contracts for these
convertible bonds. The host bond contract was then accreted from the initial
amount to the maturity amount over the period from the date of issuance to the
maturity date using the effective interest method.  The net difference between
R.O.C. GAAP and U.S. GAAP represents 1) change in fair value of embedded derivatives,
and 2) difference between accretion period under both GAAP, and premium or
discounts subject to accretion under both GAAP.
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New Accounting Pronouncements
U.S. GAAP
In March 2004, the FASB approved the consensus reached on the Emerging Issues Task Force
(EITF) Issue No. 03-1, "The Meaning of Other-Than-Temporary Impairment and Its Application to
Certain Investments." The Issue's objective is to provide guidance for identifying
other-than-temporarily impaired investments. EITF 03-1 also provides new disclosure requirements
for investments that are deemed to be temporarily impaired. In September 2004, the FASB issued a
FASB Staff Position (FSP) EITF 03-1-1 that delays the effective date of the measurement and
recognition guidance in EITF 03-1 until further notice. In November 2005, the FASB issued a FASB
Staff Position (FSP) FAS 115-1/124-1 that addresses the measurement and recognition guidance for
identifying other-than-temporarily impaired investments. This FSP also includes accounting
consideration subsequent to the recognition and requires certain disclosures about unrealized
losses that have not been recognized as other-than-temporary impairment. The disclosure
requirements of EITF 03-1 and FSP 115-1/124-1 are effective with this annual report for fiscal 2004
and 2005.
In November 2004, FASB issued FASB Statement No. 151, which amended the guidance in ARB No.
43, Chapter 4, "Inventory Pricing," to clarify the accounting for abnormal amounts of idle facility
expense, freight, handling costs, and wasted material (spoilage). SFAS No. 151 requires that those
items be recognized as current-period charges and requires the allocation of fixed production
overheads to inventory based on the normal capacity of the production facilities. The guidance is
effective for inventory costs incurred during fiscal years beginning after June 15, 2005. The
Company expected to adopt the guidance on January 1, 2006. The adoption of this Statement is
expected to increase cost of goods sold and reduce inventory balance on a US GAAP basis.
In December, 2004, the Financial Accounting Standards Board (FASB) issued FASB Statement No.
123(R), "Share-Based Payment", which is a revision of FASB Statement No. 123, "Accounting for
Stock-Based Compensation". Statement 123(R) supersedes APB Opinion No. 25, "Accounting for Stock
Issued to Employees", and amends FASB Statement No. 95, "Statement of Cash Flows". Generally, the
approach in Statement 123(R) is similar to the approach described in Statement 123. However,
Statement 123(R) requires all share-based payments to employees, including grants of employee stock
options, to be recognized in the income statement based on the fair values. Pro forma disclosure is
no longer an alternative.
Statement 123(R) must be adopted no later than January 1, 2006. Early adoption will be
permitted in periods in which financial statements have not yet been issued. We expect to adopt
Statement 123(R) on January 1, 2006. Statement 123(R) permits public companies to adopt its
requirements using one of two following methods:
A "modified prospective" method in which compensation cost is recognized beginning with the
effective date (a) based on the requirements of Statement 123(R) for all share-based payments
granted after the effective date and (b) based on the requirements of Statement 123 for all awards
granted to employees prior to the effective date of Statement 123(R) that remain unvested on the
effective date.
A "modified retrospective" method which includes the requirements of the modified prospective
method described above, but also permits entities to restate based on the amounts previously
recognized under Statement 123 for purposes of pro forma disclosures either (a) all prior periods
presented or (b) prior interim periods of the year of adoption.
We are currently evaluating the above methods of adoption.
As permitted by Statement 123, the company currently accounts for share-based payments to
employees using intrinsic value method. Accordingly, the adoption of fair value method will have
the impact on our result of operations, although it will have no impact on our overall financial
position. Had the company adopted Statement 123(R) in prior periods, the impact of that standard
would have approximated the impact of Statement 123 as described in the disclosure of pro forma net
income and earnings per share in Note 28 to the consolidated financial statements.
In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets, an amendment
of APB Opinion No.29." APB Opinion No.29, "Accounting for Nonmonetary Transactions," is based on
the principle that exchanges of nonmonetary assets should be measured based on the fair value of
the assets exchanged. SFAS No. 153 amends APB Opinion No. 29, eliminating the exception to fair
value accounting for nonmonetary exchanges of similar productive assets and replaces it with a
general exception to fair value accounting for nonmonetary exchanges that do not have commercial
substance if the future cash flows of the entity are expected to change significantly as a result
of the exchange. The statement is effective for non-monetary asset exchanges occurring in fiscal
periods beginning after June 15, 2005. The Company does not expect this statement to have a
material impact on the financial condition or results of operation.
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In May 2005, the FASB issued SFAS No. 154 "Accounting Changes and Error Corrections". SFAS No.
154 replaces APB Opinion No. 20 "Accounting Change", and SFAS No. 3 "Reporting Accounting Changes
in Interim Financial Statements" and changes the requirements for the accounting for and reporting
of a change in accounting principle. SFAS No. 154 also applies to all voluntary changes in
accounting principle and changes required by an accounting pronouncement in the unusual instance
that the pronouncement does not include specific transition provision. The statement also defines
"retrospective application" and "restatement". The retrospective application of a change in
accounting principles is limited to the direct effects of the changes. The statement should be
affective for accounting changes made in fiscal years beginning after December 15, 2005. The
Company does not expect this statement to have a material impact on the financial condition or
results of operation.
In February 2006, the FASB issued SFAS No. 155 "Accounting for Certain Hybrid Financial
Instruments – An Amendment of SFAS No. 133 and 140". The Statement permits fair value remeasurement
for any hybrid financial instrument that contains an embedded derivative that otherwise would
require bifurcation; establish a requirement to evaluate interests in securitized financial assets
and allow a qualifying special-purpose entity from holding a derivative financial instrument that
pertains to a beneficial interest other than another derivative financial instrument. The statement
is effective for all financial instruments acquired or issued after the beginning of an entity's
first fiscal year that begins after September 15, 2006. The Company is currently evaluating the
potential impact of this standard on its financial position and the result of operations, but does
not believe the adoption of SFAS No. 155 will have a material effect on the result of operations or
financial position of the Company.
R.O.C. GAAP
In December 25, 2003, the R.O.C. Accounting Research and Development Foundation ("ARDF")
issued Statement of Financial Accounting Standards No. 34, "Accounting for Financial Instruments",
which is effective for financial statements with fiscal years ending on or after December 31, 2006.
Early adoption of this statement is not allowed. SFAS No. 34 requires that all financial
instruments, excluding certain financial instruments specified in this statement, as either
trading, available-for-sale or held-to-maturity. Debt securities owned with positive intent and
ability to hold to maturity are classified as held-to-maturity securities and reported at amortized
cost. Debt and equity securities that are purchased and traded for short-term profit are classified
as trading securities and reported at fair value, with unrealized holding gains and losses reported
as part of net income. Debt and equity securities not classified as either held-to-maturity or
trading are classified as available-for-sale securities, which should be reported at fair value,
with unrealized gains and losses reported as a separate component of stockholders' equity. In
addition, all derivatives are required to be reported at fair value. The Company is currently
evaluating the effect of the adoption of this statement.
In July 1, 2004, the R.O.C. ARDF issued SFAS No. 35, "Accounting for Impairment of Assets",
which is effective for financial statements with fiscal years ending on or after December 31, 2005.
This statement requires that impairment loss should be recognized whenever events or changes in
circumstance indicate the carrying amount of an asset may be lesser than its recoverable amount.
The Company is currently evaluating the effect of the adoption of this statement.
In December 9, 2004, the R.O.C. ARDF issued the revision for SFAS No. 5(R), "Accounting for
Long-Term Equity Investment", which is effective for financial statements with fiscal years
beginning on or after January 1, 2005. This revision of the guidance requires that operating losses
of investees evaluated under equity method be allocated between controlling and non-controlling
interest until those losses exceed the non-controlling interest's investment. In that event, the
excess of any further losses are charged to the controlling interest except to the extent that the
minority interest has a binding obligation to, and is able to undertake the losses. The Company
does not expect SFAS No. 5(R) have a material impact on the financial condition or results of
operation.
In December 9, 2004, the R.O.C. ARDF issued the revision for SFAS No. 7(R), "Consolidated
Financial Statements", which is effective for financial statements with fiscal years beginning on
or after January 1, 2005. This revision of the guidance requires the Company to consolidate all
investees under the control of the Company. Control is not only presumed when the parent company
owns over 50% of voting rights of the investee but also evidenced by control under certain
situations specified in SFAS No. 7(R). In addition, the threshold for the determination of whether
to consolidate an investee was revoked. Before the adoption of SFAS No. 7(R), the Company was not
required to file consolidated financial statements to SFC in Taiwan, as none of the investees of
the Company pass the threshold for consolidation. However, after the adoption of this revised
statement, the Company will be required to file the semi-annual consolidated financial statements
to SFC in Taiwan.
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In June 2005, the R.O.C. ARDF issued SFAS No. 36 "Financial Instruments: Disclosure and
Presentation", which is also required to be applied by the Company on January 1, 2006. SFAS No. 36
will require the Company for the presentation of financial instruments and identifies the
information that should be disclosed about them. The presentation requirements apply to the
classification of financial instruments, from the perspective of the issuer, into financial assets,
financial liabilities and equity instruments; the classification of related interest, dividends,
losses and gains; and the circumstances in which financial assets and financial liabilities should
be offset. The guidance requires disclosure of information about factors that affect the amount,
timing and certainty of an entity's future cash flows relating to financial instruments and the
accounting policies applied to those instruments. The guidance also requires disclosure of
information about the nature and extent of an entity's use of financial instruments, the business
purposes they serve, the risks associated with them, and management's policies for controlling
those risks. SFAS No. 36 complements the principles for recognizing and measuring financial assets
and financial liabilities in SFAS No. 34 "Accounting for Financial Instruments".
Liquidity and Capital Resources
We have historically financed our business with cash flow from operations, short-term and
long-term debt (including debt convertible into our common shares) and proceeds from the issuance
of equity securities. Our ability to meet our working capital needs through cash flow from
operations is affected by the demand for, and prices of, our products, which in turn may be
affected by several factors. Many of these factors are beyond our control, such as economic
downturns and declines in the prices of our products caused by a downturn in the semiconductor
industry. The average selling prices of our products are likely to be subject to further downward
pressure in the future.
To the extent we do not generate sufficient cash flow from our operations to meet our cash
requirements, we will have to rely on external financing. However, our ability to access external
sources of financing could be materially adversely affected by our recent and forecast gross,
operating and net losses. We cannot give any assurances that we will be able to secure financing on
satisfactory terms, or at all.
Our net cash provided by operating activities was NT$4,397 million (US$134.1 million) in 2005,
compared to NT$5,987 million in 2004 and NT$1,484 million in 2003. The decrease in cash flows from
operating activities in 2005, compared to the cash flows from operating activities in 2004, was due
to the significant net loss we experienced in 2005. The net loss was partially offset by increases
in cash after taking account of non-cash adjustments and net changes in operating assets and
liabilities. Our net cash provided by operating activities was NT$1,484 million in 2003. The
improvement in operating cash flows in 2003 compared to 2002 was primarily due to the lower net
loss after taking into account non-cash adjustments and net changes in operating assets and
liabilities.
Our non-cash adjustments in 2005 included a write off of long-term investments of NT$1,536
million (US$46.8 million), impairment losses of NT$906 million (US$27.6 million), depreciation
and amortization of NT$7,253 million (US$221.1 million) and a reversal of inventory and spare parts
loss provision of NT$477 million (US$14.5 million) and a net gain on short-term investments of
NT$365 million (US$11.1 million). Net changes in our operating assets and liabilities which
affected our net cash provided by operating activities in 2005 primarily included net increase in
inventories of NT$1,655 million (US$50.5 million) and net increase in notes and accounts payable of
NT$635 million (US$19.4 million).
Our non-cash adjustments in 2004 included depreciation and amortization of NT$7,562 million
and a reversal of inventory and spare parts loss provision of NT$919 million and a gain on disposal
of long-term investments of NT$375 million. Net changes in our operating assets and liabilities
which affected our net cash provided by operating activities in 2004 primarily included net
decrease in accrued expenses of NT$300 million, net decrease in notes and accounts payable of
NT$270 million and net decreases in interest payable of debentures of NT$337 million.
Our non-cash adjustments in 2003 included depreciation and amortization of NT$9,287 million
and an inventory and spare parts loss provision reversal of NT$1,185 million. Net changes in our
operating assets and liabilities which affected our net cash provided by operating activities in
2003 primarily included net decreases in inventories of NT$2,268 million, net increase in notes and
accounts payable of NT$569 million and net decreases in interest payable of debentures of NT$990
million.
Net cash flows from investing activities was NT$130 million (US$4.0 million) in 2005. The net
cash flows from investing activities in 2005 primarily included payments for the purchase of
property, plant and equipment of NT$1,774 million (US$54.1 million), proceeds from disposals of
property, plant and equipment of NT$3 million (US$1.0 million), payments for purchase of
marketable securities of NT$11,468 million (US$349.6 million), proceeds from disposals of
marketable securities of NT$12,996 million (US$396.2 million) and decreases in restricted
investment of NT$358 million (US$10.9 million). Net cash flows from in investing activities were
NT$3,629 million in 2004. The net cash flows from investing activities in 2004 included the payment
of NT$2,769 million for the
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purchase of property, plant and equipment, and increases in intangible assets of NT$533
million. Net cash used in investing activities was
NT$423 million in 2003. The most significant components of these investing activities were the
payment of NT$2,616 million for the purchase of property, plant and equipment relating to the
construction of Fab III and decreases in restricted investments of NT$1,528 million relating to a
sinking fund for our convertible bonds that matured in May 2003.
Our net cash used in financing activities was NT$3,466 million (US$105.7 million) in 2005. The
net cash flows from financing activities in 2005 primarily included repayment of long term debts
and capital lease obligations of NT$2,063 million (US$62.9 million), decreases in short-term debts
of NT$1,070 million (US$32.6 million), and decreases in debentures of NT$415 million (US$12.7
million). The net cash flows from financing activities in 2004 were NT$2,951 million. The net
cash flows from financing activities in 2004 primarily included decreases in long-term debt and
capital lease obligations of NT$8,823 million, increases in common stock issued of NT$5,566
million, and increases in short-term debt and short-term notes of NT$377 million. The net cash
flows from financing activities in 2003 were NT$2,199. The net cash flows from financing activities
primarily in 2003 included increases in common stock issued of NT$3,823 million, increases in
short-term debt and short-term debt and capitals lease obligations of NT$2,366 million.
As of December 31, 2005, our primary sources of liquidity were NT$11,134 million (US$339.4
million) of cash and cash equivalents.
As of December 31, 2005, we had total short-term debt of NT$1,894 million (US$57.7 million).
All of our short-term loans in 2005 were letter of credit loans due within 180 days or working
capital loans at variable interest rates, ranged from 1.70% to 5.87%. The unused lines of credit
due within 180 days, including the unused letters of credit were NT$5,179 million (US$157.9
million) as of December 31, 2005. See note 12 and Note 13 to the consolidated financial statements
for the years ended December 31, 2003, 2004 and 2005 included in this annual report.
As of December 31, 2005, we did not have any outstanding balance of short-term notes. The
unused short-term lines of credit for short-term notes were NT$180 million (US$5.5 million) as of
December 31, 2005. See notes 13 to the consolidated financial statements for the years ended
December 31, 2003, 2004 and 2005 included in this annual report.
Capital Resources and Capital Expenditures
As of December 31, 2005, the long-term liabilities consisted primarily included long-term debt
of NT$5,778 million (US$176.2 million). As of December 31, 2005, the long-term loans from banks
carry variable interest rates ranged between 1.75% and 3.47% per annum with maturity between 2005
and 2016 and require payments of principal and interest on either a quarterly or monthly basis
throughout the remainder of their terms. See note 15 to our consolidated financial statements for
the years ended December 31, 2003, 2004 and 2005 included in this annual report.
As of December 31, 2005, the maturity schedule of our existing long-term debt is as follows:
Period
NT$ in millions
January 1, 2006 — December 31, 2006
4,635
January 1, 2007 — December 31, 2007
2,340
January 1, 2008 — December 31, 2008
1,525
January 1, 2009 — December 31, 2009
1,480
January 1, 2010 — December 31, 2010
68
After December 31, 2010
365
Total
10,413
In 2003, primarily as a result of net losses of NT$8,198 million, partially offset by stock
issued for cash of NT$3,823 million, conversion of convertible debentures of NT$2,454 million and
unrealized gains on long-term investments of NT$977 million, shareholders' equity declined by 3.2%
in 2003. In 2004, primarily as a result of issuance of global depositary shares of NT$5,566 million
and conversion of convertible debentures of NT$759 million,
partially offset by unrealized losses on long-term investments of NT$1,350 million, shareholders' equity increased by 17.4% in 2004 to NT$34,345 million as of December 31, 2004. In 2005, primarily as a result of the increase in accumulated deficits,
shareholders' equity decreased by 16.8% in 2005 to NT$28,558 million (US$871 million) as of
December 31, 2005.
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Our long-term loans and facilities contain various financial and other covenants that could
trigger a requirement for early payment. Among other things, these covenants require the
maintenance of certain financial ratios, such as current ratio and debt to equity ratio. We may be
unable to meet the specified debt to equity ratios unless we are able to raise additional equity
funding. In November 2003, we sold 475,000,000 new common shares for cash pursuant to a share
offering in Taiwan, and in April 2004, we issued 13,125,000 GDS representing 525,000,000 new common
shares. If we had not raised that additional equity in the share and GDS offerings, we may not have
been able to meet the financial ratios in our loan agreements as of December 31, 2003, 2004 and
December 31, 2005.
We may need to issue additional shares in the future to further increase shareholders' equity,
and we cannot assure you that we will be successful in selling all or any of such common shares. If
we continue to have losses and are unable to raise additional equity funding or renegotiate the
terms of our loan agreements, we may be in default of financial covenants in the future. Such a
default or defaults would seriously impair our ability to secure debt financing, and could require
us to delay or cancel capital expansion plans, dispose of assets or take other steps to meet the
financial ratios.
On March 31, 2004, we announced a proposed increase in our issued share capital for the issue
of up to 1,300,000,000 common shares. From time to time, we may offer and issue rights or overseas
depositary receipts. The size and the price range of any proposed issue will be determined by our
board of directors upon approval by the R.O.C. SFC. On November 16, 2005, our shareholders approved
to cancel 2,079,474,542 shares at the amount of NT$20,795 million of capital.
In addition, covenants in the agreements governing our existing debt and debt we may incur in
the future may materially restrict our operations, including our ability to incur debt, pay
dividends, make certain investments and payments and encumber or dispose of assets. A default under
one debt instrument may also trigger cross-defaults under our other debt instruments. An event of
default under any debt instrument, if not cured or waived, could have a material adverse effect on
our liquidity, as well as our financial condition and operations.
As of December 31, 2005, all of our convertible bonds had been redeemed. Among our long-term
debts, there are secured corporate bonds and syndicated loans listed as follows in accordance with
their terms:
In April 2004, we sold 13,125,000 GDSs, representing 525,000,000 new common shares, for net
proceeds of approximately US$173.25 million, to fund bond redemptions and for our capital
expenditures.
On February 17, 2006, we issued 100,000 new shares in a private placement at NT$8.07 per
share.
We issued approximately NT$3.0 billion principal amount of secured corporate bonds in Taiwan
in the months of October and November 2001 due in October 2006 to fund the construction of Fab III,
as well as the purchase of machinery and equipment and other capital expenditures.
On September 25, 2001, we entered into a syndicated loan for an amount of up to NT$12.0
billion and we have drawn down NT$6,610 million (US$194.5 million) of the syndicated loan as of May
31, 2005.
Among our total long-term debt as of December 31, 2004 of 12,509 million (US$394 million), a
total of NT$10,536 million (US$310.0 million) was secured by our assets, principally property,
plant and equipment.
In the third quarter of 2001, we entered into a capital equipment lease agreement with
Nintendo for the use of certain manufacturing equipment in the amount of US$75 million, payable in
36 monthly installments between July 31, 2002 to June 30, 2005. As of December 31, 2004, we had
aggregate lease obligations of US$9.6 million (NT$303 million) under the Nintendo lease. The lease
term is from July 31, 2001 to June 30, 2005, and title to the leased equipment will be transferred
to us at the end of the lease term.
We operate our own fabrication facilities and therefore require significant amounts of capital
to build, expand, modernize and maintain our facilities and equipment. Our total capital
expenditures were NT$1,606 in 2003, and NT$2,554 million in 2004 and NT$1,595 (US$48.6 million) in
2005. The following table sets forth our principal capital expenditures incurred in 2003, 2004 and
2005:
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Year ended December 31,
2003
2004
2005
(NT$ million)
(NT$ million)
(NT$ million)
Fab I
88
358
134
Fab II
228
92
875
Fab III
834
1,652
0
Others
456
452
586
Total
1,606
2,554
1,595
These amounts include the expansion and upgrade of Fab I and Fab II, the construction of Fab
III and the development of trainee and/or employee facilities and other areas. In 2003, our capital
expenditures consisted mainly of residual payments following the completion of the construction of
Fab III and our upgrade of Fab II. In 2004, our capital expenditures consisted primarily of
residual payments following the completion of the construction of the shell of Fab III and
investments to expand the SLC capacity of Fab I under our
"Evergreen plan" for
Fab I.
We have budgeted capital expenditures of approximately NT$3,348 million for 2006, primarily to
purchase machinery and equipment to change our product mix for producing more Flash products, as
well as for ongoing upgrades of our facilities. We may adjust the amount of our capital
expenditure upward or downward based on cash flow from operations, the progress of our expansion
plans and market conditions. We cannot assure you that we will be able to raise additional capital
should it become necessary, on satisfactory terms or at all.
We believe that our existing cash and cash equivalents, short-term investments, expected cash
flow from operations and existing credit lines under our short-term and long-term loan facilities
will be sufficient to meet our capital expenditures, working capital, payment obligations under our
existing debt and lease arrangements, and other requirements.
We will require funding for our capital expenditures for equipment and maintenance from cash
from operations.
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Contractual Obligations
The following table sets forth information on our material contractual obligated payments for
the periods indicated as at December 31, 2005:
Payments Due by Period
January 1,
January 1,
January 1,
2006 to
2007 to
2010 to
January 1,
December 31,
December 31,
December 31,
2012 and
Total
2006
2009
2011
thereafter
(in millions of NT$)
Long-term debt
10,413
4,635
5,345
137
296
Capital lease obligations (1)
0
Operating lease obligations (2)
609
85
195
130
199
Letters of credit
18
18
Construction and equipment
purchase obligations (3)
3117
3117
License fees (3) (4)
410
410
Other long-term liabilities (4)
642
642
Total
15,209
8,265
5,540
267
1,137
(1)
Capital lease obligations represent our commitments for leases of equipment.
(2)
Operating lease obligations represent our commitments for leases relating to property and
research and development software. See note 24c and 24d to our consolidated financial
statements.
(3)
We cannot forecast the time of cash-out of our construction and equipment purchase
obligations and license fees become due.
(4)
License fees above reflect the fixed amount of royalty payments. See note 24e to 24h to our
consolidated financial statements.
(5)
Other long-term liabilities include accrued pension cost and other liabilities — refundable
deposits.
Commitments and Contingencies
See "Item 8. Financial Information — A. Consolidated Statements and Other Financial
Information — Legal Proceedings" for a description of the outstanding and pending legal proceedings
to which we are a party.
Off-balance Sheet Arrangements
There are no significant off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial condition,
revenues, or expenses, results of operations, liquidity, capital expenditures or capital resources
that is material to investors.
Research and Development
We believe that research and development is critical to our future success. We incurred
expenses of NT$2,738 million in 2003, NT$2,577 million in 2004 and NT$3,110 million (US$94.8
million) in 2005 on research and development, or 15.5%, 11.0% and 16.4% of net sales revenue in
those periods, respectively. On an R.O.C. GAAP basis, royalty payments are included in research and
development expense.
Our reorganization in 2003 enabled us to consolidate our research and development efforts and
reduce the total number of projects by approximately two-thirds, to focus on those with strategic
significance to us. As a result, we have, beginning in 2003, reduced our level of research and
development expenditures.
As
of December 31, 2005, we had 444 employees engaged in research and new product development
activities. We review our new product development plans at quarterly strategic meetings, utilizing
the knowledge gained from close relationships with our key customers to determine future product
requirements of the semiconductor industry. We also engage research firms that follow the
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semiconductor industry and publish data on the size of the markets and their historical and
projected growth rates. These firms also generally publish a competition and market share profile
for each market. By combining these sources of product development information, we endeavor to
position our next generation of products competitively.
Through our research and development efforts, we have developed core design technologies in
the following five areas: memory, system logic, communications, audio and video. Our research
efforts in the memory area presently include the development of 0.13 micron process technology for
NOR Flash products based on mainstream ETOX (EPROM tunnel oxide) technology, 0.13 micron and 0.09
micron process technology based on NBit based technology, as well as four bit per cell technology.
We have also entered into a joint research initiative with IBM and Infineon Technologies to explore
a new form of computer memory called phase-change memory, which stores data by changing the state
of a special material from an amorphous to a crystalline structure.
In addition to our know-how in each of these core design technologies, we believe that one of
our strengths is our ability to integrate these various core technologies, enabling us to develop
and manufacture integrated circuit products for use in products with multimedia applications.
Examples of products with these multimedia applications include video conferencing and voice
input/synthesis equipment.
New Product Development
Examples of new products under development or recently developed are as follows:
Mask ROM
•
new 64/128/256Mb product designs for Game Boy Advance;
•
introduce cost-effective two-bit per cell manufacturing technology;
•
a new low pin-count design for 64Mb products;
•
2Mb to 64Mb ROM multimedia card;
•
16/32/64Mb one-time programmable multimedia card;
•
64/128/256Mb SD ROM card; and
•
64/128/256Mb memory stick ROM card.
Flash
•
a 256Mb data storage/code storage Flash product;
•
a 1.8 volt low voltage, synchronous, read-while-write product for portable devices and
mobile internet appliance applications;
•
a monochip design which combines Flash and multiple time programmable devices that optimizes
data storage and code storage by using two-bit per cell technology;
•
extend the capacity of SPI products by using two-bit per cell technology;
•
a 0.13 micron cost-effective two-bit per cell manufacturing technology; and
•
a 0.13 micron high endurance ETOX cost-effective manufacturing technology.
SLC
•
a 64-voice polyphonic sound generator for cellular phone ring tones;
•
an audio control chip featuring long-time recording;
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•
custom-made control chips for educational devices and language learning machines;
•
a custom-made broadband bridge chip, wireless game controller, frequency generator, and high
definition television display controller for video game platforms;
•
a new architecture for the provision of data storage for SOC devices;
•
provide intellectual property libraries and design services on single voltage embedded Flash
compilers, embedded mix signal devices, logic devices and SRAM/ROM memory devices for SOC
development of audio compact disc, general positioning system, internet appliance, LCD monitor and
educational and learning systems applications;
•
develop embedded EEPROM intellectual property for smart card applications;
•
introduce low-end derivative processes for consumer products; and
•
develop a GSM base band chipset and module, which is a digital signal processor and
controller, for wireless communication applications.
Intellectual Property
A number of elements of our products and technological processes are proprietary in nature and
are owned by us or utilized under license from others. We own patents for a number of processes
relating to our Mask ROM, Flash, EPROM and SLC products in various countries, including the United
States and Taiwan. As of December 31, 2005, we had owned the total of 763 patents in U.S.A., 950
patents in R.O.C., 150 patents in Chinese, 21 patents in Japan and 44 patents in European for
products and technology developed through our own efforts or joint research and development efforts
with other companies. As of December 31, 2005, we had over 2,000 patent applications pending in
various jurisdictions, including the United States, Taiwan, China, Japan and Europe. We intend to
continue to seek patent protection on significant new inventions.
We have applied 28 types of trademarks registrations including "MXIC", "Macronix", "MX" and
"MTP EPROM". As of December 31, 2005, we had 154 trademark registered and granted and 35
applications pending in various jurisdictions including Australia, China, the European Union,
India, Japan, Korea, Singapore, Taiwan and the United States.
As is the case with many companies in the semiconductor industry, we have from time to time
experienced incidents of infringement of our intellectual property rights and illegal copies of our
products, including some incorporating our trademarks. None of these, however, have had any
material adverse effect upon our results of operations. To decrease the risk of infringing patented
technologies of others, we have procedures to evaluate related patents as part of our product
development process. In addition, we have retained various patent counsels to review and document
our own patent monitoring and enforcement process. In spite of our efforts to decrease the risk of
infringement, we are the subject of several patent infringement claims. See "Item 8. Financial
Information — A. Consolidated Statements and Other Financial Information — Legal Proceedings".
We have also entered into an agreement with Saifun that provides us with a non-exclusive,
non-transferable, worldwide license to develop and manufacture products based on its 2 bit per cell
N-ROM technology. In 2004, pursuant to an addendum, Saifun extended the license to include 4 bit
per cell N-ROM technology. The license is effective for the duration of the Saifun patents and
thereafter shall continue on a year-to-year basis unless either party provides 12 months notice of
its intent not to renew. Under the license agreement, we are required to pay specified fixed
license fees as well as running royalties based on specified percentages of net sales from products
relying on the licensed technology. We are also required to make available to Saifun a portion of
our manufacturing capacity. Under our agreement with Saifun, we were required to reach
qualification of certain products and achieve certain net sales for those products between 2002 and
2004, failing which Saifun would be entitled to terminate the license agreement. Although we failed
to reach certain targets in 2002, 2003 and 2004, Saifun has not indicated its intention to exercise
its right to terminate the agreement.
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We license the manufacturing technology underlying a variety of our memory products, including
Mask ROM devices, to third parties. We earned in royalties approximately NT$20 million in 2003,
NT$28 million in 2004 and NT$14 million (US$0.4 million) in 2005.
Industry Trend
General
Semiconductor integrated circuits, or ICs, are critical components used in a wide and growing
array of electronic systems. In recent years, semiconductor performance has improved markedly and
the size and cost of ICs have decreased. As a result, ICs have expanded from their original primary
application in computers to other applications, including consumer electronics, telecommunications
systems, automation and control systems and security systems. As a result of increasing
applications for semiconductor ICs as well as the increasing value of semiconductors used in
electronic systems, the semiconductor market has grown at a faster rate than the electronic system
industry.
The semiconductor industry has been cyclical, with periods of growth being followed by
downturns due to global economic growth trends, inventory adjustments as well as periodic
mismatches between semiconductor demand and manufacturing capacity. The semiconductor industry
commenced a recovery in 1999, after a down cycle in the late 1990s, and recorded a 37% year on year
growth in 2000. Since the beginning of 2001, however, as demand from the computing and
communications sectors declined, the industry experienced excess capacity, overproduction,
significant inventory buildup and consequent decreases in average selling prices. In 2002, while
unit volume shipments grew in the first half, in part due to inventory replenishment, IC unit
volume growth was weaker in the second half of the year. Beginning in mid-2003, the industry saw
the initial signs of recovery, with increased IC demand and, for certain products, a slowdown and
even a reversal of the decline in average selling prices. The recovery was carried through to the
first half of 2004. Beginning in the second half of 2004, the semiconductor industry experienced
another downturn which continued into 2005, with average selling prices, particularly Flash
products, declining. Prices stabilized have stabilized during the first half of 2006.
Historically, semiconductor ICs were principally used in the computing industry. However,
future growth of the semiconductor industry is expected to be driven by increasing semiconductor
content in consumer electronic applications as well as in the communications industry. These
applications could include wireless or handheld devices, DVD players, flat panel digital
televisions, digital cameras, MP3 digital audio players, video game consoles for internet games,
electronic dictionaries and electronic books. These new applications typically require
semiconductors of increasing power and decreasing size, which is expected to drive innovation and
product volume growth. For example, next generation cellular phone handsets increasingly have
features that support more data processing applications, multimedia applications and internet
applications, and these applications are likely to drive the consumption of high performance logic
and memory products, such as high-density Mask ROM and Flash products.
Semiconductor Products
Semiconductors may be classified based on the type of technology used: analog, digital or
mixed signal. Analog semiconductors collect, monitor, condition and transform analog signals into
electrical current, and vice versa. Digital semiconductors store information from digital signals
or process data. Mixed signal semiconductors combine analog and digital devices to process both
analog signals and digital data.
Digital semiconductors that store information are referred to as memory products and tend to
be more standardized products that are differentiated by cost, performance, capacity, size, power
consumption and speed. Digital semiconductors that process data are referred to as logic devices
and require greater intellectual property and more sophisticated design.
Memory Products.
Memory products are classified as either volatile memories, which lose their
data content when power supplies are switched off, or nonvolatile memories, which retain their data
content without the need for constant power supply.
Nonvolatile memories are typically used to store program instructions that control the
operation of microprocessors and electronic systems. There are four major types of nonvolatile
memories: ROM, EPROM, EEPROM and Flash.
ROM: The earliest and most basic type of nonvolatile memory is the read-only memory ("ROM"),
which is permanently encoded when produced and cannot be reprogrammed after it is fabricated.
Measured by cost per Mb, Mask ROM is the least expensive and the most cost-effective nonvolatile
memory currently produced. Mask ROM is widely applied in the video game and printer applications
given its non-erasable nature and inexpensive unit cost. Long-term proliferation of new consumer
electronic products, such as electronic
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books, electronic dictionaries and multimedia cards for third generation phone applications,
is expected to increase the consumption of Mask ROM.
EPROM and EEPROM: EPROM can be reprogrammed by removing the device from the system, erasing
the data through exposure to ultraviolet light and reprogramming and reinstalling the device in the
system. Despite this costly and time-consuming erasure procedure, EPROM has achieved market
acceptance in a wide variety of applications.
EEPROM, or electronically erasable programmable ROM, devices, can be electronically altered
while remaining in the system. This allows system manufacturers to reprogram efficiently in the
system to achieve several important advantages in terms of cost, speed, customization and data
storage functions. However, EEPROM has remained considerably more expensive than EPROM for a given
amount of storage capacity, commonly referred to as density. As a result, its market acceptance has
been limited, and the overall EEPROM market still remains substantially smaller than the EPROM
market.
Flash: Flash products bridge a distinct product gap between EPROMs and EEPROMs. Like EEPROM,
Flash can be erased and reprogrammed without being removed from the system in which the chip is
installed. However, the cost of Flash products is substantially less than that of EEPROMs. With
Flash ICs, the user is able to erase selected blocks of data on a chip "in a Flash", instead of
byte by byte, while the device remains in the system. As Flash products continue to improve in
performance and decrease in cost, the applications for Flash products are expected to expand
rapidly. Flash demand has increased significantly in recent years, driven by growing usage in
cellular phones, VCD/DVD players, digital television recorders, digital still cameras and
networking devices. The market is expanding in both the number of key applications and memory usage
per system.
Logic Products.
Logic devices process digital data to control the operation of electronic
systems. The largest segment of the logic market, standard logic devices, includes microprocessors,
microcontrollers and digital signal processors ("DSPs"). Standard devices are intended to be used
by a large group of systems designers for a broad range of applications. Consequently, standard
devices usually contain more functions than are actually required and, therefore, may not be
cost-effective for some applications.
Many electronic system makers therefore prefer to incorporate application specific integrated
circuits, or ASICs, which are custom-designed semiconductors, into their products. These devices
include a broad range of full-custom, semi-custom and application-specific standard product logic
devices, which have been developed specifically for direct use into a wide variety of applications.
Compared to memory products, logic devices are much more differentiated and dependent upon
intellectual property and advanced product design skills.
System-on-a-chip.
SOC refers to a process of combining the functions of several integrated
circuits on a single chip. SOC products are generally faster, smaller and use less power than a
device employing independent ICs. SOC products differ from ASIC devices in that ASICs generally
adapt a particular chip function to a specific product without integrating other chip functions
onto the silicon.
The growing shift in semiconductor use from personal computers to communications and consumer
electronics, such as cellular phones and personal digital assistants, which require low power
consumption and smaller size, has given rise to increasing demands for SOC solutions. Furthermore,
convergence of cellular phones and personal digital assistants will further increase the complexity
and functionality of semiconductors, which is expected to continue to drive the demands for SOC
solutions.
Item 6.
Directors, Senior Management and Employees
A. Directors and Senior Management
The following table sets forth the name of each director, supervisor and executive officer,
his position with us, the date of his initial appointment and his age as of May 30, 2006. We do not
have any executive officers other than the directors, supervisors and executive officers listed
below.
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Name
Position with Our Company
Date of Initial Appointment
Age
Miin Wu (1)
President,
September 1, 1989,
57
Executive Director and Chairman
November 25, 1989 and March 7, 2005
Ding-Hua Hu (1)(2)
Executive Director
November 25, 1989
63
H. C. Chen (3)
Executive Director
July 18, 1992
67
Y.S.Chuang(4)
Director
June 18, 2004
70
Takata Akira (5)
Director
May 12, 2005
47
Dang-Hsing Yiu
Director and Senior Vice President of Integrated
June 5, 1995
53
Solution Group
March 14, 2003
C.Y. Lu
Director and Senior Vice President of Microelectronics
April 18, 2003
55
and Memory Solution Group
March 14, 2003
Yaou-Dong Wang
Director and Vice President
June 18, 2004 and February 1, 2001
51
J.P. Peng (6)
Director and Vice President
June 18, 2004 and February 1, 2001
50
Raymond S. Mak
Director and Vice President
June 29, 1998 and September 18, 1995
55
C.L. Liu
Independent Director
June 27, 2003
71
Simon M. Sze
Independent Director
June 27, 2003
69
Cheng Yi Fang
Independent Director
April 19, 2001
64
Roger Chu(4)
Supervisor
July 18, 1992
58
Ping Tien Wu
Supervisor
November 27, 1993
64
J.D. Lee (5)
Supervisor
June 18, 2004
47
Paul Yeh
Associate Vice President of Finance Center
July 1, 2001
49
(1)
Mr. Wu succeeded Dr. Hu as the chairman, and Dr. Hu resigned from the chairmanship, effective
March 7, 2005.
(2)
Nominee of Champion Investment Corporation
(3)
Nominee of Hung Chih Investment Corporation
(4)
Nominee of Delta Electronics Ltd.
(5)
Nominee of Shun Ying Investment
(6)
Nominee of Hui Ying Investment, Ltd.
Miin Wu
succeeded Dr. Hu as our chairman on March 7, 2005. He is also our president. Mr. Wu
has been one of our executive officers since our inception in 1989. He is also the chairman of
Magic Pixel Inc. and MaxNova Inc., spin-offs of our company. He had over 20 years of experience in
the semiconductor industry. Mr. Wu received both a B.S. degree and an M.S. degree in electrical
engineering from National Cheng-Kung University in Taiwan as well as a M.S. degree in material
science and engineering from Stanford University.
Ding-Hua Hu
is an executive director and has been our director since our inception in 1989,
and our chairman since our inception in 1989 until March 7, 2005. Dr. Hu has additionally served as
the chairman of AVID Electronics Corporation as well as a director of ZYXEL Communication
Corporation, United Integrated Services Co., Ltd. and Applied Vacuum Coating Technologies Co., Ltd.
He received a B.S. degree in electrical engineering from National Taiwan University, an M.S. degree
in electronic engineering from the National Chiao Tung University in Taiwan, an M.S. degree in
Management from Stanford University and a Ph.D. in electrical engineering from the University of
Missouri.
H.C. Chen
has been a director since 1992. He has also been the president of Chin Ho Fa Steel &
Iron Consent Order, Ltd. for over six years. He received a B.S. degree in economics from Soochow
University in Taiwan.
Y.S. Chuang has been a director since 2004. He was previously also the president of Nanyang
Technology Corporation. He received a M.S. degree in electronic engineering from the University of
Texas.
Takata Akira
has been a director since 2005. He has been an employee of MegaChips Corporation
since 1990 and is currently an officer in its China business division. He received a B.S. degree in
electronics engineering from Osaka University, Japan.
Dang-Hsing Yiu
has been a director since 1995 and our senior vice president of our Integrated
Solution Group since 2003. Mr. Yiu has been an executive officer of our company since 1990 and was
previously our chief operating officer. He has also worked in the semiconductor and technology
related industries since 1979. Mr. Yiu received a B.S. degree in electrical engineering from
National Taiwan University and an M.S. degree in electronic engineering from the University of
California, Berkeley.
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C.Y. Lu
has been a director since 2003 and our senior vice president of our Microelectronics
and Memory Solution Group since 2003. He was previously our chief technology officer. Mr. Lu is
also the chairman of Ardentec Corporation. He has over 20 years experience in the semiconductor and
technology related industries. Mr. Lu received a Ph.D. in physics from Columbia University.
Yaou-Dong Wang
has been a vice president since 1991 and a director since 2004. He received a
Ph.D. in chemical engineering from Columbia University.
J.P. Peng
has been a vice president since 1991 and a director since 2004. He received a M.S.
degree in electrical engineering from the University of Iowa.
Raymond S. Mak
has been a director since 1998 and a vice president since 1995. He has also
served as chairman of Macronix America, our United States subsidiary, since 1995. Before that, he
was an executive officer of Macronix America from 1987 to 1995. Mr. Mak was the engineering manager
of VLSI Technology Inc. in the United States from 1982 to 1987. He received a B.S. degree in
electrical engineering from San Francisco State University.
C.L. Liu
has been a director since 2003. He has been the president and professor of computer
science at National Tsing Hua University in Taiwan since 1998. He also has been the associate
provost of the University of Illinois at Urbana-Champaign since 1995. Mr. Liu received a Ph.D. in
electrical engineering from the Massachusetts Institute of Technology.
Simon M. Sze
has been a director since 2003. He worked with Bell Laboratory from 1963 to 1989.
Currently, he is a professor of NCTU and president of National Nano Device Laboratory. Mr. Sze
received a Ph.D. in electrical engineering from Stanford University.
Cheng Yi Fang
has been a director since 2004. Mr. Fang is a director of Mercuries & Associates
Ltd. and president of Avnet Mercuries Company. He received a B.A. degree from the business
administration department of National Taiwan University.
Roger Chu
has been a supervisor since 1992. He is also the financial controller of Delta
Electronics, Ltd. and has been with that company since 1986. He received a B.S. degree in economics
from the Chinese Cultural University in Taiwan.
Ping Tien Wu
has been a supervisor since 1993. Mr. Wu is also president of Trace Storage
Technology Corporation, and before that, was president of Asia Chemical Corporation. He received a
Ph.D. in physics from the University of Iowa.
J.D. Lee has been supervisor since 2004. He is also president of Chien Kung Venture Capital,
Chien Cheng Venture Capital and Hon Pang Venture Capital. He received a B.S. degree in industrial
management from the National Taiwan Institute of Technology.
Paul Yeh
has been the associate vice president in charge of our finance center since July
2001. Prior to that, he was the senior director of our finance center from 1995 to June 2001. He
received an M.B.A. degree from National Chengchi University in Taiwan and a B.S. degree in
management science from National Chiao Tung University in Taiwan.
The business address for all of our directors and senior management is our principal executive
offices at No. 16 Li
-
Hsin Road, Science Park, Hsinchu, Taiwan, Republic of China, except
that the business address for Raymond Mak is Macronix America, Inc., 1338 Ridder Park Drive, San
Jose, California 95131.
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B. Compensation
The following table sets forth cash remuneration paid to our current directors, supervisors
and executive officers in 2005:
Total
Name
Position with our Company in 2004
Compensation
(thousands of NT$)
Miin Wu (2)
Executive Director, Chairman and President
5,669
Dang-Hsing Yiu (3)
Director and Senior Vice President of Integrated Solution Group
20,125
Raymond S. Mak (3)
Director and Vice President
Yaou-Dong Wang
(3)
Director and Vice President
J.P. Peng (3)
Director and Vice President
C.Y. Lu (3)
Director and Senior Vice President of Microelectronics and Memory Solution Group
Ding-Hua Hu (1)
Executive Director
113
H.C. Chen
Executive Director
113
Akira Takata
Director
63
C.L. Liu
Independent Director
700
Simon M. Sze
Independent Director
700
Cheng Yi Fang (4)
Independent Director
700
Ping Tien Wu
Independent Supervisor
700
J. D. Lee
Supervisor
100
(1)
Resigned from the chairmanship, effective March 7, 2005
(2)
Succeeded to the chairmanship, effective March 7, 2005
(3)
Total compensation for Dang-Hsing Yiu, Raymond S. Mak, Yaou-Dong Wang, J.P. Peng, and C.Y. Lu
(4)
Resigned as supervisor and re-elected as independent director, effective June 18, 2004
According to our Articles, we may distribute 2.0% of distributable earnings to our directors
and supervisors as compensation. In the event that a director or supervisor serves as a
representative of a legal entity, such compensation is paid to the legal entity. We pay our
executive officers monthly salaries, including our Chairman, in addition to employee bonuses.
As
of December 31, 2005, 85,792,690 shares were held by directors, supervisors and executive
officers. In addition, the president, vice-president, executive directors, and the associate vice
president of the finance center combined, held options to purchase up to 27,467,599 shares of the
company. There have been no loans or advances made by us or any of our subsidiaries to, or
guarantees given by us or any of our subsidiaries in relation to loans or advances received by, the
directors, supervisors and executive officers. We are not involved in any unusual transactions
(such as purchases outside normal activities, acquisitions or disposals of assets) with any of our
directors, supervisors or executive officers.
All material transactions between the company and its directors, supervisors and executive
officers are described in "Item 7. Major Shareholders and Related Party Transactions — B. Related
Party Transactions".
C. Board Practices
Our
shareholders elect the members of our board of directors. Our board
of directors is composed of 12 directors, three of whom are members of our executive director
committee and three of whom are independent directors. The chairman of our board of directors is
elected from among our executive directors. The chairman of our board of directors presides at
meetings of our shareholders, meetings of our board of directors and meetings of the executive
director committee, and also represents us in connection with external matters. Between meetings of
our board of directors, the executive director committee regularly exercises power and authority on
behalf of our board of directors in accordance with applicable law, our articles of incorporation
and resolutions adopted at shareholders' meetings and meetings of the board of directors.
All of our directors were elected or re-elected on June 18, 2004 for a three-year term. Our
board of directors appoints our executive officers. In accordance with the R.O.C. Company Law, our
supervisors cannot concurrently serve as our directors, executive officers or other staff members.
We currently have three supervisors, each of whom were elected in 2004 and serves a three-year
term. Our supervisors' duties and powers include, but are not limited to, investigation of our
condition, inspection of corporate records, verification of statements by our board of directors at
shareholders' meetings, calling of shareholders' meetings, representation of us in negotiations
with our directors and giving notification, when appropriate, to our board of directors to cease
acting in contravention of applicable law or regulation or our articles of incorporation or
resolution adopted at our shareholders' meeting.
Certain of our directors and supervisors serve in their capacity as representatives of the
corporate entities who hold the board or supervisor seats and do not serve in their individual
capacity. Consequently, if any of these individuals withdraws, dies or otherwise becomes unable to
serve, the corporate entity he or she represents has the ability to replace that person with a
different representative of its choice. Hui Ying Investment, Ltd. was previously appointed as a
director on April 19, 2001 and re-elected as a director on June 18, 2004. Hui Ying Investment, Ltd.
appointed J.P. Peng as a representative on May 12, 2005.
We currently have three independent directors, namely, Mr. Liu, Mr. Sze and Mr. Fang.
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Audit Committee
We established an Audit Committee on October 27, 2004. We currently have three members in our
audit committee who are independent directors, namely, Mr. Cheng Yi Fang, Mr. C.L. Liu and Mr.
Simon M. Sze. As of December 31, 2005, R.O.C. law does not require us to have an audit committee.
As R.O.C. law requires our Board of Directors to be responsible for the appointment, termination,
compensation and oversight of our auditors, our audit committee is responsible for, among other
matters, recommending to our Board of Directors with respect to such matters and evaluating and
nominating suitable auditors.
We established a compensation committee on August 27, 2005. We currently have three members in our
compensation committee who are independent directors, Mr. C. L. Liu and Mr. Cheng Yi Fang, and our
executive director, Mr. H. C. Chen.
Difference between NASDAQ Requirements and Home Country Practices
In general, corporate governance principles for Taiwanese companies are set forth in the
Company Act of the Republic of China, or R.O.C. Company Act, the R.O.C. Securities and Exchange Act
and, to the extent they are listed on the Taiwan Stock Exchange, listing rules of the Taiwan Stock
Exchange. Corporate governance principles under provisions of R.O.C. law may differ in significant
ways to corporate governance standards for U.S. NASDAQ-listed companies. Under NASD Marketplace
Rule 4350(a)(1), foreign private issuers are permitted to follow certain home country corporate
governance practices in lieu of the requirements of Rule 4350. The following are the requirements
of Rule 4350 we do not follow and the home country practices we follow.
Under the Rule 4350(c)(1), beginning from July 31, 2005, a majority of the board of directors
must comprise of independent directors. We currently have three independent directors out of a
total of 13 directors on our board, and have no plans to have a majority of independent directors
as we are not required to do so under R.O.C. requirements.
Rule 4350(c)(3) requires that, beginning from July 31, 2005, the compensation of the chief
executive officer of a company must be determined, or recommended to the board, either by a
majority of the independent director or an independent compensation committee. We currently follow
the practice under R.O.C. Company Act, which requires that the compensation of directors be
approved by shareholders. In addition, we also follow Article 29 of the R.O.C. Company Act, which
provides that the compensation of executive officers of the company shall be decided by resolutions
adopted by the majority of the board at a meeting satisfying a quorum of more than one-half of the
directors.
Under Rule 4350(c)(4), beginning from July 31, 2005, director nominees must either be
selected, or recommended for the Board's selection, either by a majority of the independent
directors or an independent nominations committee. The R.O.C. Company Act expressly grants the
power of nomination to the shareholders, as well as to the board of directors. Under the R.O.C.
Company Act and the interpretations thereof, candidates to serve as directors are nominated either
by the board of directors prior to the shareholders' meeting or by the shareholders during the
election of the director. In addition, the Legislative Yuan of the R.O.C. has approved an amendment
to the R.O.C. Company Act specially granting director nomination powers to holders of at least one
percent of the total issued and outstanding shares of the company. Therefore, the requirement of a
nominations committee is in conflict with the R.O.C. Company Act. We currently follow the home
country practice.
Under Rule 4350(i)(1)(A), each issuer shall require shareholder approval when a stock option
or purchase plan is to be established or materially amended or other equity compensation
arrangement made or materially amended, pursuant to which stock may be acquired by officers,
directors, employees, or consultants. Under the corresponding domestic requirements in the R.O.C.
Company Act and the R.O.C. Securities and Exchange Act, shareholders' approval is required for the
distribution of employee bonuses in the form of stock, while the board of director has authority,
subject to the approval of the R.O.C. SFB, to approve employee stock option plans and to grant
options to employees pursuant to such plans. We follow the home country practice. R.O.C. law
provides for specific safeguards on employee stock option grants. Options granted under the plans
are subject to certain statutory volume limitations. Under the R.O.C. Company Act, the directors of
a company may not receive stock options because they are not considered "employees" of the company.
D. Employees
As of December 31, 2005, we employed 3,529 full-time employees, of whom 589 were executive
officers and administrators, 1,531 were engineers and technicians and 1,409 were operators of
machinery and equipment. Of all our operators, we employed 231 persons from outside Taiwan that are
based in Taiwan. Approximately 52.7% of our employees as of that date had undergraduate or college
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degrees, 1.2% who possessed doctoral degrees and approximately 19.1% who held master's
degrees. As of December 31, 2005, the average age of our employees was 32.0 years old.
The following table sets forth, as of the dates indicated, the number of our full-time
employees serving in the capacity indicated:
Year ended December 31,
Position
2003
2004
2005
Executive and Senior Managers
278
313
325
Supporting Staff and Administrators
173
277
264
Engineers and Technicians
1,503
1,562
1,531
Operations
Local
1,299
1,223
1,178
Overseas
181
218
231
Total
3,434
3,593
3,529
Our future success will depend, in part, on our ability to continue to attract and retain
highly qualified technical, marketing, engineering and management personnel. The competition in
Taiwan for qualified engineers and managers with experience in the semiconductor industry is
particularly intense. We have had considerable success in attracting engineers and managers of
R.O.C. origin working in the United States to emigrate back to Taiwan but this success may not
continue. In 2003, 2004 and 2005 we also recruited a number of design engineers in Korea and our
subsidiary in the United States recruited a number design engineers in the United States, to
partially replace a number of engineers who had left. We have not experienced any strikes or
significant work stoppages and believe that our relations with our employees are good.
We believe that our management policies and comprehensive benefits to employees have
contributed to good employee relations and employee retention. Our employee benefits include
subsidized meals and housing, health insurance, life insurance and education/training subsidies, as
well as employee bonuses. We have an employee pension plan ("old plan") under which we contribute
an amount equal to 2% of each employee's annual salary to a pension fund deposited with the Central
Trust of China. We also adopted the Labor Pension Act ("new plan") effective in Taiwan on July 1,
2005. The new act prescribed that the Company shall make monthly contributions to the employees'
pension accounts and the rate of the contribution from the Company shall be not less than 6% of the
employees' monthly wages. We have a 15-member pension fund committee consisting of five management
representatives and 10 employee representatives to manage and administer the fund. We completed
construction of modern athletic and recreational facilities for use by our employees in the fourth
quarter of 2002.
We have also established an employee benefit committee for implementing a variety of employee
programs including, among others, recreational activities, special group travel programs, emergency
assistance programs, maternity assistance programs and holiday gift certificate programs.
E. Share Ownership
The following table sets forth the personal share ownership of our directors, supervisors and
executive officers and their immediate families as of May 31, 2006:
66
Table of Contents
Shares owned by
Spouses and minor
Share Ownership
children
Number
Number of
Title
Name
of Shares
Percentage
Shares
Percentage
Executive Director, Chairman and
President
Miin Wu (1)
18,055,841
0.62
%
—
—
Executive Director
Ding-Hua Hu (2)
2,334,854
0.08
%
—
—
Executive Director
H. C. Chen (3)
603,647
0.02
%
—
—
Director and Senior Vice President of
Integrated Solution Group
Dang-Hsing Yiu
10,090,724
0.35
%
2,335,263
0.08
%
Director and Senior Vice President of
Microelectronics and Memory Solution
Group
C.Y. Lu
1,357,264
0.05
%
—
—
Director and Vice President
Raymond S. Mak
4,045,506
0.14
%
—
—
Director and Vice President
Yaou Dong Wang
3,288,788
0.11
%
712,829
0.03
%
Director and Vice President
J.P. Peng (4)
3,515,795
0.12
%
—
—
Director
Akira Takata (5)
70,074,805
2.40
%
—
—
Independent Director
C.L. Liu
100,000
—
—
—
Independent Director
Simon M. Sze
—
—
—
—
Independent Director
Cheng Yi Fang
634,344
0.02
%
210,659
0.01
%
Independent Supervisor
Ping Tien Wu
115,860
<0.01
%
—
—
Supervisor
J.D. Lee (5)
70,074,805
2.40
%
—
—
Associate Vice President, Finance Center
Paul Yeh
4,517,418
0.15
%
25,134
<0.01
%
(1)
Succeeded to the chairmanship, effective March 7, 2005.
(2)
Nominee of Champion Investment Corporation. Resigned from the chairmanship, effective March
7, 2005.
(3)
Nominee of Hung Chih Investment Corporation.
(4)
Nominee of Hui Yin Investment Corporation.
(5)
Nominee of Shun Yin Investment Co., Ltd.
67
Table of Contents
F. Stock Plans
Stock Performance-Based Employee Bonus Plan
In April 1999, our board approved a program similar to a stock appreciation rights plan under
which our employees who are eligible to participate would receive cash bonuses based on increases
in the market price of our common shares. Our board has authorized our chairman to use his
discretion to alter the terms of this plan, including the vesting period and the amount of the
bonus allocated to our employees. We initially allocated 61,179,500 shares upon the establishment
of the plan. Rights to receive cash bonuses under the plan were scheduled to vest with respect to
25% of the common shares allocated to the plan on August 1 of each year, starting August 1, 2000,
another 25% on August 1, 2001 and the remaining 50% on August 1, 2002. In April 2002, our board of
directors approved an amendment to the plan, changing the vesting date for the final 25% to August
1, 2002 from March 31, 2003. These rights to receive cash bonuses were forfeited for employees who
discontinued their employment before the scheduled vesting dates.
Between the establishment of the plan and December 31, 2002, rights to receive cash bonuses
with respect to a total of 6,197,600 shares have been forfeited, and rights to receive cash bonuses
with respect to a net additional 17,227,048 shares were allocated under the plan as a result of
stock dividends made on the shares allocated to the plan, exercise of rights under the plan and
allocation of additional rights. As of December 31, 2002, rights to receive cash bonuses with
respect to 72,208,948 shares were outstanding under the plan, of which all were vested. In April
2003, all remaining rights to receive cash bonuses under the plan, with respect to 72,208,948
shares, expired and were cancelled.
U.S. GAAP requires us to account for this plan in accordance with Accounting Principles Board
Opinion No. 25 ("APB No. 25"), "Accounting for Stock Issued to Employees". Under APB No. 25, we
recognize compensation expense for the plan based on the amount by which the quoted market value of
our shares covered by the grant exceeds the exercise price of the rights. Compensation determined
in accordance with the preceding sentence will be accrued as a charge to expense over the vesting
period during which the employee performs the related services. As a result, the compensation
expense adjustment under U.S. GAAP for this plan in 1999 was NT$245 million of additional expense.
Due to the reversal of compensation expense accrued on an R.O.C. GAAP basis, we recorded an
increase in income adjustment of NT$598 million in 2000, NT$496 million in 2001, NT$93 million in
2002, nil for 2003, 2004 and 2005 for this plan under U.S. GAAP. Unlike U.S. GAAP, R.O.C. GAAP has
no specific accounting provisions for stock appreciation rights plans. For R.O.C. GAAP reporting
purposes, we do not recognize compensation expense until the year in which these appreciation
rights vest. In 1999, no rights vested and, as a result, we did not recognize any compensation
expense. When the rights vest, we recognize compensation expense that is calculated based on the
difference between (i) the fair market value of our shares plus additional costs related to the
rights vested and (ii) the aggregate exercise price of the rights having vested in the period. We
have entered into a number of equity derivative contracts to cover the rights under the plan. We
recognized a reversal of compensation expense for the stock appreciation rights under R.O.C. GAAP
of nil in 2003, 2004 and 2005. See "Item 5. Operating and Financial Review and Prospects —
Operating Results — U.S. GAAP Reconciliation — Stock Performance-Based Employee Bonus Plan".
Share Option Plans
Our board of directors approved five share option plan on November 29, 2001, April 24, 2002,
April 7, 2003, March 11, 2004, March 7, 2005, which were approved by the R.O.C. SFC on December 20,
2001, May 23, 2002, April 24, 2003, March 30, 2004, March 7, 2005 respectively.
These share option plans provide that our officers and employees and those of our subsidiaries
may, at the discretion of our board of directors, be granted options to purchase our common shares
at an exercise price of or not less than the reported closing price of our common shares traded on
the Taiwan Stock Exchange on the date the options are granted. According to the share option plan,
upon expiry of the second anniversary of the date the options are granted, up to 50% of the granted
options may be vested, and another 25% of the granted options may be vested upon the expiry of each
of the third anniversary and fourth anniversary of the date the options are granted. Each vested
option can be exercised within a period of six years from the relevant date the options are
granted. There are no special senior management options. The options held by our directors,
supervisors and executive officers bear the same conditions as the ones received by our employees.
In addition, only directors and executive officers who are also hired as employees can be granted
options pursuant to the share option plans. Our board of directors will have complete discretion to
determine which eligible individuals are to receive option grants and the number of shares subject
to each grant.
Under the share option plan of November 29, 2001, we granted 71,768,500, 560,000, 1,507,000
and 6,164,500 share options at initial exercise prices of NT$25.1, NT$24.5, NT$11.5 and NT$11.7 on
January 16, 2002, May 6, 2002, October 1, 2002 and December 16,
68
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2002, respectively. As of December 31, 2005, we had 112,000 and 217,000 outstanding share
options at exercise prices of NT$11.1 and NT$11.3, respectively, under the share option plan of
November 29, 2001.
Under share option plan of April 24, 2002, we granted 150,000,000, 10,284,500 and 2,753,500
share options at initial exercise prices of NT$11.5, NT$11.7 and NT$9.35 on October 1, 2002,
December 16, 2002 and April 7, 2003, respectively. As of December 31, 2005 we had 87,286,500,
4,149,000 and 1,802,500 outstanding share options at exercise prices of NT$11.1, NT$11.3 and
NT$9.2, respectively, under the share option plan of April 24, 2002.
Under the share option plan of April 7, 2003, we granted 193,212,000, 829,000, 685,000,
785,000 and 749,000 share options at initial exercise prices of NT$7.75, NT$9.1, NT$13.15, NT$12.3
and NT$14.1 on June 13, 2003, November 4, 2003, March 11, 2004, March 30, 2004 and April 27, 2004,
respectively. As of December 31, 2005, we had 138,906,453, 496,000, 314,000, 553,000 and 749,000
outstanding share options at exercise prices of NT$7.75, NT$9.0, NT$12.9, NT$12.2 and NT$14.1,
respectively, under the share option plan of April 7, 2003.
Under the share option plan of March 11, 2004, we granted 176,972,000, 4,919,000, 2,176,000,
5,015,500, 4,466,000, 4,428,500 and 1,172,000 share options at initial exercise prices of NT$14.55,
NT$14.1, NT$11.0, NT$9.25, NT$7.05, NT$7.05 and NT$6.88 on April 9, 2004, April 27, 2004, June 2,
2004, August 11, 2004, October 27, 2004, January 28, 2005 and March 7, 2005, respectively. As of
December 31, 2005, we had 151,214,500, 2,626,000, 1,780,000, 4,054,500, 3,393,000, 3,988,500 and
888,000 outstanding share options at exercise prices of NT$14.55, NT$14.1, NT$11.0, NT$9.25,
NT$7.05, NT$7.05 and NT$6.88, respectively, under the share option plan of March 11, 2004.
Under
the share option plan of March 7, 2005, we granted 188,958,500,
7,978,500 and 2,372,000 share options at initial exercise prices of NT$5.84, NT$5.83 and NT$5.81 on August 8, 2005, August
29, 2005, and October 25, 2005, respectively. As of December 31, 2005, we had 186,129,500,
7,530,500 and 2,372,000 outstanding share options at exercise prices of NT$5.84, NT$5.83, and
NT$5.81, respectively, under the share option plan of March 7, 2005.
Our Articles of Incorporation set out the total number of authorized shares reserved for
grants for employee share options. In June 2003, a two-thirds supermajority of our stockholders
approved an increase of total number of authorized shares reserved for grants for employee share
options from 450 million common shares to 650 million common shares. On June 18, 2004, a two-thirds
supermajority of our stockholders approved a further increase of the total number of authorized
shares reserved for grants for employee share options to 800 million shares.
The R.O.C. SFC regulates the terms of our stock options and each of our stock option plans
must be approved by the R.O.C. SFC. Current R.O.C. SFC regulations require, among other things, the
exercise price to be not less than the reported closing price of our common shares traded on the
Taiwan Stock Exchange on the date the options are granted, the options to be exercisable beginning
two years after the options are granted in accordance with the plan, and the options to be valid
for a maximum period of 10 years. Therefore the terms of our stock option plans are largely
determined by prevailing R.O.C. SFC regulations, and our board of directors approve each stock
option plan before it is submitted to the R.O.C. SFC for approval.
Item 7.
Major Shareholders and Related Party Transactions
A. Major Shareholders
The following table sets forth certain information, as of May 2, 2006, with respect to the
common shares of our company owned of record by our top five shareholders and all directors,
supervisors and executive officers as a group. To our knowledge, as of May 2, 2006, no shareholder
beneficially owned 5% or more of our common shares.
Percentage of total
Number of
outstanding
Name of Shareholder
common shares
common shares
Shun Ying Investment Co., Ltd.
70,074,805
2.40
%
National Stabilization Fund
38,395,004
1.31
%
Kuo Hua Life Insurance Co., Ltd.
35,333,345
1.21
%
ABP Pension Fund
20,966,767
0.71
%
Miin Wu
18,055,841
0.61
%
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Table of Contents
B. Related Party Transactions
Members of our board of directors and our executive officers also serve or have served as
directors of companies with which we do business. These individuals include Mr. Miin Wu, who serves
as a director of Tower Semiconductor, Mr. C.Y. Lu, who serves as the chairman of Ardentec
Corporation ("Ardentec"). We believe that the transactions we conduct with these parties are on an
arms-length commercial basis.
We subcontract a portion of our assembly and testing requirements to Powertech Co., Ltd. and
Ardentec. For services performed by Powertech, we incurred manufacturing processing charges of
NT$211 million in 2003, nil in 2004 and nil in 2005. Powertech Co., Ltd. was no longer our related
party after June 18, 2004 since we resigned the supervisor position from Powertech Co., Ltd. For
services performed by Ardentec, we incurred manufacturing processing charges of NT$130 million in
2003, NT$260 million in 2004 and NT$218 million (US$6.7 million) in 2005. We purchase industrial
gases from United Industry Gas. We incurred NT$100 million in 2003 and NT$100 million in 2004, in
charges for industrial gases provided by United Industry Gas. After June 28, 2004, United Industry
Gas was no longer our related party since we no longer represented the director in United Industry
Gas.
In August 2000, we entered into a five-year manufacturing and technology cooperation agreement
with Tower Semiconductor, an Israeli company, whereby Tower Semiconductor will provide silicon
wafer manufacturing processing services that can employ Tower Semiconductor's microFLASH
technology. This technology is based on proprietary technology licensed from Saifun, an Israeli
integrated circuit design company. We also have entered into a separate agreement with Saifun that
provides us with rights to develop and manufacture certain products related to the microFLASH
process technology. Under the agreement with Tower Semiconductor, Tower Semiconductor will be
obligated to manufacture for us up to an agreed number of six-inch wafers per month upon receiving
our orders. Due to the market conditions in 2001 and 2002, we have placed orders for less than the
numbers of wafers that we could have required Tower Semiconductor to manufacture for us in those
periods. Wafer purchases from Tower Semiconductor was NT$37 million in 2003, NT$20 million in 2004
and NT$189 million (US$5.8 million) in 2005.
In December 2000, we entered into a share purchase agreement and related additional purchase
obligation agreements to invest a total of US$75 million in Tower Semiconductor, together with a
foundry agreement. Under the agreements, we are entitled to appoint one member of Tower
Semiconductor's board of directors and to a guaranteed portion of the wafer manufacturing capacity
of Tower Semiconductor's new eight-inch fabrication facility, which is now in the start-up stage.
Under the agreements, we agreed to purchase approximately 2.7 million Tower Semiconductor ordinary
shares, of which 866,551 shares were purchased at the initial closing in January 2000, and the
remainder were to be purchased in five equal installments at subsequent closings upon achievement
of certain milestones by Tower Semiconductor. The purchase price at each closing was to be based on
the fair market value of the shares at the time, subject to a minimum of US$12.50 and a maximum of
US$30 per share. Our payment obligations were US$20 million for the initial closing and US$11
million at each subsequent closing. Under the share purchase agreement, the excess of our payment
obligations over the total share purchase consideration is credited to a prepaid credit account.
Amounts in the credit account may be applied to future purchases of wafers, purchases of Tower
Semiconductor's shares (not including purchases under the original purchase commitments) or royalty
payments.
In September 2001, following the first two subsequent closings at which we acquired a further
733,380 shares, Tower Semiconductor underwent a financial restructuring under which, among other
things, it issued additional shares. We purchased 1,255,848 shares at a price per share of
US$12.75, and funded the purchase from our prepaid credit account. Pursuant to the third and fourth
subsequent closings in April and October 2002, we purchased a total of 2,416,326 shares at prices
per share adjusted to take account of dilution. In October 2002 we purchased a further 660,000
shares pursuant to a rights offering for US$5.00 per share, and received warrants for the purchase
of a further 297,000 shares.
In March 2003, we and other Tower Semiconductor investors reached an agreement with Tower
Semiconductor to amend our obligations in relation to the fifth and final subsequent closing
purchase obligation. Pursuant to the amended agreement, in May 2003, we paid US$3.6 million for the
purchase of 1,206,839 shares. In August 2003, we paid a further US$0.7 million to for the purchase
of a further 228,646 shares at US$2.98 per share. In November 2003, under a further amendment,
among other things, we waived all terms of Tower Semiconductor's milestones, agreed to advance the
remaining portion of the fifth and final purchase obligation, agreed not to use wafer credits until
January 1, 2007 except with respect to purchase orders issued before the date of the amendment and
obtained an option to convert credits we would otherwise have been able to utilize into shares of
Tower Semiconductor. Under the November 2003 amendment, the unconverted wafer credits accrue
interest at an agreed rate through December 31, 2007 and the aggregate principal amount of the
unconverted credits will be repaid in one lump sum on December 31, 2007. We also agreed not to sell
our shares in Tower
70
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Semiconductor until January 29, 2006, except that we may sell 30% of the Tower Semiconductor
shares we held as of January 29, 2004. In December 2003, we paid a further US$2.3 million for the
purchase of a further 777,295 shares at US$2.98 per share. We paid the balance of the fifth and
final purchase obligation of US$4.4 million in December 2003 for the purchase of 628,611 shares at
US$7.0 per share which we received in January 2004.
Our payments to Tower Semiconductor, as of December 10, 2003 when the balance of the fifth and
final purchase obligation was paid, totaled US$78.3 million, and of this the total share purchase
consideration is US$64.2 million.
At December 31, 2004, our credit account balance was US$14.1 million, and we owned 8,773,395,
or approximately 13.35%, of Tower Semiconductor's outstanding shares. As of December 2003 and 2004,
we provided an allowance of US$9.7 million for such prepaid credit account after assessing an
impairment. Our average purchase price per share as of December 31, 2004 was US$7.31, which is
somewhat higher than the fair market values due to the minimum per share price in the original
agreement.
Until the establishment of our audit committee, our board of directors as well as our
supervisors historically reviewed and approved related party transactions, consistent with R.O.C.
laws and practices. Since its establishment on February 24, 2005, our audit committee approves all
related party transactions.
Item 8.
Financial Information
A. Consolidated Statements and Other Financial Information
The selected income statement data for the years ended December 31, 2003, 2004 and 2005, and
the selected balance sheet data as of December 31, 2004 and 2005 presented below are derived from
our audited financial statements included in this annual report, which were prepared on a
consolidated basis. The selected income statement data for the years ended December 31, 2001 and
2002 and the selected balance sheet data as of December 31, 2001, 2002 and 2003 presented below are
derived from our audited financial statements not included in this annual report, which were also
prepared on a consolidated basis. Certain accounts in the selected balance sheet data as of
December 31, 2001, 2002, 2003 and 2004 have been reclassified to conform with the presentation of
the current period as of December 31, 2005.
We publish our financial statements in New Taiwan dollars, the lawful currency of Taiwan. All
references in this annual report to "United States dollars", "U.S. dollars" and "US$" are to United
States dollars and references to "New Taiwan dollars", "N.T. dollars" and "NT$" are to New Taiwan
dollars. All translations from New Taiwan dollars to United States dollars were made, unless
otherwise indicated, on the basis of the noon buying rate in The City of New York for cable
transfers in N.T. dollars per U.S. dollar as certified for customs purposes by the Federal Reserve
Bank of New York on December 31, 2005 of NT$32.80 = US$1.00. On June 20, 2006, the noon buying rate
between New Taiwan dollars and United States dollars was NT$32.56 = US$1.00.
The financial data set forth below should be read in conjunction with, and are qualified in
their entirety by reference to, our financial statements and the related notes included in this
annual report, and "Item 5. Operating and Financial Review and Prospects". Our financial statements
are prepared and presented in accordance with R.O.C. GAAP and R.O.C. reporting practices. For a
discussion of certain differences between R.O.C. GAAP and U.S. GAAP, see note 28 to our
consolidated financial statements for the years ended December 31, 2003, 2004 and 2005 included in
this annual report and "Item 5. Operating and Financial Review and Prospects — A. Operating Results
— U.S. GAAP Reconciliation".
71
Table of Contents
Year ended, and as of, December 31,
(in millions except per share and ADS data)
2001
2002
(Notes)
2003
(Notes)
2004
(Notes)
2005
2005
(NT$)
(NT$)
(NT$)
(NT$)
(NT$)
(US$)
Consolidated Income Statement Data:
R.O.C. GAAP
Net sales revenue
21,747
16,492
17,712
23,380
18,908
576.5
Cost of goods sold
(11,674
)
(17,105
)
(20,657
)
(18,990
)
(18,666
)
(569.1
)
Less: Unrealized profit as of December 31
—
(2
)
3
(1
)
—
—
Realized gross profit (loss)
10,073
(615
)
(2,942
)
4,388
242
7.4
Operating expenses
(6,557
)
(6,212
)
(4,742
)
(4,737
)
(5,116
)
(156.0
)
Operating income (loss)
3,516
(6,827
)
(7,684
)
(349
)
(4,875
)
(148.6
)
Total other income
1,356
466
1,877
1,619
1,197
36.5
Total other expenses
(4,795
)
(4,976
)
(2,370
)
(1,023
)
(3,205
)
(97.7
)
Income (loss) before taxes and minority interest
77
(11,337
)
(8,177
)
247
(6,882
)
(210.0
)
Income tax benefit (expense )
(943
)
(20
)
(21
)
(35
)
(215
)
(6.6
)
Income (loss) before minority interest
(866
)
(11,357
)
(8,198
)
212
(7,098
)
(216.4
)
Minority interest loss
—
0.4
0.3
5
70
2.1
Net Income (loss)
(866
)
(11,357
)
(8,198
)
218
(7,027
)
(214.2
)
Net income (loss) per share — basic (1)
(0.40
)
(5.32
)
(3.65
)
0.08
(2.41
)
(0.07
)
Net income (loss) per share — diluted (1)
(0.40
)
(5.32
)
(3.65
)
0.08
(2.41
)
(0.07
)
U.S. GAAP
Gross profit (loss)
6,598
(4,018
)
(1,576
)
5,052
688
21.0
Operating income (loss)
(2,263
)
(10,186
)
(6,614
)
335
(4,356
)
(132.8
)
Net income (loss) before cumulative effect
of change in accounting principle in
accordance with U.S. GAAP
(3,842
)
(13,674
)
(8,027
)
(469
)
(4,636
)
(141.3
)
Basic net income (loss) per share before
cumulative effect of change in accounting
principle in accordance with U.S. GAAP
(1.79
)
(6.39
)
(3.53
)
(0.17
)
(1.59
)
(0.05
)
Diluted net income (loss) per share before
cumulative effect of change in accounting
principle in accordance with U.S. GAAP
(1.79
)
(6.39
)
(3.53
)
(0.17
)
(1.59
)
(0.05
)
Net income (loss) (2)
(4,463
)
(13,674
)
(8,027
)
(469
)
(4,636
)
(141.3
)
Net income
(loss) per share—basic (1) (3)
(2.07
)
(6.39
)
(3.53
)
(0.17
)
(1.59
)
(0.05
)
Net income (loss) per share —diluted (1)(3)
(2.07
)
(6.39
)
(3.53
)
(0.17
)
(1.59
)
(0.05
)
Balance Sheet Data:
R.O.C. GAAP
Total current assets
25,358
21,301
21,002
21,706
20,027
610.6
Net property, plant and equipment
39,562
40,029
32,600
27,993
16,202
494.0
Total assets
71,693
67,450
59,919
54,396
45,604
1,390.4
Total current liabilities
9,016
17,687
18,717
9,449
10,664
325.1
Long -term liabilities
19,533
19,549
11,954
10,602
6,180
188.4
Total liabilities
28,549
37,236
30,671
20,051
16,844
513.5
Total shareholders' equity
43,144
30,214
29,248
34,344
28,558
870.7
U.S. GAAP
Total current assets
26,646
21,037
21,398
21,716
19,832
604.6
Total assets
72,979
65,509
59,200
52,807
46,220
1,409.1
Total current liabilities
10,152
18,127
18,986
9,445
10,699
326.2
Total liabilities
29,679
36,991
71,051
20,052
16,877
514.5
Total shareholders' equity
43,300
28,518
28,149
32,755
29,264
892.2
Other Data:
R.O.C. GAAP
Capital expenditures
9,078
8,975
1,606
2,554
1,595
48.6
Depreciation and amortization
8,006
8,742
9,287
7,562
7,253
221.1
Net cash provided by operating activities
9,209
217
1,484
5,987
4,397
134.1
Net income (loss) per ADS — basic
(4.0
)
(53.2
)
(36.5
)
0.80
(24.1
)
(0.70
)
Net income (loss) per ADS — diluted
(4.0
)
(53.2
)
(36.5
)
0.80
(24.1
)
(0.70
)
Number of common shares outstanding
(weighted, as adjusted ) (4)
2,157
2,140
2,272
2,822
2,912
2,912
Stock dividend per common share (5)
30
%
10
%
—
—
—
—
Note: 2002, 2003 and 2004
U.S. GAAP data were restated.
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(1)
Retroactively adjusted for our capital reduction in 2006 and all subsequent stock dividends
and employee bonuses declared.
(2)
The difference between net income under R.O.C. GAAP and U.S. GAAP was largely derived from
different treatments under these two accounting principles with respect to employee bonus
shares, derivative contracts, plant capacity loss, other-than-temporary decline in value on
marketable securities, and convertible debt securities with beneficial conversion features.
The difference in accounting treatment with respect to employee bonus shares under the two
accounting principles resulted in an additional expense of NT$4,273 million in 2001, no
additional expense or income in 2002 and 2003, 2004 and 2005. The differences of accounting
treatment with respect to derivative contracts under the two accounting principles resulted in
additional income of NT$228 million in 2001, additional income
of NT$616 million in 2002,
additional expense of NT$379 million in 2003, additional income
of NT$34 million in 2004 and additional expense of
NT$32 million (US$1.0 million) in 2005. The
difference in accounting treatment with respect to plant capacity loss under the two
accounting principles resulted in an additional income of NT$528 million in 2001, an
additional expense of NT$528 million in 2002, additional income of NT$269 million in 2003,
an additional expense of NT$258 million in 2004 and an
additional income of NT$0.4 million (US$0.01 million) in 2005.
The difference in accounting treatment with respect to other-than-temporary decline in value
on marketable securities under the two accounting principles resulted in an additional expense
of NT$646 million in 2001, an additional expense of NT$538 million in 2002, no additional
expense or income in 2003, an additional expense of
NT$448 million in 2004 and additional income of NT$1,326 million
(US$40.4 million) in 2005.
(3)
Retroactively adjusted for our capital reduction in 2006, all subsequent stock dividends and
employee bonuses declared. See note 22 to our consolidated financial statements for the years
ended December 31, 2003, 2004 and 2005 included in this annual report and "Item 5. Operating
and Financial Review and Prospects — A. Operating Results — U.S. GAAP Reconciliation".
(4)
Common shares outstanding weighted, as adjusted for our capital reduction in 2006, any
employee share bonus and any subsequent stock dividends declared.
(5)
The percentage of our stock dividend is determined by the number of common shares we
distributed to existing shareholders divided by the common shares outstanding immediately
prior to the share issuance. We did not distribute any cash dividends in any of the periods
presented.
Export Sales
Our
export sales accounted for 68%, 66% and 70% of total net sales for the years ended
December 31, 2003, 2004 and 2005, respectively. See note 26 to our consolidated financial
statements for the years ended December 31, 2003, 2004 and 2005 included in this annual report.
Export sales from the R.O.C. are as follows:
For the year ended December 31,
2003
2004
2005
NT$
NT$
NT$
US$
(in thousands)
Japan
7,269,548
8,363,806
7,706,521
234,955
Singapore and Hong Kong
3,487,250
5,119,396
4,076,395
124,280
United States
823,145
980,911
629,235
19,184
Europe
453,641
1,077,416
888,867
27,094
Total
12,033,584
15,541,521
13,300,838
405,513
Dividend Policy
We generally are not permitted under R.O.C. Company Law and our articles of incorporation to
distribute dividends or make other distributions to shareholders for any year in which we have no
current or retained earnings (excluding reserves). R.O.C. Company Law
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Table of Contents
also requires that 10% of annual net income, less prior years' losses, if any, and applicable
income taxes be set aside as a legal reserve until our accumulated legal reserve equals our paid-in
capital. In addition, we may set aside a special reserve in accordance with applicable laws and
regulations. Our articles of incorporation further provide that, after we pay our income taxes,
deduct any losses incurred in prior years and deduct the legal and/or special reserve from our net
income, the remaining portion of our net income may be appropriated or distributed in the
proportions specified in our articles of incorporation. We may pay these distributions in stock or
cash or a combination of stock and cash, except that any employee bonuses and shareholder dividends
will normally be distributed in stock unless we determine otherwise, and provided that not more
than 20% of our distributable net income may be distributed in the form of cash. All or part of the
dividends to shareholders may be reserved at the relevant annual shareholders' meeting as retained
earnings for distribution in later years. See "Item 10 — Additional Information — B. Memorandum and
Articles of Association — Description of Our Common Shares — Dividends and Distributions".
Our shareholders on a dividend record date will be entitled to the full dividend declared
without regard to any prior or subsequent transfer of these common shares. The record date for the
annual shareholders' meeting was determined by the board of directors at a meeting that was held on
March 7, 2005. No annual dividend was declared at our annual general meeting of shareholders held
on May 25, 2005.
For information relating to R.O.C. withholding taxes payable on dividends, see "Item 10.
Additional Information — E. Taxation — R.O.C. Taxation".
Legal Proceedings
As is the case with many companies in the semiconductor industry, we from time to time receive
communications from third parties asserting certain patents to our products. We have entered into
discussions with some of these third parties as to their respective positions and the terms of any
possible licenses. We could incur significant costs with respect to the defense of the claims that
could have a material adverse effect on our results of operations or financial condition. For
royalty payments under the existing license agreements or the potential new patent license
agreements, we have estimated the royalty budgets based on historical experiences and specific
arrangements. The royalty accrual was NT$198 million in 2003, NT$140 million in 2004 and NT$218
million (US$6.6 million) in 2005. As of December 31, 2005, the outstanding balance of this reserve
was NT$612 million (US$18.7 million).
On July 9, 2003 we learned from Tower Semiconductor that a shareholders class action was filed
on behalf of a class consisting of the ordinary shareholders of Tower Semiconductor at the close of
business in the United States on April 1, 2002. This case was filed in the United States District
Court for the Southern District of New York against Tower Semiconductor and its major corporate
shareholders, including, us, and against directors of Tower Semiconductor, including Miin Wu, our
president and CEO. The lawsuit alleges violation of section 14(a) and 20(a) of the Securities
Exchange Act of 1934, as amended, and Rule 14a-9 promulgated thereunder. The lawsuit alleges that
Tower Semiconductor and its directors made false and misleading statements and omissions in a proxy
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solicitation to Tower Semiconductor's shareholders regarding a proposed amendment to a
contract between Tower Semiconductor and its major shareholders, including us. The plaintiffs are
seeking unspecified damages and attorneys' and experts' fee and expenses. On January 30, 2004, the
defendants filed with the court a motion to dismiss the action. On April 20, 2004, the plaintiffs
filed a memorandum in opposition to defendants' motion to dismiss. On May 24, 2004, the defendants
filed a reply memorandum to further support defendants' motion to dismiss the plaintiffs'
complaint. On August 19, 2004, the court granted the motion to dismiss and on June 6, 2006, the United States Court of Appeals for the Second Circuit affirmed
this decision.
On March 7, 2006, Spansion, Inc. filed an action against us and Macronix America Inc. in the U.S.
District Court for the Northern District of California. The original complaint asserted causes of
action for false advertising, trademark dilution and unfair competition. The complaint further
sought $100 million in enhanced damages, attorneys' fees, and injunctive relief. On May 19, 2006,
Spansion filed an amended complaint alleging an additional claim for copyright infringement. All
claims asserted by Spansion arise out of the comparative advertising and marketing of the Macronix
NBit
Ô
flash memory chips. On June 5, 2006, we and Macronix America filed answers to the
amended complaint denying the allegations and asserting a number of affirmative defenses. A case
management conference was held on June 13, 2006, and the trial date was set on April 16, 2007. The
parties are currently in the beginning stages of discovery. We and Macronix America deny any
liability to Spansion and intend to vigorously defend the action.
Except as described above, we are currently not involved in any material legal proceedings,
although we may become involved in other litigation in the future. "Item 5. Operating and Financial
Review and Prospects — E. Research and Development, Patents and Licenses, etc. — Intellectual
Property".
B. Significant Changes
Except as otherwise noted, no significant changes have occurred since December 31, 2005. See
"Item 4. Information on the Company — History and Development of the Company — Recent Developments"
and note 17c of our consolidated financial statements for the years ended December 31, 2003, 2004
and 2005 included in this annual report.
Item 9.
The Offer and Listing
A. Offer and Listing Details
Each ADS represents ten of our common shares. Our ADSs have been listed on the Nasdaq National
Market since May 9, 1996. The table below presents, for the periods indicated, the high and low
closing prices on the Nasdaq National Market for our outstanding ADSs.
Average daily trading
volume (in thousands
Nasdaq Composite
Closing Price Per ADS(1)
of ADSs)(1)
Index
High
Low
High
Low
(US$)
(US$)
2001
21.76
6.62
37.796
2,859.15
1,423.19
2002
14.64
4.68
31.127
2,059.38
1,114.11
2003
6.25
2.06
15.467
2,009.88
1,271.47
First Quarter
6.25
4.37
9.360
1,460.99
1,271.47
Second Quarter
4.63
2.06
29.994
1,677.14
1,348.30
Third Quarter
4.99
3.75
12.679
1,909.55
1,640.13
Fourth Quarter
5.43
3.60
9.777
1,976.37
1,832.25
2004
8.79
3.43
9.868
2,178.34
1,752.49
First Quarter
6.68
4.09
16.480
2,153.83
1,901.80
Second Quarter
8.79
4.88
10.066
2,079.12
1,876.64
Third Quarter
5.57
3.77
7.594
2,015.55
1,752.49
Fourth Quarter
4.35
3.43
5.541
2,178.34
1,903.02
2005
3.80
1.56
6.175
2,273.37
1,904.18
First Quarter
3.80
2.23
7.881
2,152.15
1,973.88
Second Quarter
3.43
2.12
3.653
2,097.80
1,904.18
Third Quarter
3.53
1.60
5.186
2,218.15
2,045.20
Fourth Quarter
2.71
1.56
7.614
2,273.37
2,037.47
December
2.71
1.97
9.889
2,273.37
2,205.32
2006
January
3.14
2.36
10.444
2,231.36
2,243.74
February
2.66
2.28
1.767
2,310.56
2,239.81
March
2.36
2.00
6.623
2,340.82
2,249.72
April
2.57
2.16
18.484
2,370.88
2,310.35
May
3.06
2.41
7.865
2,344.99
2,158.76
June (through June 20)
2.50
1.61
5.434
2,219.86
2,072.47
Source: Bloomberg L.P.
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Table of Contents
(1)
As adjusted retroactively by Bloomberg L.P. to give effect to stock dividends paid in the
periods indicated.
Each GDS represents 40 of our common shares. Our GDSs have been listed on the Luxembourg Stock
Exchange since April 5, 2004. The table below presents, for the periods indicated, the high and low
closing prices on the Luxembourg Stock Exchange for our outstanding GDSs.
Average daily
trading volume
(in thousands of
Luxembourg Stock
Closing Price Per GDS(1)
GDSs)(1 )
Exchange Index
High
Low
High
Low
(US$)
(US$)
2004
Second Quarter (from April 5)
20.90
13.05
0
1,097.30
992.73
Third Quarter
12.47
8.8
0
1,104.12
1,019.37
Fourth Quarter
9.20
8.35
0
1,294.63
1,112.89
December
9.20
8.75
0
1,294.63
1,223.83
2005
1,639.50
1,281.26
First Quarter
8.00
5.25
0
1,396.69
1,281.26
Second Quarter
7.50
5.07
0
1,380.98
1,295.92
Third Quarter
7.80
3.80
0
1,491.42
1,358.45
Fourth Quarter
6.39
4.25
0
1,639.50
1,440.26
December
6.39
4.96
0
1,639.50
1,553.65
2006
January
7.11
6.32
0
1,850.35
1,646.31
February
6.16
5.17
0
1,920.35
1,855.48
March
5.22
4.67
0
1,896.57
1,832.20
April
5.37
5.11
0
1,902.02
1,843.42
May
N/A
N/A
0
1,949.33
1,767.01
June (through June 20)
N/A
N/A
0
1,778.72
1,667.50
Source: Bloomberg L.P.
(1)
Average includes only days in which GDSs were traded.
Our common shares have been listed on the Taiwan Stock Exchange since March 15, 1995. The
table below presents, for the periods indicated, the high and low closing prices and the average
daily volume of trading activity on the Taiwan Stock Exchange for our common shares and the highest
and lowest of the daily closing values of the Taiwan Stock Exchange Index.
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Average daily
trading volume
(in thousands of
Taiwan Stock
Closing Price Per Share (1)
shares)
Exchange Index
High
Low
High
Low
(NT$)
(NT$)
2001
68.89
24.92
38,127
6,104.24
3,446.26
2002
50.93
15.76
34,149
6,462.36
3,850.04
2003
21.84
7.06
25,556
6,142.32
4,139.50
2004
28.78
11.22
35,877
7,034.10
5,316.87
First Quarter
15.85
13.71
31,124
7,034.10
6,041.56
Second Quarter
28.78
16.96
58,700
6,880.18
5,482.96
Third Quarter
18.50
12.16
17,516
5,970.18
5,316.87
Fourth Quarter
14.05
11.22
16,589
6,139.69
5,650.97
December
14.05
11.65
21,857
6,139.69
5,798.62
2005
12.33
5.19
19,258
6,575.53
5,632.97
First Quarter
12.33
7.02
19,094
6,259.69
5,771.48
Second Quarter
10.55
6.96
22,619
6,373.86
5,693.01
Third Quarter
10.69
5.19
16,588
6,455.57
5,925.54
Fourth Quarter
9.01
5.33
18,725
6,575.53
5,632.97
December
9.01
6.82
29,507
6,575.53
6,179.82
2006
January
10.19
7.81
35,624
6,742.39
6,381.97
February
8.87
7.20
15,770
6,720.08
6,474.69
March
7.62
6.41
13,509
6,642.96
6,364.60
April
7.88
6.89
20,422
7,171.77
6,660.76
May
9.80
8.43
51,048
7,474.05
6,843.98
June (through June 20)
9.07
7.04
19,819
6,959.64
6,299.59
Source: Bloomberg L.P.
(1)
As adjusted retroactively by Bloomberg L.P. to give effect to stock dividends paid in the
periods indicated.
The Taiwan Stock Exchange has experienced substantial fluctuations in the prices of listed
securities and there are currently limits on the range of daily price movements, as set forth in
Article 63 of the operating rules of the Taiwan Stock Exchange Corporation. See "Cautionary
Statement" for purposes of the safe harbor provisions of the Private Securities Litigation Reform
Act of 1995", "Item 3. Key Information — D. Risk Factors — Political and Economic Risks — The
trading price of our common shares may be adversely affected by the general activities of the
Taiwan Stock Exchange and the economic performance of Taiwan", " — The Taiwan Stock Exchange" and "
— Taiwan Stock Exchange Index".
As of May 31, 2006, a total of 2,915,921,786 of our common shares were outstanding. Holders of
common shares that are not R.O.C. persons are required to hold these common shares through a
brokerage or custodial account in the R.O.C.. The entities in which these accounts are maintained
are the registered holders of the shares and thus all of the registered holders of our common
shares are R.O.C. persons. As of May 31, 2006, 13,585,957 common shares were registered in the name
of nominees of The Bank of New York, the depositary under the ADS deposit agreement. The Bank of
New York has advised us that, as of May 31, 2006, 1,358,595.7 ADSs, representing 13,585,957 common
shares, were held of record by Cede & Co. and seven other U.S. persons. We have no further
information as to common shares of our company held, or beneficially owned, by U.S. persons. As of
May 31, 2006, 1,109,055 common shares were registered in the name of a nominee of Citibank, N.A.,
the depositary under the GDS deposit agreement. Citibank, N.A. has advised us that, as of May 31,
2006, 27,726 GDSs, representing 1,109,055 common shares, were held of record by Cede & Co.
The Taiwan Stock Exchange
In 1961, the Securities and Futures Commission, working together with private interests,
established the Taiwan Stock Exchange to provide a marketplace for securities trading. The Taiwan
Stock Exchange is a corporation owned by government-controlled and private banks and enterprises.
The Taiwan Stock Exchange is independent of entities transacting business through it, each of which
pays a user's fee. Generally, all transactions in listed securities by brokers, traders and
integrated securities firms must be made through the Taiwan Stock Exchange.
The Taiwan Stock Exchange commenced operations in 1962. During the early 1980s, the Securities
and Futures Commission actively encouraged new listings on the Taiwan Stock Exchange and the number
of listed companies grew from 119 in 1983 to 691 as of
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December 31, 2005. As of December 31, 2005, the market capitalization of companies listed on
the Taiwan Stock Exchange was NT$15,633 billion.
Historically, Taiwan companies have listed only shares and bonds on the Taiwan Stock Exchange.
However, the Securities and Futures Commission has encouraged companies to list other types of
securities. In 1988, the Securities and Futures Commission permitted the issuance of the Taiwan's
first convertible bonds. Since 1989, there have been offerings of domestic convertible bonds and
convertible preferred shares. In addition, beneficiary units evidencing beneficiary interests in
closed-end investment funds and Dragon Bonds issued by Asian Development Bank are also listed on
the Taiwan Stock Exchange or traded on the GreTai Securities Market of Taiwan. The Securities and
Futures Commission also has regulations which permit foreign issuers to list their equity
securities directly on the Taiwan Stock Exchange or through the use of depositary receipts. To
date, five foreign issuers have listed their equity securities on the Taiwan Stock Exchange through
the use of depositary receipts in accordance with these regulations.
The Taiwan Stock Exchange requirements for listing are based on the following company
attributes:
•
shareholder diversification;
•
length of time in business;
•
amount of paid-in capital; and
•
profitability.
However, special listing criteria apply to technology companies, key businesses engaging in
national economic development and private enterprises participating in major national public
construction project under the encouragement of the government.
The GreTai Securities Market
To complement the Taiwan Stock Exchange, the GreTai Securities Market (formerly known as the
Over-the-Counter Securities Exchange) was established in September 1982 on the initiative of the
Securities and Futures Commission to encourage the trading of securities of companies who do not
qualify for listing on the Taiwan Stock Exchange. As of December 31, 2005, 503 companies had listed
equity securities on the GreTai Securities Market and the total market capitalization of those
companies was approximately NT$6,431 billion. In addition, the Emerging Stock Board of the GreTai
Securities Market was established on January 1, 2002 at the initiative of the Securities and
Futures Commission to encourage trading of securities of companies that are public companies but
not qualified for listing on the Taiwan Stock Exchange or the GreTai Securities Market.
Taiwan Stock Exchange Index
The Taiwan Stock Exchange Index is calculated on the basis of a wide selection of listed
shares weighted according to the number of shares outstanding. This weighted average method is also
used for the Standard and Poor's Index in the United States and the Nikkei Stock Average in Japan.
The Taiwan Stock Exchange Index is compiled by dividing the market value by the base day's total
market value for the index shares. The Taiwan Stock Exchange Index is the oldest and most widely
quoted market index in Taiwan.
The weighting of the shares in the Taiwan Stock Exchange Index is fixed as long as the number
of shares outstanding remains constant. When the total number of shares outstanding changes, the
weight of each stock is adjusted. Stock splits and stock dividends are adjusted automatically. Cash
dividends are not included in the calculation.
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The following table shows for the periods indicated information relating to the Taiwan Stock
Exchange Index.
Number of listed
Index at
companies at
Index
Index
period
Period ended December 31,
the period end
high
low
end
1990
199
12,495
2,560
4,530
1991
221
6,305
3,316
4,601
1992
256
5,392
3,328
3,377
1993
285
6,071
3,136
6,071
1994
313
7,184
5,195
7,125
1995
347
7,051
4,503
5,174
1996
375
6,983
4,690
6,934
1997
404
10,117
6,820
8,187
1998
437
9,277
6,251
6,418
1999
462
8,609
5,475
8,449
2000
474
10,202
8,350
8,843
2001
584
5,551
4,647
5,551
2002
638
6,462
3,850
4,452
2003
669
6,142
4,140
5,891
2004
697
7,034
5,317
6,140
2005
691
6,575
5,632
6,548
Sources: Status of Securities Listed on Taiwan Stock Exchange.
As indicated above, the performance of the Taiwan Stock Exchange has in recent years been
characterized by extreme price volatility.
B. Plan of distribution
Not applicable.
C. Markets
The principal trading market for our common shares is the Taiwan Stock Exchange. The ADSs have
been issued by The Bank of New York as depositary and are quoted on the Nasdaq National Market
under the symbol "MXICY". Prior to the initial public offering and subsequent listings on the
Taiwan Stock Exchange on March 15, 1995 and May 9, 1996, respectively, there was no market for the
common shares or the ADSs.
D. Selling Shareholders
Not applicable.
E. Dilution
Not applicable.
F. Expenses of the Issue
Not applicable.
Item 10.
Additional Information
A. Share Capital
Not applicable.
B. Memorandum and Articles of Association
Description of Our Common Shares
An English translation of our Articles of Incorporation is filed herewith as Exhibit 3.1.
Set forth below is a description of our common shares, including summaries of the material
relevant provisions of our articles of incorporation, the R.O.C. Company Law, the R.O.C. Securities
and Exchange Law and the rules and regulations under these laws. Unless otherwise indicated in this
annual report, holders of our ADSs generally have the same rights as holders of our common shares.
See "Item 3. Key Information — D. Risk Factors — Risks Relating to our Common Shares and our ADSs"
for a description of certain differences and " —Voting Rights of ADS Holders".
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General
Our authorized capital is NT$65.5 billion, divided into 6.5 billion shares, including up to
650 million shares reserved for the exercise of employee stock options as of June 20, 2006. As of
May 31, 2006, 2,915,821,786 of our common shares had been fully paid-in and were outstanding. All
of our common shares are in registered form.
As of May 31, 2006, 13,585,957 common shares underlying ADSs were held in the name of nominees
of The Bank of New York, as depositary for our ADS facility. The Bank of New York has advised us
that, as of May 31, 2006, 1,358,595.7 ADSs, representing 13,585,957 common shares, were held of
record by Cede & Co. and seven registered holders. We have no further information as to our common
shares held, or beneficially owned, by U.S. persons.
As of May 31, 2006, 1,109,055 common shares underlying GDSs were registered in the name of a
nominee of Citibank, N.A., the depositary under the GDS deposit agreement. Citibank, N.A. has
advised us that, as of May 31, 2006, 27,726 GDSs, representing 1,109,055 common shares, were held
of record by Cede & Co.
The R.O.C. Company Law, the R.O.C. Statute for Establishment and Administration of Science
Park and the R.O.C. Securities and Exchange Law provide that any change in the issued share capital
of a publicly-listed company, such as our company, requires various approvals. These include:
•
the approval of the board of directors;
•
an amendment to the articles of incorporation (which requires shareholder approval) if
the original paid-in share capital plus the number of the shares to be converted from the
convertible bonds or exercised from bonds with warrants, or to be exercised from employee
options, or the number of any new shares issued, exceeds the number of shares specified in
the articles of incorporation; and
•
the approval of the R.O.C. Securities and Futures Commission and the R.O.C. Ministry of
Economic Affairs or the Hsinchu Science Park Administration, as applicable.
Increase in Capital; Delivery of Certificates
We are required under R.O.C. law to file an amendment to our corporate registration within 15
days after the capital increase record date. Under the R.O.C. Securities and Exchange Law and
applicable regulations, we are required to deliver common share certificates to the relevant
purchasers within 30 days after receiving approval from the Hsinchu Science Park Administration of
our amendment to our corporate registration.
An amendment to the R.O.C. Company Law was passed by the R.O.C. Legislative Yuan on October
25, 2001 and became effective on November 14, 2001. Under the amended R.O.C. Company Law, when a
public company, such as our company, issues new shares, it could:
•
issue multiple share certificates and deliver them to shareholders;
•
issue a single share certificate representing the total number of new shares and deposit
the certificate with the Taiwan Securities Central Depositary Co., Ltd. (the "Central
Depositary"); or
•
register the new hares with the Central Depositary in lieu of issuing share certificates.
Dividends and Distributions
Except in limited circumstances, we are not permitted under the R.O.C. Company Law and our
articles of incorporation to distribute dividends or make other distributions to shareholders for
any year in which we did not have current or retained earnings (excluding reserves). The R.O.C.
Company Law also requires that 10% of our annual net income, less prior years' losses, if any, and
applicable income taxes be set aside as a legal reserve until the accumulated legal reserve equals
our paid-in capital. In addition, we may set aside a
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special reserve in accordance with applicable laws and regulations. Our articles of
incorporation further provide that, after we pay our income taxes, deduct losses incurred in prior
years and deduct the legal reserve and any special reserve, the remaining portion of our net income
for any year may be appropriated or distributed by our board of directors, subject to the approval
of our shareholders, as described in the following paragraph, in the following sequence:
•
83% as a dividend to shareholders;
•
15% for bonuses to employees; and
•
2% for remuneration to directors and supervisors.
We may pay these distributions in shares or cash or a combination of shares and cash, except
that any employee bonuses and shareholder dividends will normally be distributed in shares unless
we determine otherwise, and provided that not more than 20% of our distributable net income may be
distributed in the form of cash. All or part of the dividends to shareholders as described above
may be reserved at the relevant annual shareholders' meeting as retained earnings for distribution
in subsequent years.
Our articles of incorporation also provide that employee bonuses will be distributed in the
same form as the distribution of dividends to shareholders. In addition, distribution of shares as
bonuses to employees is applicable to the employees of our affiliated companies that satisfy the
requirements set by our board of directors. In 2003, 2004 and 2005, we did not distribute any
employee bonuses. The number of common shares issued as a bonus is obtained by dividing the total
nominal N.T. dollar amount of the bonus by the par value of our common shares, or NT$10 per share.
Subject to compliance with the above requirements, we may pay dividends or make other distributions
from our earnings and reserves as permitted by R.O.C. Company Law.
At our annual ordinary meeting of shareholders, our board of directors submits for shareholder
approval our consolidated financial statements for the preceding year and the proposal of the board
of directors for the distribution of dividends and bonuses from our net income, subject to
compliance with the requirements described above, for the preceding year. All of our common shares
outstanding and fully paid as of the relevant record date are entitled to share equally in any
approved dividend or other distribution.
In addition to permitting dividends to be paid out of net income if we do not have losses, the
R.O.C. Company Law permits us to make distributions of additional common shares to our shareholders
by capitalizing reserves, including the legal reserve and capital surplus of premium from issuing
shares and earnings from gifts received. However, the capitalized portion payable out of our legal
reserve is limited to 50% of the total accumulated legal reserve, and only if and to the extent the
accumulated legal reserve exceeds 50% of our paid-in-capital.
For information as to R.O.C. taxes on dividends and distributions, see "Item 10 Additional
Information — E. Taxation — R.O.C. Taxation."
Preemptive Rights and Issues of Additional Common Shares
According to the R.O.C. Company Law, when a company issues new common shares for cash, 10% to
15% of the issue must be offered to its employees. In addition, the R.O.C. Securities and Exchange
Law and the relevant securities regulations require that, if a company listed on the Taiwan Stock
Exchange or whose shares are traded on the GreTai Securities Market intends to offer new shares for
cash, at least 10% of the issue must be offered to the public, except under certain circumstances
or when exempted by the R.O.C. Securities and Futures Commission. This percentage can be increased
by a resolution passed at a shareholders' meeting, thereby reducing the number of new shares
subject to the preemptive rights of existing shareholders. Unless the percentage of shares to be
offered to the public is increased by the shareholders, existing shareholders who are listed on the
shareholders' register as of the record date have a preemptive right to acquire the remaining 75%
to 80% of the issue. The shares not subscribed for by the employees and shareholders at the
expiration of the period for the exercise of their rights should be sold to the public or specified
persons at the direction of our board of directors. According to the amended R.O.C. Securities and
Exchange Law, which became effective on February 8, 2002, the preemptive rights provisions will not
apply to offerings of new shares through a private placement approved at a shareholders' meeting.
Authorized but un-issued shares of any class may be issued, subject to the above-mentioned
provisions of the R.O.C. Company Law, the R.O.C. Statute for Establishment and Administration of
Science Park and the R.O.C. Securities and Exchange Law, upon the terms as our board of directors
may determine.
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Meetings of Shareholders
Meetings of our shareholders may be ordinary or extraordinary. Ordinary meetings of our
shareholders generally are held in Hsinchu, Taiwan, within six months after the end of our fiscal
year. Extraordinary meetings of our shareholders may be convened by resolution of our board of
directors whenever it deems necessary, or under certain circumstances, by shareholders or our
supervisors. Notice in writing of meetings of our shareholders, stating the place, time and purpose
of the meeting, must be sent to each shareholder at least 30 days, in the case of ordinary
meetings, and 15 days, in the case of extraordinary meetings, before the date set for each such
meeting.
We had previously, since we were listed on Nasdaq in 1996, obtained an exemption from Nasdaq
from its requirement to solicit proxies and to provide proxy statements for all meetings of
shareholders. We comply with the applicable R.O.C. laws and regulations with regard our shareholder
meetings.
Voting Rights
Under the R.O.C. Company Law, a shareholder has one vote for each common share. Except as
otherwise provided by law, a resolution may be adopted by the holders of a simple majority of the
common shares represented at the shareholders' meeting. At least a majority of the holders of the
total issued and outstanding common shares must be present at the meeting for the resolution to be
binding. The election of directors and supervisors at a shareholders' meeting is by means of
cumulative voting unless the articles of incorporation provide otherwise. Ballots for the election
of directors are cast separately from those for the election of supervisors. Candidates for the
offices of director and supervisor may be nominated at the shareholders' meeting at which ballots
for the election are cast.
The R.O.C. Company Law also provides that shareholder approval is required for major corporate
actions, including:
•
any amendment to the articles of incorporation, which is required, among other things,
for any increase in authorized share capital;
•
entering into, modification or termination of any contracts regarding leasing of all
business, outsourcing of operations or joint operations;
•
the dissolution, amalgamation or spin-off of a company;
•
the removing of directors or supervisors;
•
the transfer of the whole or an important part of a company's business or properties;
•
the taking over of the whole of the business or properties of any other company which
would have a significant impact on the acquiring company's operations; or
•
the distribution of any share dividend.
To obtain this approval, a shareholders' meeting must be convened. The holders of at least
two-thirds of all of the issued and outstanding common shares must be present at this meeting.
Then, the holders of at least a majority of the common shares represented at the meeting must vote
in favor of the action. However, in the case of a publicly-listed company such as our company, the
resolution may be adopted by the holders of at least two-thirds of the common shares represented at
a meeting of shareholders at which holders of at least a majority of the issued and outstanding
common shares are present. However, if a controlling company holds not less than 90% of its
subordinate company's outstanding shares, the controlling company's merger with the subordinate
company can be approved by board resolution adopted by majority consent at a meeting with
two-thirds of directors present. A shareholder may be represented at a shareholders' meeting by
proxy. A valid proxy must be delivered to us at least five days before the commencement of the
meeting.
Holders of ADSs will not have the right to exercise voting rights with respect to the common shares
represented thereby, except as described in "—Voting Rights of ADS Holders".
Other Rights of Shareholders
Under the R.O.C. Company Law, dissenting shareholders of our company are entitled to appraisal
rights in the event of amalgamation, spin-off and various other major corporate actions within 20
days of the resolution enacting the event. A dissenting shareholder may request that we redeem all
of the shares owned by the shareholder at a fair price to be determined by mutual agreement.
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If an agreement cannot be reached, the valuation will be determined by a court order. For
amalgamations or spin-offs, a dissenting shareholder may exercise its appraisal right by serving
written notice on us before or during the related shareholders' meeting or by raising and
registering its objection at the shareholders' meeting. For other major corporate actions, a
dissenting shareholder may exercise its appraisal right by serving written notice on us before the
related shareholders' meeting and by raising and registering its objection at the shareholders'
meeting.
In addition to appraisal rights, within 30 days after the date of the shareholders' meeting,
any shareholder has the right to sue for the annulment of any resolution adopted at a shareholders'
meeting where the procedures or the method of resolution were legally defective. However, if a
court is of the opinion that such violation is not material and does not affect the result of the
resolution, the court may reject or dismiss the shareholder's lawsuit. One or more shareholders who
have held more than 3% of our issued and outstanding shares for over a year may require a
supervisor to bring a derivative action on behalf of the company against a director for losses
suffered by the company as a result of the director's unlawful actions or failure to act by sending
a written request to a supervisor. In addition, one or more shareholders who have held more than 3%
of our issued and outstanding shares for over a year may require our board of directors to convene
an extraordinary shareholders' meeting by sending a written request to the board of directors.
Register of Shareholders and Record Dates
We maintain our shareholder register at our office in Taipei, Taiwan, and enter transfers of
our common shares in the register upon presentation of, among other documents, the certificates for
the common shares transferred. Under the R.O.C. Company Law, the transfer of common shares is
effected by endorsement and delivery of the related share certificates. In order, however, to
assert shareholders' rights against us, the transferee must have his name and address registered on
the shareholder register. Shareholders are required to file their respective specimen seals with
us. The settlement of trading in our common shares is normally carried out on the book-entry system
maintained by the Central Depositary.
The R.O.C. Company Law permits us to set a record date and close our shareholder register for
a specified period in order for us to determine the shareholders or pledgees that are entitled to
certain rights pertaining to our common shares by giving advance public notice.
Under the amended R.O.C. Company Law, a public company's shareholder register, such as ours,
is closed for a period of 60 days before each ordinary shareholders' meeting, 30 days before each
extraordinary shareholders' meeting and a period of five days before each record date for
distribution of dividends, bonuses or other benefits.
Annual Financial Statements
Under the R.O.C. Company Law, ten days before the ordinary meeting of shareholders, our annual
financial statements must be available at our principal office in Hsinchu for shareholder
inspection.
Acquisition of Common Shares by our Company
With minor exceptions, we may not acquire our common shares under the R.O.C. Company Law and
any common shares we acquire must be sold at the current market price within six months after our
acquisition of the shares.
Under the R.O.C. Securities and Exchange Law, we may, in accordance with R.O.C. Securities and
Futures Commission procedures and a resolution adopted by a majority of our board of directors at a
meeting attended by more than two-thirds of the directors, purchase our shares on the Taiwan Stock
Exchange or the GreTai Securities Market or by a tender offer for the following purposes:
•
for share transfer to our employees;
•
for the delivery of shares following the conversion or exercise of bonds with warrants,
preferred shares with warrants, convertible bonds, convertible preferred shares or
certificates of warrants issued by us; and
•
for maintaining our credit and our shareholders' equity, except that the shares so
purchased shall be cancelled thereafter.
The total shares purchased by us may not exceed 10% of our total issued and outstanding
shares. In addition, the total cost of the purchased shares may not exceed the aggregate amount of
our retained earnings, any premium from share issuances and the realized portion of our capital
reserve. The shares purchased by us pursuant to the first two items above will be transferred to
the intended
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transferees within three years after the purchase; otherwise the shares will be cancelled. For
the shares to be cancelled under the third item above, we are required to complete an amendment
registration for the cancellation within six months after the purchase. The shares purchased by us
may not be pledged or hypothecated. In addition, we may not exercise any shareholders' rights
attaching to these shares. Our affiliates (as defined in Article 369-1 of the R.O.C. Company Law),
directors, supervisors, managers and their respective spouses and minor children and/or nominees
are prohibited from selling our shares during the period we purchase our shares.
Liquidation Rights
In the event of the liquidation of our company, the assets remaining after payment of all
debts, liquidation expenses, taxes and distributions to holders of preferred shares, if any, will
be distributed pro rata to the shareholders in accordance with the R.O.C. Company Law.
Transfer Restrictions
The R.O.C. Securities and Exchange Law requires each director, supervisor, manager or
shareholder who, together with such shareholder's spouse, minor children or nominees, holds more
than 10% of our shares, to report the amount of such person's holding to us and limits the number
of shares that can be sold or transferred on the Taiwan Stock Exchange or on the GreTai Securities
Market by such person per day (unless the number of shares transferred does not exceed 10,000).
Voting Rights of ADS Holders
ADS holders may direct the exercise of voting rights with respect to the Common Shares
represented by ADSs only in accordance with the provisions of the deposit agreement and applicable
R.O.C. law. See ''Item 3. Key Information – D. Risk Factors — Risks Related to our Common Shares,
ADSs and GDSs — ADS and GDS holders do not have the same voting rights as our common shareholders,
which may affect the value of the ADSs and GDSs''. If an ADS holder wishes to withdraw its Common
Shares, the ADS holder must appoint a local agent and open a securities trading account with a
local brokerage firm. Even if the ADS holder does all this, however, the ADS holder might not know
about the meeting early enough in advance to withdraw the shares or the ADS holder may not have
enough time to register the Common Shares for voting purposes before the shareholder register is
closed. See ''Item 10. Additional Information — B. Memorandum and Articles of Association —
Description of Our Common Shares — Meetings of Shareholders'' and ''— Register of Shareholders and
Record Dates''.
Except as described below, ADS holders will not be able to exercise voting rights attaching to
the Common Shares represented by the ADSs on an individual basis. According to the R.O.C. Company
Law, a shareholder's voting rights attaching to shareholdings in a R.O.C. company must, as to all
matters subject to a vote of shareholders (other than the election of directors and supervisors),
be exercised as to all shares held by the shareholder in the same manner. Accordingly, the voting
rights attaching to the Common Shares represented by ADSs must be exercised as to all matters
subject to a vote of shareholders by the depositary or its nominee, who represents all holders of
ADSs, collectively in the same manner, except in the case of an election of directors and
supervisors. Directors and supervisors are elected by cumulative voting.
In the deposit agreement, ADS holders appointed the depositary as their representative to
exercise the voting rights with respect to the Common Shares represented by their ADSs.
We will provide the depositary with copies (including English translations) of notices of
meetings of our shareholders and the agenda of these meetings. These materials will contain an
indication of the number of directors or supervisors to be elected if an election of directors or
supervisors is to be held at the meeting. The depositary will also mail to ADS holders a voting
instruction form. In order to be valid, the holder of ADSs must complete, sign and return to the
depositary the voting instruction form by a date specified by the depositary. The number of
directors or supervisors to be elected may change after the depositary has mailed the voting
instruction form to ADS holders. If a change were to occur, the depositary would be unable to
follow each ADS holder's exact voting instructions and may calculate such ADS holder's votes
according to procedures not inconsistent with the provisions of the deposit agreement.
We cannot assure ADS holders that they will receive the materials in time to ensure that they
can instruct the depositary to vote the Common Shares represented by their ADSs. In addition, the
depositary and its agents are not responsible for failing to carry out voting instructions or for
the manner of carrying out voting instructions if such act or failure to act is in good faith. This
means that ADS holders may not be able to exercise their right to vote and there may be nothing ADS
holders can do if the Common Shares represented by their ADSs are not voted as they requested.
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Subject to the provisions described in the second succeeding paragraph, which will apply to
the election of directors and supervisors, if persons together holding at least 51% of the ADSs
outstanding at the relevant record date instruct the depositary to vote in the same manner in
respect of one or more resolutions to be proposed at the meeting (other than the election of
directors or supervisors), the depositary will notify the instructions to our president, or if he
is no longer an officer or director of our company, then the Chairman of our board of directors
(the ''designated representative''), or such person as he may designate. The depositary will
appoint the president or his designated person to serve as the ADS holders' designated
representative and that of the depositary's or its nominee. The designated representative will
attend the meeting and vote all the Common Shares represented by ADSs in the manner so instructed.
If, for any reason, the depositary has not by the date specified by it received instructions
from persons together holding at least 51% of all the ADSs outstanding at the relevant record date
to vote in the same manner in respect of any resolution specified in the agenda for a meeting
(other than the election of directors or supervisors), then ADS holders will be deemed to have
instructed the depositary or its nominee to authorize and appoint the designated representative as
the ADS holders' representative and that of the depositary's or its nominee to attend the meeting
and vote all the Common Shares represented by all ADSs as the designated representative deems
appropriate with respect to the resolution or resolutions, which may not be in the best interests
of ADS holders. However, no authorization will be given with respect to any matter as to which the
designated representative informs the depositary that he does not wish to be so authorized, in
which event the depositary will not vote at the relevant meeting. The depositary will, however,
take such action as is necessary to cause all the Common Shares represented by ADSs to be counted
for the purpose of satisfying applicable quorum requirements.
The depositary will notify the designated representative of the instructions for the election
of directors and supervisors received from ADS holders and appoint the designated representative as
the ADS holders' representative and that of the depositary's or its nominee to attend any meeting
and vote the Common Shares represented by ADSs as to which the depositary has received instructions
from ADS holders for the election of directors and supervisors, subject to any restrictions imposed
by R.O.C. law and our articles of incorporation. If, by the date specified by the depositary, ADS
holders have not delivered instructions to the depositary, ADS holders will be deemed to have
instructed the depositary to authorize and appoint the designated representative as the ADS
holders' representative and that of the depositary's or its nominee to attend the meeting and vote,
at his sole discretion, all the Common Shares represented by ADSs as to which the depositary has
not received instructions from ADS holders for the election of directors and supervisors as the
designated representative deems appropriate, which may not be in the best interests of ADS holders.
However, no authorization will be given with respect to any election of directors or supervisors as
to which the designated representative informs the depositary that he does not wish to be so
authorized, in which event the depositary will attend such meeting and will vote those Common
Shares represented by the ADSs as to which it has received instructions from ADS holders for the
election of directors and supervisors in the manner so instructed. The depositary will not vote at
the relevant meeting any Common Shares represented by ADSs, as to which the depositary has not
received instructions from ADS holders for the election of directors any supervisors but will take
such action as is necessary to cause all the Common Shares represented by ADSs to be counted for
the purpose of satisfying applicable quorum requirements.
By continuing to hold ADSs or any interest in the ADSs, ADS holders will be deemed to have
agreed to the voting provisions set forth in the deposit agreement, as these provisions maybe
amended from time to time.
C. Material Contracts
Except for the contracts stated below we have not been a party to any material contracts that
were entered into beyond our ordinary course of business during the preceding two year period.
Indenture for Zero Coupon Convertible Bonds Due February 10, 2008
On February 10, 2003 and March 4, 2003, we issued zero coupon convertible bonds totaling US$90
million pursuant to an international bond offering. The bonds will mature on February 10, 2008 at a
redemption price equal to their principal amount, together with redemption premium. The bonds do
not bear interest. Unless previously redeemed or repurchased and cancelled, the bonds, at the
option of the holders of the bonds, are convertible at anytime, except during a closed period, on
or after March 12, 2003 and on or before January 11, 2008, into common shares, par value NT$10.00
per share. The initial conversion price will be NT$12.06 per common share, subject to adjustment in
certain events. As of December 31, 2005, all the zero coupon convertible bonds due February 10,
2008 had been converted or redeemed. The bonds are evidenced by the indenture included as Exhibit
14.2 hereto.
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GDS Deposit Agreement Dated April 5, 2004
In April 2004, we sold 13,125,000 GDSs, representing 525,000,000 new common shares. The
offering price for the GDSs was US$13.20 per GDS and net proceeds were approximately US$173.25
million. The GDSs are listed on the Luxembourg Stock Exchange plc. Our GDSs are not fungible with
our ADSs, and each GDS represents 40 of our common shares. As of June 21, 2004, GDSs holders
representing over 95% of the GDSs issued in April 2004 have withdrawn from our GDSs program and
converted their GDSs to common shares.
The GDSs are subject to the terms and conditions set forth in the deposit agreement dated
April 5, 2004 entered into between us and Citibank, N.A., in its capacity as depositary, which is
included as Exhibit 14.9 hereto.
We have undertaken in the deposit agreement to use our best endeavors to maintain, so long as
any GDS is outstanding, a listing for the GDSs on the Luxembourg Stock Exchange. In the event that
the listing on the Luxembourg Stock Exchange is not maintained, we have undertaken in the deposit
agreement to use our best endeavors with the reasonable assistance of the depositary (provided at
our expense) to obtain and maintain a listing of the GDSs on any other internationally recognized
stock exchange in Europe.
The deposit agreement and the GDSs are governed by, and shall be construed in accordance with,
English law except that the certifications set forth in Schedule 3 to the deposit agreement and any
provisions relating thereto shall be governed by and construed in accordance with the laws of the
State of New York and any United States Federal Court sitting in the Borough of Manhattan, New York
City. The rights and obligations attaching to the Deposited Shares (as defined in the deposit
agreement) and Certificates of Payment (as defined in the deposit agreement) will be governed by
R.O.C. law.
Holders of GDSs are not party to the deposit agreement and thus, under English Law, have no
contractual rights against, or obligations to, us or the depositary. However, the Deed Poll
executed by us in favor of the holders provides that, if we fail to perform the obligations imposed
on us by certain specified provisions of the deposit agreement, any holder may enforce the relevant
provisions of the deposit agreement as if it were a party to the deposit agreement and was the
"Depositary" in respect of that number of Deposited Shares to which the GDSs of which he is the
holder relate. The depositary is under no duty to enforce any of the provisions of the deposit
agreement on behalf of any holder of a GDS or any other person.
Set forth below is a summary of certain provisions of the deposit agreement relating to rights
of GDS holders, which are subject to the detailed provisions of the deposit agreement. Terms used
in this summary and not defined herein but which are defined in the deposit agreement have the
meanings ascribed to them in the deposit agreement.
Rights Issues
If and whenever we announce our intention to distribute rights to the holders of our common
shares to subscribe for or to acquire our common shares, securities or other assets, the depositary
will give notice to GDS holders of such offer or invitation, specifying the manner by which and
time during which holders may request the depositary to exercise such rights as provided below or,
if such be the case, specifying details of how the depositary proposes to distribute the rights or
the proceeds of any sale thereof. The depositary will deal with such rights in the manner described
below:
(1)
if and to the extent that the depositary shall, at its discretion, deem it to be lawful
and reasonably practicable, the depositary shall make arrangements whereby the GDS holders
may, upon payment of the subscription price together with such fees, taxes, duties, charges,
costs and expenses as may be required under the deposit agreement and completion of such
undertakings, declarations, certifications and other documents as the depositary may
reasonably require, request the depositary to exercise such rights on their behalf with
respect to the deposited common shares and to distribute the common shares, securities or
other assets so subscribed or acquired to the holders entitled thereto by an increase in the
numbers of GDSs corresponding to the Master GDS
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(as defined in the deposit agreement) or an issue of certificates in definitive registered
form in respect of GDSs, according to the manner in which the holders hold their GDSs; or
(2)
if and to the extent that the depositary shall at its discretion, deem it to be lawful
and reasonably practicable, the depositary will distribute such rights to the holders
entitled thereto in such manner as the depositary may at its discretion determine; or
(3)
if and to the extent that the depositary deems any such arrangement and distribution as
is referred to in paragraphs (1) and (2) above to all or any holders not to be lawful and
reasonably practicable (including, without limitation, due to the fractions which would
otherwise result or to any requirement that we, the Custodian (as defined in the deposit
agreement) or the depositary withhold an amount on account of taxes or other governmental
charges) or to be unlawful, the depositary will, provided that holders have not taken up
rights through the depositary as provided in (1) above, sell such rights (either by public
or private sale and otherwise at its discretion subject to all applicable laws and
regulations) and distribute the net proceeds of such sale as a cash distribution pursuant to
the deposit agreement to the holders entitled thereto. If the depositary is unable to sell
such rights, it will allow such rights to lapse.
We have agreed in the deposit agreement that we will, unless prohibited by applicable law or
regulation, give our consent to, and if requested use all reasonable endeavors (subject to the next
paragraph) to facilitate, any such distribution, sale or subscription by the depositary or the
holders, as the case may be, pursuant to certain provisions of the deposit agreement (including the
obtaining of legal opinions from counsel reasonably satisfactory to the Depositary concerning such
matters as the Depositary may reasonably specify).
If we notify the depositary that registration is required in any jurisdiction under any
applicable law of the rights, securities or other property to be distributed under certain
provisions of the deposit agreement or the securities to which such rights relate in order for us
to offer such rights or distribute such securities or other property to the GDS holders or owners
of GDSs and to sell the securities corresponding to such rights, the depositary will not offer such
rights or distribute such securities or other property to the GDS holders or sell such securities
unless and until we procure the receipt by the depositary of an opinion from counsel reasonably
satisfactory to the depositary and us that a registration statement is in effect or that the
offering and sale of such rights or securities to such GDS holders or owners of GDSs are exempt
from registration under the provisions of such law. Neither we nor the depositary shall be liable
to register such rights, securities or other property or the securities to which such rights relate
and they shall not be liable for any losses, damages or expenses resulting from any failure to do
so.
If at the time of the offering of any rights, at its discretion, the depositary shall be
satisfied that it is not lawful or reasonably practicable (for reasons outside its control) to
dispose of the rights in any manner provided in paragraphs (1), (2) and (3) above, the depositary
shall permit the rights to lapse. The depositary will not be responsible for any failure to
determine that it may be lawful or feasible to make such rights available to GDS holders or owners
of GDSs in general or to any GDS holder or owner of a GDS or GDS holders or owners of GDSs in
particular.
See ''Item 3. Key Information – D. Risk Factors — Risks Related to our Common Shares, ADSs and
GDSs — The rights of holders of our ADSs and GDSs to participate in our rights offerings may be
limited, which may cause dilution to their holdings''.
Voting Rights of GDS Holders
GDS holders may direct the exercise of voting rights with respect to the our common shares
represented by GDSs only in accordance with the provisions of the deposit agreement and applicable
R.O.C. law. See ''Item 3. Key Information — D. Risk Factors — Risks Related to our Common Shares,
ADSs and GDSs — ADS and GDS holders do not have the same voting rights as our common shareholders,
which may affect the value of the ADSs and GDSs''. If a GDS holder wishes to withdraw its common
shares, the GDS holder must appoint a local agent and open a securities trading account with a
local brokerage firm. Even if the GDS holder does all this, however, the GDS holder might not know
about the meeting early enough in advance to withdraw the shares or the GDS holder may not have
enough time to register the common shares for voting purposes before the shareholder register is
closed. See ''Item 10. Additional Information — B. Memorandum and Articles of Association —
Description of Our Common Shares — Meetings of Shareholders'' and ''— Register of Shareholders and
Record Dates''.
Except as described below, GDS holders will not be able to exercise voting rights attaching to
our common shares represented by the GDSs on an individual basis. According to the R.O.C. Company
Law, a shareholder's voting rights attaching to shareholdings in a R.O.C. company must, as to all
matters subject to a vote of shareholders (other than the election of directors and supervisors),
be exercised as to all shares held by the shareholder in the same manner. Accordingly, the voting
rights attaching to the common shares represented by GDSs must be exercised as to all matters
subject to a vote of shareholders by the depositary or its nominee, who
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represents all holders of GDSs, collectively in the same manner, except in the case of an
election of directors and supervisors. Directors and supervisors are elected by cumulative voting.
In the deposit agreement, GDS holders appointed the depositary as their representative to
exercise the voting rights with respect to the common shares represented by their GDSs.
We will provide the depositary with copies (including English translations) of notices of
meetings of our shareholders and the agenda of these meetings. These materials will contain an
indication of the number of directors or supervisors to be elected if an election of directors or
supervisors is to be held at the meeting. The depositary will also mail to GDS holders a voting
instruction form. In order to be valid, the holder of GDSs must complete, sign and return to the
depositary the voting instruction form by a date specified by the depositary. The number of
directors or supervisors to be elected may change after the depositary has mailed the voting
instruction form to GDS holders. If a change were to occur, the depositary would be unable to
follow each GDS holder's exact voting instructions and may calculate such GDS holder's votes
according to procedures not inconsistent with the provisions of the deposit agreement.
We cannot assure GDS holders that they will receive the materials in time to ensure that they
can instruct the depositary to vote the common shares represented by their GDSs. In addition, the
depositary and its agents are not responsible for failing to carry out voting instructions or for
the manner of carrying out voting instructions if such act or failure to act is in good faith. This
means that GDS holders may not be able to exercise their right to vote and there may be nothing GDS
holders can do if the common shares represented by their GDSs are not voted as they requested.
Subject to the provisions described in the second succeeding paragraph, which will apply to
the election of directors and supervisors, if persons together holding at least 51% of the GDSs
outstanding at the relevant record date instruct the depositary to vote in the same manner in
respect of one or more resolutions to be proposed at the meeting (other than the election of
directors or supervisors), the depositary will notify the instructions to our president, or if he
is no longer an officer or director of our company, then the Chairman of our board of directors
(the ''designated representative''), or such person as he may designate. The depositary will
appoint the president or his designated person to serve as the GDS holders' designated
representative and that of the depositary's or its nominee. The designated representative will
attend the meeting and vote all the common shares represented by GDSs in the manner so instructed.
If, for any reason (other than failure by us to supply the notice of the shareholders' meeting
to the depositary within the requisite time period provided in the deposit agreement), the
depositary has not by the date specified by it received instructions from persons together holding
at least 51% of all the GDSs outstanding at the relevant record date to vote in the same manner in
respect of any resolution specified in the agenda for a meeting (other than the election of
directors or supervisors), then GDS holders will be deemed to have instructed the depositary or its
nominee to authorize and appoint the designated representative as the GDS holders' representative
and that of the depositary's or its nominee to attend the meeting and vote, at his sole discretion,
all the common shares represented by all GDSs as the designated representative deems appropriate
with respect to the resolution or resolutions, which may not be in the best interests of GDS
holders. However, no authorization will be given with respect to any matter as to which the
designated representative informs the depositary that he does not wish to be so authorized, in
which event the depositary will not vote at the relevant meeting. The depositary will, however,
take such action as is necessary to cause all the common shares represented by GDSs to be counted
for the purpose of satisfying applicable quorum requirements.
The depositary will notify the designated representative of the instructions for the election
of directors and supervisors received from GDS holders and appoint the designated representative as
the GDS holders' representative and that of the depositary's or its nominee to attend any meeting
and vote the common shares represented by GDSs as to which the depositary has received instructions
from GDS holders for the election of directors and supervisors, subject to any restrictions imposed
by R.O.C. law and our articles of incorporation. If, by the date specified by the depositary, GDS
holders have not delivered instructions to the depositary, GDS holders will be deemed to have
instructed the depositary to authorize and appoint the designated representative as the GDS
holders' representative and that of the depositary's or its nominee to attend the meeting and vote,
at his sole discretion, all the common shares represented by GDSs as to which the depositary has
not received instructions from GDS holders for the election of directors and supervisors, which may
not be in the best interests of GDS holders. However, no authorization will be given with respect
to any election of directors or supervisors as to which the designated representative informs the
depositary that he does not wish to be so authorized, in which event the depositary will attend
such meeting and will vote those common shares represented by the GDSs as to which it has received
instructions from GDS holders for the election of directors and supervisors in the manner so
instructed. The depositary will not vote at the relevant meeting any common shares represented by
GDSs, as to which the depositary has not received instructions from GDS holders for the election of
directors any supervisors but will take such action as is necessary to cause all the common shares
represented by GDSs to be counted for the purpose of satisfying applicable quorum requirements.
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By continuing to hold GDSs, GDS holders will be deemed to have agreed to the voting provisions
set forth in the deposit agreement, as these provisions maybe amended from time to time.
D. Exchange Controls
Foreign Exchange
Set forth below are the period-end noon buying rates in effect between the N.T. dollar and the
U.S. dollar, expressed in N.T. dollars per U.S. dollar, for the periods indicated.
Period-End
NT$ per US$1.00
1999
31.39
2000
33.17
2001
35.00
2002
34.70
2003:
First Quarter
34.72
Second Quarter
34.61
Third Quarter
33.78
Fourth Quarter
33.99
2004:
First Quarter
33.00
Second Quarter
33.66
Third Quarter
33.99
Fourth Quarter
31.74
2005:
First Quarter
31.46
Second Quarter
31.64
Third Quarter
33.18
Fourth Quarter
32.80
2006:
January
31.97
February
32.40
March
32.42
April
31.90
May
31.99
June (through June 20)
32.56
Source:
The noon buying rate in New York for cable transfers payable in foreign currencies as
certified for customs purposes by the Federal Reserve Bank of New York.
Taiwan's Foreign Exchange Control Statute and regulations provide that all foreign exchange
transactions must be executed by banks designated by the Ministry of Finance and by the Central
Bank of China to handle foreign exchange transactions. Current regulations favor trade-related
foreign exchange transactions. Consequently, foreign currency earned from exports of merchandise
and services may now be retained and used freely by exporters. All foreign currency needed for the
importation of merchandise and services may be purchased freely from the designated foreign
exchange banks.
Aside from trade-related foreign exchange transactions, a Taiwan company and a resident
individual may, without foreign exchange approval, remit to and from Taiwan foreign currencies of
up to US$50 million, or its equivalent, and US$5 million, or its equivalent, each calendar year.
Furthermore, any remittance of foreign currency into Taiwan by a Taiwan company or a resident
individual in a year will be offset by the amount remitted out of Taiwan by such company or
individual (as applicable) within its annual quota and will not use up its annual inward remittance
quota to the extent of such offset. These limits apply to remittances involving a conversion
between New Taiwan dollars and U.S. dollars or other foreign currencies. In addition, all private
enterprises are required to register all medium and long-term foreign debt with the Central Bank of
China.
In addition, a foreign person may, subject to certain requirements but without foreign
exchange approval, remit to and from Taiwan foreign currencies of up to US$100,000 per remittance
if the required documentation is provided to the Taiwan authorities. This limit applies only to
remittances involving a conversion between New Taiwan dollars and U.S. dollars or other foreign
currencies.
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E. Taxation
R.O.C. Taxation
General
The following summary addresses the principal R.O.C. tax consequences of the ownership and
disposition of common shares, ADSs or GDSs to a nonresident individual or non-resident entity that
holds such common shares or ADSs (a "Non-R.O.C. Holder"). As used in the preceding sentence, a
"non-resident individual" (a "Non-R.O.C. Individual") is a foreign national individual who is not
physically present in the R.O.C. for 183 days or more during any calendar year in which he or she
owns common shares, ADSs or GDSs and a "non-resident entity" (a "Non-R.O.C. Entity") is a
corporation or a non-corporate body that is organized under the laws of a jurisdiction other than
the R.O.C. for profit-making purposes and does not have a fixed place of business or other
permanent establishment in the R.O.C..
ADS and GDS HOLDERS AND COMMON SHARE HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISERS CONCERNING
THE TAX CONSEQUENCES OF OWNING THE ADSs, GDSs OR COMMON SHARES IN TAIWAN AND ANY OTHER RELEVANT
TAXING JURISDICTION TO WHICH THEY ARE SUBJECT.
ADSs and GDSs
Dividends.
Dividends, whether in cash or stock declared by us out of retained earnings and
distributed to a Non- R.O.C. Holder in respect of our shares represented by ADSs and GDSs are
subject to R.O.C. withholding tax, currently at a rate of 20% on the amount of the distribution, in
the case of cash dividends, or on the par value of the distributed shares, in the case of stock
dividends. The Depositary may dispose of a portion of the dividends to pay such tax. Distributions
of stock dividends out of capital reserves are not subject to R.O.C. withholding tax.
Sale
. Transfers of ADSs and GDSs are not subject to R.O.C. securities transaction tax. Gains
on sale of ADSs and GDSs are not subject to R.O.C. income tax.
Common Shares
Dividends.
Dividends (whether in cash or stock) declared by us out of retained earnings and
distributed to a Non-R.O.C. Holder in respect of common shares are subject to R.O.C. withholding
tax, currently at the rate of 20%, on the amount of the distribution (in the case of cash
dividends) or on the par value of the common shares (in the case of stock dividends).
Distributions of stock dividends declared by us out of capital reserves are not subject to
R.O.C. withholding tax.
Sale.
Security transaction tax will be withheld at the rate of 0.3% of the transaction price
upon a sale of common shares.
Capital gains on transactions in securities issued by R.O.C. companies are exempt from income
tax. This exemption applies to capital gains derived from the sale of common shares.
Preemptive Rights.
Distributions of statutory subscription rights for the common shares in
compliance with the R.O.C. Company Law are not subject to R.O.C. tax. Proceeds derived from sales
of statutory subscription rights evidenced by securities are currently exempted from income tax but
are subject to securities transaction tax, currently at the rate of 0.3% of the gross sales amount.
Proceeds derived from sales of statutory subscription rights which are not evidenced by securities
are subject to capital gains tax at the rate of (i) 25% of the gains realized by Non-R.O.C. Entity
Holders and (ii) 35% of gains realized by Non-R.O.C. Individual Holders. Subject to compliance with
R.O.C. law, we have the sole discretion to determine whether statutory subscription rights shall be
evidenced by the issuance of securities.
Inheritance Tax and Gift Tax
R.O.C. inheritance tax is payable on any property situated within the R.O.C. of a deceased
Non-R.O.C. Individual, and R.O.C. gift tax is payable on any property situated within the R.O.C.
donated by such person. Inheritance tax is payable at rates ranging from 2% of the first NT$600,000
to 50% of amounts over NT$100,000,000. Gift tax is payable at rates ranging from 4% of the first
NT$600,000 to 50% of amounts over NT$45,000,000. Under R.O.C. inheritance and gift tax law, bonds
and shares issued by R.O.C. companies are
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deemed situated within the R.O.C. irrespective of the location of the owner. It is unclear
whether a holder of ADSs or GDSs will be considered to own common shares for this purpose.
Tax Treaties
The United States does not have an income tax treaty with the R.O.C.. At present, the R.O.C. has
income tax treaties with Australia, Gambia, Indonesia, Malaysia, Macedonia, the Netherlands, New
Zealand, Singapore, South Africa, Swaziland, United Kingdom and Vietnam which limit the rate of
withholding tax on dividends or interest paid with respect to shares or bonds in R.O.C. companies
to residents of these countries. It is unclear whether a Non-R.O.C. Holder will be considered to
own common shares for the purposes of such income tax treaties. Accordingly, holders of common
shares who are otherwise entitled to the benefits of the relevant income tax treaty should consult
their own tax advisors concerning their eligibility for benefits under the treaty with respect to
the common shares.
An amendment to the R.O.C. Income Tax Law (the "Amendment") was enacted on January 1, 1998, to
integrate the corporate income tax and the shareholder dividend tax with the aim of eliminating the
double taxation effect for resident shareholders of Taiwanese corporations. In accordance with the
Amendment, a 10% retained earnings tax will be imposed on a company for its after-tax earnings
generated after January 1, 1998 that are not distributed in the following year. The retained
earnings tax so paid will further reduce the retained earnings available for future distribution.
When the company declares dividends out of those retained earnings, the retained earnings tax can
be credited against the 20% withholding tax imposed on the Non-R.O.C. Holders up to 10% of the
declared dividends.
United States Federal Income Taxation
General
The following discussion addresses the principal United States federal income tax consequences
to United States Holders, as defined below, of purchasing, owning and disposing of ADSs, GDSs or
common shares, but it does not purport to be a comprehensive description of all of the United
States federal income tax considerations that may be relevant to a decision to purchase, own, or
dispose of the ADSs, GDSs or common shares, and it does not address the tax treatment under
applicable state or local tax laws or the laws of any jurisdiction other than the United States.
This discussion is of a general nature only and is not intended to be, and should not be construed
to be, legal or tax advice to any prospective investor and no representation with respect to the
tax consequences to any particular investor is made.
In particular, this discussion does not address special United States federal income tax
situations, such as the consequences applicable to persons who are subject to special treatment
because they are:
•
dealers in securities or currencies;
•
traders in securities who elect to use a mark-to-market method of accounting for their securities holdings;
•
banks;
•
financial institutions;
•
insurance companies;
•
regulated investment companies;
•
real estate investment trusts;
•
persons who actually and constructively own less than 10% of our voting stock.
•
tax-exempt organizations;
•
persons liable for the alternative minimum tax;
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•
persons who hold ADSs, GDSs or common shares as part of a hedging, integrated or
conversion transaction, constructive sale or straddle;
•
persons who are citizens or residents of a possession or territory of the United States;
•
persons who hold ADSs, GDSs or common shares pursuant to certain retirement plans;
•
persons who receive ADSs, GDSs or common shares as compensation for services;
•
persons whose "functional currency" is not the U.S. dollar; or
•
partners in a partnership that holds ADSs, GDSs or common shares.
The following discussion of United States federal income tax matters is based:
•
on the federal income tax laws of the United States as in effect on the date of this
annual report, including the Internal Revenue Code of 1986, as amended (the "Code"),
judicial decisions, administrative pronouncements and Treasury regulations, changes to any
of which after the date of this annual report could apply on a retroactive basis and affect
the tax consequences described in this annual report; and
•
in part, on representations by the depositary, and assumes that each obligation under the
applicable deposit agreement and any related agreements will be performed in accordance with
their terms.
As used in this discussion, the term "United States Holder" means a beneficial owner of ADSs,
GDSs or common shares that holds the ADSs, GDSs or common shares as capital assets and that is:
•
an individual who is a citizen or resident of the United States;
•
a corporation (or other entity treated as a corporation) organized under the laws of the
United States or any State or the District of Columbia (a "U.S. Corporation");
•
an estate the income of which is subject to United States federal income taxation
regardless of its source;
•
a trust if a court within the United States is able to exercise primary supervision over
the administration of the trust and one or more United States persons have the authority to
control all substantial decisions of the trust; or
•
a trust that has a valid election in effect under applicable United States Treasury
regulations to be treated as a United States person.
If a partnership holds our ADSs, GDSs or common shares, the tax treatment of a partner in such
partnership will generally depend upon the status of the partner and the activities of the
partnership. We encourage any such partners to consult their own tax advisor.
A "Non-United States Holder" is any beneficial owner of ADSs, GDSs or common shares that is
not a United States Holder as defined above.
HOLDERS OF ADSs, GDSs OR COMMON SHARES ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF ADSs,
GDSs OR COMMON SHARES, INCLUDING PARTICULARLY THE POSSIBLE IMPLICATIONS OF THE PASSIVE FOREIGN
INVESTMENT COMPANY RULES DISCUSSED BELOW AS WELL AS THE EFFECT OF ANY STATE OR LOCAL TAX LAWS OR
THE LAWS OF ANY JURISDICTION OTHER THAN THE UNITED STATES.
ADSs, GDSs and Common Shares
For United States federal income tax purposes, a United States Holder will be treated as the
beneficial owner of the common shares underlying its ADSs and GDSs. Exchanges of common shares for
ADSs or GDSs, and ADSs and GDSs for common shares, will not be subject to United States federal
income tax, and a holder's tax basis and holding period in the ADSs, GDSs or common shares received
in the exchange will be the same as its basis and holding period in the ADSs, GDSs or common
shares, as the case may be, given up in the exchange.
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Taxation of Dividends
Subject to the discussion under "—Passive Foreign Investment Company Status" below,
distributions in respect of ADSs, GDSs and common shares to United States Holders, including the
amount of any R.O.C. tax withheld, will constitute foreign source dividend income for
United States federal income tax purposes to the extent these distributions are made from our
current or accumulated earnings and profits, as determined in accordance with United States federal
income tax principles. These dividends will not be eligible for the dividends received deduction
otherwise allowed to U.S. Corporations. Such dividend income will be includable in the gross income
of a United States Holder as ordinary income on the day it is actually or constructively received
by the United States Holder, in the case of common shares, or by the depositary, in the case of
ADSs and GDSs. A non-corporate United States Holder of ADSs and GDSs will generally be eligible for
reduced rates of tax (i.e., the rates applicable to net long-term capital gain, which are 5% and
15%) with respect to dividends on ADSs and GDSs under section 1(h) of the Code if the United States
Holder has held the ADSs or GDSs for more than 60 days during the 120-day period that begins on the
date that is 60 days before the ex-dividend date. For the purpose of determining the holding
period, no account is taken of days on which the holder's risk of loss with respect to the ADSs or
GDSs is diminished by virtue of various hedging strategies described in section 246(c) of the Code.
To the extent, if any, that the amount of the distribution exceeds our current and accumulated
earnings and profits as so computed, it will be treated first as a tax-free return of the United
States Holder's tax basis in its ADSs and GDSs and common shares, and then, to the extent that such
excess exceeds the United States Holder's tax basis, as capital gain. Any such distributions in
excess of our current and accumulated earnings and profits will not give rise to foreign source
income, and a United States Holder will not be able to use the foreign tax credit arising from any
R.O.C. withholding tax imposed on such distribution unless such credit can be applied
(subject to applicable limitations) against United States federal income tax due on other foreign
source income in the appropriate category for foreign tax credit purposes.
The amount of any cash distribution paid in NT dollars will generally equal the U.S. dollar
value of the NT dollar distribution, including the amount of any
R.O.C. tax withheld,
calculated by reference to the exchange rate in effect on the date the dividend is actually or
constructively received by the United States Holder, in the case of common shares, or by the
depositary, in the case of ADSs and GDSs, regardless of whether the payment is in fact converted
into U.S. dollars on that date. If the NT dollars received are not converted into U.S. dollars on
the date of receipt, a United States Holder will have a basis in the NT dollars equal to their U.S.
dollar value on the date of receipt. Generally, gain or loss, if any, realized on a subsequent
conversion or other disposition of the NT dollars will be ordinary income or loss. This gain or
loss will generally be treated as United States source income for United States foreign tax credit
limitation purposes. The amount of any distribution of property other than cash will be the fair
market value of the property on the date of distribution.
Subject
to specified limitations, including holding period requirements,
R.O.C.
taxes withheld from dividend distributions maybe eligible for credit against the United States
Holder's United States federal income taxes or, at the United States Holder's option, for deduction
from United States taxable income. Under the Code, the limitation on foreign taxes eligible for
credit is calculated separately with respect to specific classes of income. For this purpose,
dividends paid by us will generally be "passive" income or, in the case of certain United States
Holders, "financial services" income. Due to the complexity of the rules governing foreign tax
credits, we encourage United States Holders of ADSs, GDSs and common shares to consult their own
tax advisors concerning the availability of foreign tax credits under their particular
circumstances.
Taxation of Sales or Other Dispositions
Subject to the discussion under "— Passive Foreign Investment Company Status" below, a United
States Holder will recognize capital gain or loss for United States federal income tax purposes on
a sale or other disposition of ADSs, GDSs or common shares in an amount equal to the difference
between the United States Holder's adjusted basis in the ADSs, GDSs or common shares and the amount
realized on the disposition. This capital gain or loss will be long-term capital gain or loss if
the United States Holder has held the ADSs, GDSs or common shares for more than one year at the
time of the sale or exchange. The holding period of the ADSs, GDSs or common shares will include
the holding period of bonds converted into such ADSs, GDSs or common shares and, if they were
received in an exchange, the holding period of the ADSs, GDSs or common shares for which they were
exchanged. Long-term capital gain of a non-corporate United States Holder is generally subject to a
maximum rate of 15% in respect of property held for more than one year. For corporate United States
Holders, a capital gain is currently taxed at the same rate as ordinary income. The deductibility
of capital losses is subject to limitations for both corporate and non-corporate United States
Holders. Any gain or loss recognized by a United States Holder will generally be treated as United
States source gain or loss. United States Holders should note that any ROC securities transaction
taxes imposed on a sale may not be eligible for credit and may not be eligible for deduction
against the United States Holder's United States federal income taxes. In the event that any
R.O.C.
securities taxes are not eligible for deduction, however the amount of any such
taxes will reduce the amount realized by the United States Holder upon the disposition of the
common shares, ADSs or GDSs.
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Passive Foreign Investment Company Status
Certain adverse United States federal income tax rules apply to United States persons who are
holders of equity interests in a corporation classified as a "passive foreign investment company"
("PFIC"). Based on current and projected financial data, we believe that we should not currently be
treated as a PFIC for United States federal income tax purposes, but this conclusion is a factual
determination made annually and thus may be subject to change based on future operations and the
composition and valuation of our assets. In general, we will be a PFIC with respect to a United
States Holder if, for any taxable year in which the United States Holder holds ADSs, GDSs or common
shares, after the application of certain "look through" rules to the assets and income of 25% or
greater owned subsidiaries, either:
•
at least 75% of our gross income for the taxable year is passive income; or
•
at least 50% of the average percentage by value of our assets during the taxable year is
attributable to assets that produce or are held for the production of passive income.
If the Company is or becomes a PFIC, a United States Holder would be treated as realizing gain
from the sale or disposition of the Shares and certain "excess distributions" ratably over such
holder's holding period for the Shares and would be taxed at the highest tax rate in effect for
each such year to which the gain or excess distribution was allocated, together with an interest
charge on the tax attributable to each such year. An election may be available to avoid these
adverse tax consequences but only if (i) the United States Holder may and does elect to annually
mark-to-market the Shares or (ii) the United States Holder elects to include in income annually its
share of the income and gain of the Company and we satisfy certain reporting requirements. We have
not determined whether we will undertake the necessary measures to be able to satisfy the
requirements for the election in clause (ii), in the event we are treated as a PFIC.
Should the Company ever be classified as a PFIC, United States Holders are advised to consult
their tax advisors concerning the United States federal income tax consequences of holding the
Shares and of making the mark-to-market election. A United States Holder who owns Shares during any
year that the Company is a PFIC must file with the IRS Form 8621.
United States Federal Income Taxation of Non-United States Holders
Subject to the discussion of United States backup withholding tax below, a Non-United States
Holder of ADSs, GDSs or common shares will not be subject to United States federal income or
withholding tax on distributions on a common share, ADS or GDS or gains realized on the sale of
ADSs, GDSs or common shares, provided that (i) such income items are not effectively connected with
the conduct by the Non-United States Holder of a trade or business within the United States (or, in
the case where a Non-United States Holder is eligible for the benefits of an income tax treaty with
the United States, the Non-United States Holder does not have a permanent establishment or fixed
place of business in the United States to which such income is attributable), (ii) there has not
been a present or former connection between the Non-United States Holder and the United States,
including, without limitation, such Non-United States Holder's status as a citizen or former
citizen, or resident or former resident, of the United States, and (iii) in case of a gain from the
sale or disposition of ADSs, GDSs or common shares by an individual, the Non-United States Holder
is not present in the United States for 183 days or more during the taxable year of the sale. A
Non-United States Holder that is also a corporation for United States federal income tax purposes
may also be subject to an additional "branch profits tax" of 30% (or such lower rate as maybe
specified by a tax treaty for whose benefits the Non-United States Holder corporation is eligible)
with respect to income that is subject to United States federal income taxation on a net basis.
United States Backup Withholding Tax and Information Reporting
Payments made by a paying agent within the United States to the United States Holders other
than corporations and other exempt recipients in respect of the ADSs, GDSs or common shares maybe
subject to information reporting to the United States Internal Revenue Service. A backup
withholding tax at a rate of 28% on amounts received will apply to those payments if a non-exempt
United States Holder fails to provide certain identifying information, such as the holder's
taxpayer identification number, and to comply with certain other requirements concerning backup
withholding. Non-United States Holders maybe required to comply with applicable certification
procedures to establish that they are not United States Holders in order to avoid the application
of such information reporting requirements and backup withholding tax.
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Any amounts withheld under the backup withholding tax rules from a payment to a holder
generally will be allowed as a refund or a credit against such holder's United States federal
income tax, provided that the required information is furnished to the Internal Revenue Service.
F. Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
H. Documents on Display
We are required to file reports and other information with the SEC under the provisions of the
U.S. Securities Exchange Act of 1934 which apply to foreign private issuers. We are required to
file annual reports on Form 20-F and submit reports on Form 6-K and other information with the SEC.
We do not intend to file any other reports, including interim reports on Form 10-Q. These reports
and other information filed, submitted or to be submitted by us can be inspected and copied at the
public reference facilities maintained by the SEC at Judiciary Plaza, 450 Fifth Street, N.W., Room
1024, Washington, D. C. 20549.
The SEC maintains a website at www.sec.gov that contains reports, proxy and information
statements, and other information regarding registrants that make electronic filings with the SEC
using its EDGAR system. As a foreign private issuer, we are required to make our SEC filings as
electronic filings using the EDGAR system, commencing with this annual report on Form 20-F. This
annual report and our future filings will be available at the website referred to above.
Our periodic reports and other information may also be inspected at the offices of the Nasdaq
National Market, Reports Section, 1735 K Street, N.W., Washington, D. C. 20006. As a foreign
private issuer, we are exempt from the rules under the U.S. Securities Exchange Act of 1934 which
require the furnishing and govern the content of proxy statements, and our executive officers,
directors, supervisors, and principal shareholders are exempt from the reporting and short-swing
profit recovery provisions contained in Section 16 of the Exchange Act.
I. Subsidiary Information
Not applicable.
Item 11.
Quantitative and Qualitative Disclosure About Market Risk
For the purposes of compiling the respective tables, the following rates have been used:
•             The exchange rates for Japanese yen as at December 31, 2005 is
based on the official exchange rate as determined by the Bank of
Taiwan, being NT$0.2796 = JPY1.00.
•             The exchange rates for U.S. dollars as at December 31, 2005 is
based on the official exchange rate as determined by the Bank of
Taiwan being NT$32.85 = US$1.00.
•
Interest rates are derived from the prevailing interest rate swap
market in the respective currencies as at December 31, 2005.
Interest Rates
Our exposure to interest rate risk relates primarily to our long-term debt, which is normally
entered into to fund our corporate activities, primarily for capital expenditures. Other interest
rate sensitive short-term assets and liabilities include mainly cash in banks and bank loans.
The table below presents the period-end principal amounts outstanding and the contractual
rate, where applicable, or the related weighted-average implied forward interest rate by year of
maturity, of our debt obligations.
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Principal (notional) amount by expected maturity for non-trading purposes
Expected Maturity
January 1,
January 1,
January 1,
January 1,
January 1,
2006 to
2007 to
2008 to
2009 to
2010 to
December 31,
December 31,
December 31,
December 31,
December 31,
Fair value
2006
2007
2008
2009
2010
Total
December 31, 2005
NT$ in million
Rate sensitive assets
Cash
Variable rate
7,249
7,252
7,252
Average
interest rate
0.59
%
Fixed rate
3,885
3,882
3,882
Average
interest rate
1.29
%
Restricted deposit
1,929
1,929
1,929
Fixed rate
1.77
%
Rate sensitive liabilities
Short term debt (US$
million)
1,894
1,894
1,894
Variable rate
4.48
%
Long term debt
NT$ debt
Fixed rate
3,000
3,000
3,039
Average interest rate
3.3
%
Variable rate
1,635
2,384
1,480
1,480
68
7,048
7,048
Average interest rate
2.73
%
2.39
%
2.70
%
2.70
%
3.47
%
Foreign Currencies
A significant portion of our revenues is denominated in currencies other than the N.T. dollar.
As of December 31, 2005, most of our accounts payable and payables for purchases of capital goods
were denominated in currencies other than the N.T. dollar, primarily in U.S. dollars and Japanese
yen. As of December 31, 2005, part of our short-term debts is in U.S. dollars. To protect against
reductions in value and volatility of future cash flows caused by changes in foreign exchange
rates, we utilize derivative financial instruments to hedge our currency exposure. These hedging
transactions are designed to reduce, but do not eliminate, the impact of foreign currency exchange
rate movements. Our policy is to account for these contracts on a hedge accounting basis.
Most of our sales are denominated in U.S. dollars and Japanese yen and part of our debts are
in U.S. dollars. An appreciation of the Japanese yen against the N.T. dollar would result in a
foreign exchange gain to us from our underlying sales. However, a depreciation of the Japanese yen
against the N.T. dollar would result in a foreign exchange loss to us. Conversely, an appreciation
of the U.S. dollar against the N.T. dollar would result in a foreign exchange loss to us, while a
depreciation of the U.S. dollar against the N.T. dollar would result in a foreign exchange gain to
us. To reduce the foreign exchange loss from a depreciation of Japanese yen, we entered into
forward contracts and dual currency deposit contracts (Japanese yen against U.S. dollar, the DCD
contracts).
If the Japanese yen appreciates, it is highly likely that the counter-parties would exercise the
DCD contracts. However, we would be compensated from the gain from our underlying Japanese yen
sales and use the U.S. dollars received to pay down the U.S. dollar debts. If the Japanese yen
depreciates, it is highly likely the counter-parties would not exercise the option, and the
premiums received would provide us additional cash flow against the foreign exchange loss from our
sales as a result of the weak Japanese yen.
As of December 31, 2005, we had no outstanding forward contract or DCD contract.
96
Table of Contents
Market Price Sensitivity Analysis
Equity Contract
On May 5, 1998, we issued zero coupon convertible debentures amounting to US$150 million,
which were privately placed with a financial institution. One of our wholly owned subsidiaries
subsequently entered into a call option contract with the financial institution, with the
underlying reference being the convertible debentures. The terms of the contract provided that the
notional amount of US$150 million is divided into fifteen options and our subsidiary is entitled to
exercise the options separately, at the discretion of the subsidiary during the life of the
contract, but at a minimum number of two. We simultaneously entered into currency swaps, based on
the notional amount of the debt, converting Japanese Yen into New Taiwan dollars and New Taiwan
dollars into United States dollars. Subsequently, the option contract and the currency swaps were
combined into one contract. The subsidiary exercised two options and five options on January 22,
2000 and June 26, 2000, respectively. As of December 31, 2002, the outstanding portion of this
compound derivative contract had a negative fair value of US$14.5 million, and the carrying amount
had a negative fair value of US$10.3 million. In May 2003, we settled the contract with respect to
the remaining eight options by paying US$13.1 million.
In June 2000, we entered into a contract with a financial institution for the settlement of
five options relating to our zero coupon convertible debenture due 2003 and in connection with our
stock appreciation rights plan, with the underlying reference being 47,727,535 of our common
shares. The contract, as amended, expired on May 5, 2005. Under the contract, if the share price
was less than the predetermined contract price, we would pay the differences between the two
amounts to the financial institution. The contract rate at which the contract was settled and based
on U.S. dollars, and our share price were converted into U.S. dollars using prevailing N.T. dollars
to U.S. dollars exchange rates in order to determine the settlement amount. The predetermined
contract price was US$1.37 per share. Between March 17, 2005 and April 28, 2005, we reduced the
number of common shares that formed the underlying reference securities for the contract to nil,
and we settled the contract on May 5, 2005. Our additional loss under the contract in 2005 up to
the date of settlement of the contract was US$4.4 million (NT$140 million). See "Item.
5.
Operating and Financial Review and Prospects — Operating Results — Equity Derivative
Contracts" and note 25 to our consolidated financial statements for the years ended December 31,
2003, 2004 and 2005 included in this annual report.
Item 12. Description of Securities Other than Equity Securities
Not applicable.
PART II
Item 13.
Default, Dividend Arrearages and Delinquencies
As of December 31, 2005, we were not in default in the payment of principal or interest to any
of our lenders.
Item 14.
Material Modifications to the Rights of Security Holders and Use of
Proceeds
Not applicable.
Item 15.
Controls and Procedures
Subsequent to the filing of our consolidated financial statements on
Form 20-F for the year ended December 31, 2004 and through the process
of addressing financial statement comments raised by the SEC, we
determined that our controls over the processes and procedures related
to the recording and review of convertible bonds and embedded
derivatives were not adequate to ensure that such accounts were
completely and accurately recorded, due primarily to inadequate U.S.
GAAP experience in relation to such accounting matters. As a result of
this control material weakness, we restated our consolidated financial
statements for the years ended December 31, 2003, and 2004 with
respect to certain U.S. GAAP financial information disclosed in note 28
and elsewhere in our consolidated financial statements.
In connection with the restatement, we evaluated our disclosure controls and procedures. We
identified several internal control deficiencies that we believe are material weaknesses,
including, among other items, insufficient U.S. GAAP expertise and insufficient documentation
procedures. Our management has concluded that our disclosure controls and procedures were not
sufficiently effective as of December 31, 2005 and as of the date of this annual report.
However, we have taken corrective actions and allocated additional resources to improve the
disclosure controls and procedures. For example, we have retained external consultants to assist us
with issues that arise during the course of the reconciliation of our financial statements under US
GAAP.
In preparation for certain internal control reporting requirements set
forth in Section 404 of the Sarbanes-Oxley Act of 2002, we have
continued to perform the necessary system and process evaluation and
testing required (and any necessary remediation) to comply with such
section by the effective date for compliance. Our efforts to implement
standardized internal control procedures and develop internal tests
necessary to verify the proper application of the internal control
procedures are a key area of focus for our board of directors and our senior management.
Except as disclosed herein, there has been no change in our internal
control over financial reporting that occurred during the period
covered by this annual report that has materially affected, or is
reasonably likely to materially affect, our internal control over
financial reporting.
97
Table of Contents
Item 16A.
Audit Committee Financial Expert
Our Board of Directors has determined that one of our audit committee members, Mr. Cheng Yi
Fang qualifies as an Audit Committee financial expert defined under SEC Rule 4350 (d)(2).
Item 16B.
Code of Ethics
On June 2, 2004, we adopted a Code of Business Conduct and Ethics for our employees, including
our chief executive officer, associate vice president of finance center who acts as our chief
accounting officer and other persons performing similar functions.
We will provide to any person without charge, upon request, a copy of our Code of Business
Conduct and Ethics. Any request should be made to our Investor Relations Department at No. 16
Li-Hsin Road, Science Park, Hsinchu, Taiwan, Republic of China.
Item 16C.
Principal Accountant Fees and Services
The table below summarizes the fees that we were billed for services provided by Diwan, Ernst
& Young and its affiliates for the years ended December 31, 2004 and 2005:
2004
2005
(in thousands of NT$)
Audit fees
10,511
10,202
Audit-related fees
4,028
571
Tax fees
3,115
1,989
Others
555
1,910
Total
18,209
14,672
Audit-related Fees
Services provided consist of assurance and related services that are reasonably related to the
performance of the audit or review of our financial statements and are not included under "Audit
fees." The services for the fees disclosed under this category include royalty audits and review of
certain regulatory filings with the R.O.C. Securities and Futures Commission and other reviews in
connection with ADS, GDS, convertible bond and Form 20F filings.
Tax Fees
This category consists of professional services for tax compliance and tax advice. The
services for the fees disclosed under this category include tax return preparation and technical
tax advice.
Others
This category consists primarily of fees for non-audit and non-tax fees, such as annual report
filing fees and business certification service fees.
Pre-Approval of Services
Prior to forming an audit committee, our board of directors is responsible for the oversight
of our independent accountants' work. The policy of our board of directors is to pre-approve all
audit and non-audit services provided by Diwan, Ernst & Young, including
98
Table of Contents
audit services, audit-related services, tax services and other services, as described above.
Item 16D. Exemptions from the Listing Standards for Audit Committees
Not applicable.
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Not applicable.
PART III
Item 17.
Financial Statements
We have elected to provide the financial statements and related information specified in Item
18 in lieu of Item 17.
Item 18.
Financial Statements
Reference is made to pages F-1 to F-88 for year-end financial statements.
Item 19.
Exhibits
Exhibit
Number
Description
2b.1
The Company hereby agrees to furnish to the Securities and
Exchange Commission, upon request, copies of instruments defining
the rights of holders of long-term debt of the Company and its
subsidiaries.
3.1
Articles of Incorporation of the Company (English translation).*
8.1
List of subsidiaries of the Company.*
12.1
Certifications of our President pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*
12.2
Certifications of our Associate Vice President, Finance
Department, pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.*
13.1
Certifications of our President pursuant to 18 U.S.C. Section 1350
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.*
13.2
Certifications of our Associate Vice President, Finance
Department, pursuant to 18 U.S.C. Section 1350 as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.*
14.1
Amended and Restated Deposit Agreement, dated as of February 7,
2002, among the Company, The Bank of New York, as depositary, and
Holders from time to time of American Depositary Receipts issued
thereunder, including the form of American Depositary Receipt(2).
14.2
Indenture, dated as of February 10, 2003, by and between the
Company and The Bank of New York, as trustee(3).
14.3
Land Lease Agreement, dated as of March 3, 1990, by and between
the Company and the Hsinchu Science-Based Industrial Park
Administration, in relation to Office Building and Fab I Site(4).
14.4
Land Lease Agreement, dated as of August 1, 1994, by and between
the Company and the Hsinchu Science-Based Industrial Park
Administration, in relation to Auxiliary Vehicular Facilities(5).
14.5
Land Lease Agreement, dated as of January 1, 1994, by and between
the Company and the Hsinchu Science-Based Industrial Park
Administration, in relation to Back-End Operation Plant(6).
14.6
Land Lease Agreement, dated as of June 1, 1995, by and between the
Company and the Hsinchu Science-Based Industrial Park
99
Table of Contents
Exhibit
Number
Description
Administration, in relation to Fab II and Fab III Site (7).
14.7
Deposit Agreement, dated as of April 5, 2004, among the Company,
Citibank, N.A., as depositary,
and Holders from time to time of Global Depositary Receipts issued
thereunder, including the form of Global Depositary Receipt(8).
Exhibit
Number
Description
*
Filed with this Form 20-F.
(1)
Incorporated by reference to Exhibit 3.1 to the Company's Form 20-F filed with the Commission on June 29, 2004.
(2)
Incorporated by reference to Exhibit 3(a) to the Company's Registration Statement on Form F-6 (File No. 333-8602) filed with the Commission on February 7, 2002.
(3)
Incorporated by reference to Exhibit 10.2 to the Company's Form 20-F filed with the Commission on July 1, 2003.
(4)
Incorporated by reference to Exhibit 10.6 to the Company's Registration Statement on Form F-1 (File No. 333-1870) filed with the Commission on March 1, 1996.
(5)
Incorporated by reference to Exhibit 10.7 to the Company's Registration Statement on Form F-1 (File No. 333-1870) filed with the Commission on March 1, 1996.
(6)
Incorporated by reference to Exhibit 10.8 to the Company's Registration Statement on Form F-1 (File No. 333-1870) filed with the Commission on March 1, 1996.
(7)
Incorporated by reference to Exhibit 10.9 to the Company's Registration Statement on Form F-1 (File No. 333-1870) filed with the Commission on March 1, 1996.
(8)
Incorporated by reference to Exhibit 14.9 to the Company's Form 20-F filed with the Commission on June 29, 2004.
100
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Financial Statements of Macronix
International Co., Ltd. and its Subsidiaries
Independent Auditors' Report
F-2
Consolidated Balance Sheets as of December 31, 2004 and 2005
F-3
Consolidated Statements of Operations for each of the three
years in the period ended December 31, 2005
F-5
Consolidated Statements of Cash Flows for each of the three
years in the period ended December 31, 2005
F-6
Consolidated Statements of Shareholders' Equity for each of
the three years in the period ended December 31, 2005
F-8
Notes to Consolidated Financial Statements
F-9
F-1
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Board of Directors, Supervisors, and Shareholders
of Macronix International Co., Ltd.
We have audited the accompanying consolidated balance sheets of Macronix International Co.,
Ltd. as of December 31, 2004 and 2005, and the related consolidated statements of operations,
shareholders' equity, and cash flows for each of the three years in the period ended December 31,
2005. 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 standards generally accepted in the Republic
of China and the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. We were not engaged to perform an
audit of the Company's internal control over financial reporting. Our audits included
consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial reporting.
Accordingly we express no such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and 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 consolidated financial position of Macronix International Co., Ltd. at December 31,
2004 and 2005, and the consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 2005, in conformity with accounting principles
generally accepted in the Republic of China, which differ in certain respects from accounting
principles generally accepted in the United States of America (see note 28 to the consolidated
financial statements).
As described in Note 2 to the consolidated financial statements, effective January 1, 2005,
Macronix International Co., Ltd. and its subsidiaries adopted the R.O.C. Statement of Financial
Accounting Standards No. 35, "Accounting for Asset Impairment", adopted the R.O.C. Statement of
Financial Accounting Standards No. 5 "Accounting for Long-term Equity Investment", and adopted the
amendments to the R.O.C. Statement of Financial Accounting Standards No. 7, "Consolidation of
Financial Statements".
As more fully described in note 28, the consolidated financial statements for the years ended
December 31, 2003 and 2004 have been restated.
DIWAN, ERNST & YOUNG
CERTIFIED PUBLIC ACCOUNTANTS
Taipei, Taiwan, R.O.C.
June 14, 2006
F-2
Table of Contents
MACRONIX INTERNATIONAL CO., LTD.
CONSOLIDATED BALANCE SHEETS
December 31, 2004 and 2005
(Amounts in thousands except share and per share data)
December 31
ASSETS
Notes
2004
2005
NT$000
NT$000
US$000
Current assets
Cash and cash equivalents
4
10,115,688
11,133,620
339,440
Restricted investments-current
16
2,429,606
1,928,913
58,808
Short-term investments
5
918,040
—
—
Notes and accounts receivable (net)
6
2,553,510
2,006,456
61,172
Receivables from related parties
23
132,286
707,095
21,558
Other receivables from related parties
23
—
38,379
1,170
Inventories (net)
7
4,826,241
3,589,445
109,434
Deferred income taxes (net)
18
18,951
19,494
594
Prepaid expenses
496,326
464,723
14,169
Others
215,622
139,295
4,247
Total current assets
21,706,270
20,027,420
610,592
Property, plant and equipment
9,14
Land
1,288,720
598,076
18,234
Buildings and facilities
23,666,553
15,833,841
482,739
Production equipment
46,438,058
49,780,215
1,517,690
Research and development equipment
1,187,554
2,388,842
72,831
Office furniture and equipment
900,149
907,391
27,664
Leased equipment
1,754,540
—
—
Construction in progress and prepaid equipment
2,130,130
285,338
8,699
Total property, plant and equipment
77,365,704
69,793,703
2,127,857
Less: Accumulated depreciation
(49,372,239
)
(53,591,454
)
(1,633,886
)
Net property, plant and equipment
27,993,465
16,202,249
493,971
Deferred income taxes (net)
18
1,877,349
1,679,447
51,203
Intangible assets (net)
928,015
810,010
24,695
Long-term investments
8
1,620,465
1,226,753
37,401
Idle assets
10
—
314,802
9,598
Assets to be disposed (net)
11
—
5,300,000
161,585
Refundable deposits
87,620
17,506
534
Other assets
182,492
26,232
800
Total assets
54,395,676
45,604,419
1,390,379
See accompanying notes to consolidated financial statements.
F-3
Table of Contents
MACRONIX INTERNATIONAL CO., LTD.
CONSOLIDATED BALANCE SHEETS-(Continued)
December 31, 2004 and 2005
(Amounts in thousands except share and per share data)
December 31
LIABILITIES
& SHAREHOLDERS' EQUITY
Notes
2004
2005
NT$000
NT$000
US$000
Current liabilities
Short-term debts
12
2,896,854
1,893,754
57,736
Short-term notes
13
99,924
—
—
Current portion of capital lease obligations
14
303,446
—
—
Current portion of long-term debts
15
2,196,469
4,635,295
141,320
Notes and accounts payable
1,685,279
1,931,183
58,878
Payables to related parties
23
42,776
79,413
2,421
Payables to equipment suppliers
327,314
147,958
4,511
Accrued expenses
1,630,357
1,667,294
50,832
Income taxes payable
18
197,218
205,158
6,255
Others
69,523
104,110
3,174
Total current liabilities
9,449,160
10,664,165
325,127
Long-term liabilities
Long-term debts, less current portion
15
10,313,038
5,777,743
176,151
Accrued pension cost
17
278,656
371,792
11,335
Credit balance of long term equity investments
—
29,838
910
Other liabilities
349
143
4
Total liabilities
20,041,203
16,843,681
513,527
Commitments and contingencies
24
Shareholders' equity
19
Common shares NT$10
par value, authorized 6,550,000,000
shares as of December 31, 2005
and issued 5,035,296,328 and 4,995,296,328
shares as of December 31, 2004 and 2005,
respectively.
50,352,963
49,952,963
1,522,956
Additional paid-in capital
315,704
—
—
Capital reserve
39,945
57,990
1,768
Accumulated deficits
(13,886,018
)
(21,388,090
)
(652,076
)
Unrealized losses on long-term investments
(1,351,527
)
—
—
Cumulative translation adjustments
62,042
77,902
2,375
Treasury stock
21
(1,188,436
)
(142,365
)
(4,340
)
Total shareholders' equity
34,344,673
28,558,400
870,683
Minority interests
9,800
202,338
6,169
Total liabilities and shareholders' equity
54,395,676
45,604,419
1,390,379
See accompanying notes to consolidated financial statements.
F-4
Table of Contents
MACRONIX INTERNATIONAL CO., LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 2003, 2004 and 2005
(Amounts in thousands except share and per share data)
For the year ended December 31
Notes
2003
2004
2005
NT$000
NT$000
NT$000
US$000
Sales revenue
18,058,229
23,499,507
18,990,422
578,976
Less: Sales returns
(313,544
)
(30,453
)
(51,047
)
(1,556
)
Sales discounts
(32,498
)
(89,331
)
(31,239
)
(952
)
Net sales revenue
17,712,187
23,379,723
18,908,136
576,468
Cost of goods sold
(20,656,731
)
(18,990,296
)
(18,666,372
)
(569,097
)
Gross profit (loss)
(2,944,544
)
4,389,427
241,764
7,371
Less: Unrealized profit
2,895
(1,451
)
—
—
Realized gross profit (loss)
(2,941,649
)
4,387,976
241,764
7,371
Operating expenses
Selling expenses
(560,660
)
(729,246
)
(699,370
)
(21,322
)
Administrative expenses
(1,443,449
)
(1,430,617
)
(1,307,283
)
(39,856
)
Research and development expenses
(2,738,231
)
(2,576,801
)
(3,109,670
)
(94,807
)
Total operating expenses
(4,742,340
)
(4,736,664
)
(5,116,323
)
(155,985
)
Operating income (loss)
(7,683,989
)
(348,688
)
(4,874,559
)
(148,614
)
Non-operating income
Research and development subsidies
5,125
18,125
21,918
668
Interest income
103,847
101,646
99,860
3,045
Dividend income
11,349
23,589
36,852
1,124
Reversal of allowance for bad debts
34,476
6,119
50,712
1,546
Foreign exchange gain
375,087
—
—
—
Gain on disposal of property,
plant and equipment
308
3,408
396
12
Gain on disposal of long-term
investments
63,565
374,806
23,898
729
Net gain on short-term investments
43,591
10,209
365,304
11,137
Reversal of inventory and spare
parts loss provision
1,185,227
918,545
476,780
14,536
Others
54,009
162,601
121,222
3,696
Total other income
1,876,584
1,619,048
1,196,942
36,493
Non-operating expenses
Interest expense
(1,077,898
)
(684,105
)
(377,261
)
(11,502
)
Foreign exchange loss
—
(154,023
)
(88,395
)
(2,695
)
Net loss from equity investment
(87,219
)
(99,073
)
(89,525
)
(2,729
)
Net investment loss
(737,382
)
(56,218
)
(1,536,483
)
(46,844
)
Impairment loss
—
—
(905,658
)
(27,612
)
Loss on allowance for prepaid
expenses
(334,971
)
—
(141,711
)
(4,321
)
Others
(132,162
)
(29,801
)
(65,472
)
(1,996
)
Total other expenses
(2,369,632
)
(1,023,220
)
(3,204,505
)
(97,699
)
Income (loss) before taxes and
minority interest
(8,177,037
)
247,140
(6,882,122
)
(209,820
)
Income tax expense
18
(21,027
)
(34,781
)
(215,414
)
(6,568
)
Income (loss) before minority
interest
(8,198,064
)
212,359
(7,097,536
)
(216,388
)
Minority interest loss
319
5,333
70,347
2,145
Net income (loss)
(8,197,745
)
217,692
(7,027,189
)
(214,243
)
Earnings Per Common Share*:
20
Net income (loss) per common share
- basic
NT$
(3.65
)
NT$
0.08
NT$
(2.41
)
US$
(0.07
)
Net income (loss) per common share
- diluted
NT$
(3.65
)
NT$
0.08
NT$
(2.41
)
US$
(0.07
)
Pro-forma data: assuming that the
Company's shares owned by subsidiaries were not
treated as treasury stock
18
Net income (loss)
(8,222,374
)
221,787
(7,043,761
)
(214,749
)
Net income (loss) per common share
- basic
NT$
(3.66
)
NT$
0.08
NT$
(2.42
)
US$
(0.07
)
Net income (loss) per common share
- diluted
NT$
(3.66
)
NT$
0.08
NT$
(2.42
)
US$
(0.07
)
See accompanying notes to consolidated financial statements.
F-5
Table of Contents
MACRONIX INTERNATIONAL CO., LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2003, 2004 and 2005
(Amounts in thousands except share and per share data)
For the year ended December 31
2003
2004
2005
NT$000
NT$000
NT$000
US$000
Cash flows from operating activities:
Net income (loss)
(8,197,745
)
217,692
(7,027,189
)
(214,243
)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities :
Depreciation
8,614,734
7,092,077
6,740,549
205,505
Amortization
672,277
470,083
511,984
15,609
Depreciation and market-value decline on idle assets
91,530
—
—
—
Loss on allowance for prepaid expenses
334,971
—
141,711
4,320
Gain on disposal of long-term investments
(63,565
)
(374,806
)
(23,898
)
(729
)
Net gain on short-term investments
(43,591
)
(10,209
)
(365,304
)
(11,137
)
Change in valuation allowance of accounts receivable and other receivable
(33,059
)
(238
)
(49,886
)
(1,521
)
Inventory and spare parts provision (reversal)
(1,185,227
)
(918,545
)
(476,780
)
(14,536
)
Net loss from equity investment
87,219
99,073
89,525
2,729
Impairment loss
—
—
905,658
27,612
Write off on long-term investments
—
50,344
1,536,483
46,844
Net gain on disposal of property, plant and equipment
(308
)
(3,408
)
(396
)
(12
)
Net changes in operating assets and liabilities
Notes and accounts receivable
(56,457
)
151,459
634,589
19,347
Receivables from related parties
(12,137
)
(27,016
)
(555,538
)
(16,937
)
Other Receivable from relted parties
—
—
(49,911
)
(1,522
)
Inventories
2,268,453
191,223
1,654,614
50,446
Other current assets
135,347
12,000
77,371
2,359
Prepaid expenses
92,071
(81,366
)
22,337
681
Deferred income tax assets
48,143
1,914
198,039
6,038
Notes and accounts payable
569,471
(270,018
)
245,904
7,497
Payables to related parties
(53,239
)
(60,794
)
36,638
1,117
Accrued expenses
(416,501
)
(299,759
)
36,938
1,126
Income taxes payable
(83,518
)
(23,708
)
7,940
242
Other current liabilities
(381,938
)
20,470
34,587
1,054
Accrued pension cost
86,569
86,893
93,136
2,840
Interest payable of debentures
(989,775
)
(336,725
)
(21,778
)
(664
)
Net cash provided by operating activities
1,483,725
5,986,636
4,397,323
134,065
Cash flows from investing activities:
Decrease (increase) in restricted investments
1,527,888
(345,297
)
358,349
10,925
Payments for purchase of marketable securities
(10,077,010
)
(21,961,161
)
(11,467,983
)
(349,634
)
Proceeds from disposal of marketable securities
10,455,091
21,911,781
12,995,611
396,208
Payments for purchase of other financial assets
(173,730
)
(101,280
)
—
—
Proceeds from disposal of other financial assets
173,730
101,280
—
—
Additions to long-term equity investments
(542,451
)
(278,694
)
—
—
Proceeds from disposals of long-term equity investments
124,113
463,051
175,705
5,357
Payments for purchase of property, plant and equipment
(2,616,208
)
(2,768,934
)
(1,774,419
)
(54,098
)
Proceeds from disposals of property, plant and equipment
6,979
3,680
3,186
97
Refundable deposits
893,434
(161,182
)
71,636
2,184
Other assets
39,678
40,575
(44,507
)
(1,357
)
Additions to intangible assets
(235,463
)
(532,968
)
(187,977
)
(5,731
)
Proceeds from disposals of intangible assets
454
—
—
—
Net cash provided by (used in) investing activities
(423,495
)
(3,629,149
)
129,601
3,951
See accompanying notes to consolidated financial statements.
F-6
Table of Contents
MACRONIX INTERNATIONAL CO., LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS-(Continued)
For the years ended December 31, 2003, 2004 and 2005
(Amounts in thousands except share and per share data)
For the year ended December 31
2003
2004
2005
NT$000
NT$000
NT$000
US$000
Cash flows from financing activities:
Net increase (decrease) in short-term debts
624,815
276,663
(1,069,733
)
(32,614
)
Net increase (decrease) in short-term notes
—
99,924
(99,924
)
(3,046
)
Net decrease in debentures
—
—
(415,315
)
(12,662
)
Additions (deductions) to other liabilities -
refundable deposits
(5
)
206
(206
)
(6
)
Proceeds from long-term debts
5,835,305
1,950,000
100,000
3,048
Repayments of long-term debts and capital lease
obligations
(8,201,614
)
(10,773,284
)
(2,062,822
)
(62,891
)
Common stock issued
3,822,504
5,565,704
—
—
Minority interest
117,712
(69,867
)
82,070
2,502
Net cash provided by (used in) financing activities
2,198,717
(2,950,654
)
(3,465,930
)
(105,669
)
Effect of exchange rate changes on cash and cash
equivalents
(4,794
)
60,341
(43,062
)
(1,312
)
Net increase in cash and cash equivalents
3,254,153
(532,826
)
1,017,932
31,035
Cash and cash equivalents at the beginning of the
period
7,394,361
10,648,514
10,115,688
308,405
Cash and cash equivalents at the end of the period
10,648,514
10,115,688
11,133,620
339,440
Supplemental disclosures of cash flows information:
Interest paid during the period
998,922
735,529
385,154
11,743
Income tax paid during the period
35,064
65,261
21,770
664
Non-cash activities:
Current portion of long-term debts and capital
lease obligations
transferred to current liabilities
11,163,741
2,499,915
1,635,295
49,857
Payments for purchases of property, plant and
equipment:
Payable to equipment suppliers (beginning balance)
1,551,915
541,755
327,314
9,979
Add: Purchases of property, plant and equipment
1,606,048
2,554,493
1,595,063
48,630
Less: Payable to equipment suppliers (ending
balance)
(541,755
)
(327,314
)
(147,958
)
(4,511
)
Payments for purchases of property, plant and
equipment
2,616,208
2,768,934
1,774,419
54,098
Convertible bonds converted to common stock and
accumulated deficits
2,453,866
759,067
—
—
See accompanying notes to consolidated financial statements.
F-7
Table of Contents
MACRONIX INTERNATIONAL CO., LTD.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the years ended December 31, 2003, 2004 and 2005
(Amounts in thousands except share and per share data)
Unrealized
Total shareholders,
Additional
losses
equity attributable
Common
Common stock
paid-in
Capital
Legal
Special
Retained earnings
on long-term
Translation
Treasury
to parent company's
shares
to be registered
capital
reserve
reserve
reserve
(accumulated deficit)
investments
adjustments
stock
shareholders
NT$
NT$
NT$000
NT$000
NT$000
NT$000
NT$000
NT$000
NT$000
NT$000
NT$000
Balance as of December 31, 2002
36,912,769
—
2,630,621
356
1,708,689
378,657
(9,469,175
)
(979,081
)
219,894
(1,188,436
)
30,214,294
Additional paid-in capital used to cover accumulated deficits
—
—
(2,630,621
)
—
—
—
2,630,621
—
—
—
—
Legal reserve used to cover accumulated deficits
—
—
—
—
(1,708,689
)
—
1,708,689
—
—
—
—
Special reserve used to cover accumulated deficits
—
—
—
—
—
(378,657
)
378,657
—
—
—
—
Stock issuance for cash
4,750,000
—
—
—
—
—
(927,496
)
—
—
—
3,822,504
Conversion of convertible debentures
2,364,814
274,936
—
—
—
—
(185,884
)
—
—
—
2,453,866
Adjustments of capital reserve from equity investees
—
—
—
7,575
—
—
—
—
—
—
7,575
Unrealized gains on long-term investments
—
—
—
—
—
—
—
977,222
—
—
977,222
Net loss, 2003
—
—
—
—
—
—
(8,197,745
)
—
—
—
(8,197,745
)
Cumulative translation adjustments
—
—
—
—
—
—
—
—
(30,182
)
—
(30,182
)
Balance as of December 31, 2003
44,027,583
274,936
—
7,931
—
—
(14,062,333
)
(1,859
)
189,712
(1,188,436
)
29,247,534
Issuance of common shares for Global Depositary Shares
5,250,000
—
315,704
—
—
—
—
—
—
—
5,565,704
Conversion of convertible debentures
1,075,380
(274,936
—
—
—
—
(41,377
)
—
—
—
759,067
Adjustments of capital reserve from equity investees
—
—
—
32,014
—
—
—
—
—
—
32,014
Unrealized losses on long-term investments
—
—
—
—
—
—
—
(1,349,668
)
—
—
(1,349,668
)
Net income, 2004
—
—
—
—
—
—
217,692
—
—
—
217,692
Cumulative translation adjustments
—
—
—
—
—
—
—
—
(127,670
)
—
(127,670
)
Balance as of December 31, 2004
50,352,963
—
315,704
39,945
—
—
(13,886,018
)
(1,351,527
)
62,042
(1,188,436
)
34,344,673
Appropriation and distribution of 2004 retained earnings:
Capital reserve used to cover accumulated deficits
—
—
(315,704
)
—
—
—
315,704
—
—
—
—
Cancellation of treasury stock
(400,000
)
—
—
—
—
—
(646,071
)
—
—
1,046,071
—
Adjustments of capital reserve from equity investees
—
—
—
18,045
—
—
—
—
—
—
18,045
Reversal of unrealized losses on long-term investments
—
—
—
—
—
—
—
1,351,527
—
—
1,351,527
Net loss, 2005
—
—
—
—
—
—
(7,027,189
)
—
—
—
(7,027,189
)
Cumulative translation adjustments
—
—
—
—
—
—
—
—
15,860
—
15,860
Adjustments of accumulated deficits from equity investees
—
—
—
—
—
—
(144,516
)
—
—
—
(144,516
)
Balance as of December 31, 2005
49,952,963
—
—
57,990
—
—
(21,388,090
)
—
77,902
(142,365
)
28,558,400
Balance as of December 31, 2005 (US$)
1,522,956
—
—
1,768
—
—
(652,076
)
—
2,375
(4,340
)
870,683
F-8
Table of Contents
MACRONIX INTERNATIONAL CO., LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share, per share, and percentage data)
1.
Organization and Business
Macronix International Co., Ltd. ("MXIC") was incorporated in the Hsinchu Science Park ("HSP"),
Taiwan, under the laws of the Republic of China (the "R.O.C.") on December 9, 1989. MXIC
operates principally as a designer, manufacturer and supplier of integrated circuits and memory
chips. MXIC was listed on the Taiwan Stock Exchange ("TSE") since March 15, 1995. Starting in
May 1996 and in April 2004, MXIC listed on the NASDAQ, Luxemburg Stock Exchange in the form of
American Depositary Shares ("ADS") and Global Depositary Shares ("GDS"), respectively.
As of December 31, 2005, MXIC and its subsidiaries (hereinafter referred to collectively as the
"Company") had 4,000 employees.
2.
Summary of Significant Accounting Policies
The consolidated financial statements are presented in conformity with Guidelines Governing the
Preparation of Financial Reports by Securities Issuers and accounting principles generally
accepted in the R.O.C.
Consolidation
Effective January 1, 2005, the Company complies with the revised R.O.C. Statement of
Financial Accounting Standard ("SFAS") No. 7 "Consolidated Financial Statements". The
accompanying consolidated financial statements include the accounts of all directly and
indirectly majority owned subsidiaries of MXIC, and the accounts of all the investees under
substantial control of MXIC. All inter-company balances and transactions are
eliminated upon consolidations. Minority interest in subsidiaries aforementioned is presented
under minority interest in subsidiaries in the consolidated balance sheets.
F-9
Table of Contents
The Company's consolidated financial statements include all the consolidated entities were
listed as follows:
Ownership
% as of
December
Name of Investor
Name of Investee
Main Business
31, 2005
Note
MXIC
Hui Ying Investment,
Ltd. ("Hui Ying")
Investment
100.00
%
1
MXIC
Run Hong Investment,
Ltd. ("Run Hong")
Investment
100.00
%
—
MXIC
Kang Bao Investment,
Ltd. ("Kang Bao")
Investment
100.00
%
—
MXIC
MaxNova Inc. ("MaxNova")
Research,
development,
design,
manufacturing and
sales of memory
system and ASIC
memory products
85.50
%
2
MXIC
Magic Pixel Inc. ("MPI")
Research,
development,
design,
manufacturing and
sales of digital
still camera
controller IC and
flat panel display
controller IC
44.91
%
3
MXIC
Macronix America Inc.
("MXA")
Sales and marketing
100.00
%
—
MXIC
Macronix (BVI) Co.,
Ltd. ("MXBVI")
Investment
100.00
%
—
Hui Ying
Investment, Ltd.
Joyteck Co., Ltd.
("Joyteck")
Research,
development,
design,
manufacturing and
sales of the
software and
hardware of
handheld device
products
87.98
%
4
Macronix (BVI)
Co., Ltd.
Macronix Japan
(Cayman Islands)
Limited. ("MXJ Cayman")
Sales and marketing
100.00
%
—
Macronix (BVI)
Co., Ltd.
Wedgewood
International Co., Ltd.
("Wedgewood")
Investment
100.00
%
5
Macronix (BVI)
Co., Ltd.
New Trend Technology
Inc.
("NTTI")
IC design
100.00
%
—
F-10
Table of Contents
Ownership
% as of
December
Name of Investor
Name of Investee
Main Business
31, 2005
Note
Macronix (BVI)
Co., Ltd.
Macronix (Hong Kong)
Co., Ltd. ("MXHK")
Sales and marketing
100.00
%
6
Macronix (BVI)
Co., Ltd.
Macronix Europe NV.
("MXE")
Sales and marketing
100.00
%
—
Macronix (BVI)
Co., Ltd.
Macronix Pte. Ltd.
("MPL")
Sales and marketing
100.00
%
—
Macronix (BVI)
Co., Ltd.
Macronix
Microelecronics
(Suzhou) Co., Ltd. ("MX
Suzhou")
Sales and marketing
100.00
%
—
Run Hong
Investment, Ltd.
Biomorphic Microsystems
Corporation ("BC")
Research,
development,
design,
manufacturing and
sales of digital
still camera CMOS
Sensor
54.77
%
7
Biomorphic
Microsystems
Corporation ("BC")
Biomorphic VLSI, Inc.
IC design
100.00
%
—
Biomorphic
Microsystems
Corporation ("BC")
BM Chip Design Private
Limited.
IC design
97.75
%
—
Note 1:
As of December 31, 2005, Hui Ying held 6,023,152 shares of MXIC, which represented
0.12% of MXIC's outstanding common stock.
Note 2:
As of December 31, 2005, MXIC and Hui Ying held in aggregate an 85.5% ownership of
MaxNova. MXIC held a 50% of ownership of MaxNova and Hui Ying held a 35.5% of ownership of
MaxNova.
Note 3:
As of December 31, 2005, MXIC held a 44.91% of ownership of MPI. MXIC had the
controlling interest over the financial and operating decision in MPI as MXIC represented
over majority of the directors in MPI.
Note 4:
As of December 31, 2005, MXIC held a 87.98% of ownership of Joyteck. MXIC held
18.18% of Joyteck and Hui Ying held 69.8% of Joyteck.
Note 5:
On June 15, 2005, Wedgewood merged with MXBVI.
Note 6:
MXIC directly held the ownership of MXHK before the Company changed investment
structure on April 26, 2005.
Note 7:
As of December 31, 2005, MXIC held in aggregate a 54.77% of ownership of BC that
Hui Ying held a 20.41% of BC and Run Hong held 34.36% of BC.
F-11
Table of Contents
Use of Estimates
The preparation of the consolidated financial statements in conformity with the aforementioned
guidelines and principles requires management to make reasonable estimates and assumptions that
are inherently uncertain, and therefore; that affect the amounts reported in the financial
statements and accompanying notes. The actual results experienced by the Company may differ from
management's estimates.
Foreign Currency Transactions and Translation
The Company and its subsidiaries in Taiwan maintain the accounting records in New Taiwan dollars
("N.T. dollars" or "NT$"), the national currency of the R.O.C. Transactions denominated in
foreign currencies are recorded in N.T. dollars on the transaction dates. Foreign exchange gains
and losses derived from foreign currency transactions are included in the statement of
operations. At the end of each year, assets and liabilities denominated in foreign currencies
are revalued at the prevailing exchange rates with the resulting gains or losses recognized in
the statement of operations.
The R.O.C. Statement of Financial Accounting Standard ("SFAS") No. 14, "Accounting for
Foreign-Currency Transactions and Translation of Foreign Financial Statements" applies to foreign
subsidiaries that use their respective local currencies as their functional currencies. Assets
and liabilities denominated in foreign currencies are translated into N.T. dollars using the
exchange rates in effect on the balance sheet date. Revenue and expenses denominated in foreign
currencies are translated into N.T. dollars using the average exchange rate for the relevant
period. The resulting translation adjustment is recorded as a component of shareholders' equity.
Cash and Cash Equivalents
Cash includes cash on hand, saving deposits, checking deposits, cancelable time deposits,
available-for-sale transferable certificates of deposits, and cash equivalents.
Cash equivalents are short-term, highly liquid investments that are readily convertible to known
amounts of cash, and so near to their maturity that they present insignificant risk of changes in
interest rates. Commercial paper, negotiable certificates of deposit, and bank acceptances are
classified as cash equivalents.
F-12
Table of Contents
Short-Term Investments
Short-term investments are recorded at historical cost and carried at the lower of cost or market
value on the balance sheet date. The cost of short-term investments is accounted for using
the weighted average method. The market value of the publicly traded securities or
close-ended funds is determined using the average closing prices during the last month of
the reporting year, while open-ended funds are valued using the net asset value at the end
of reporting year.
An allowance for decline in value is provided and is charged to the statement of operations
when the aggregate carrying value exceeds the aggregate market value of the short-term
investment. A reversal of the allowance is recorded for a subsequent recovery of the
aggregate market value.
Cash dividends are recorded as investment income in the year received. Stock dividends are
accounted for the increase of the number of holding shares in the investments.
Allowance for Doubtful Accounts
The allowance for doubtful accounts is recorded based on the review of the Company's credit
policies, the collectibility of the accounts, and the aging analyses on notes receivables,
accounts receivables and other receivables.
Inventories
Inventories are carried at the lower of cost or market value using the weighted average cost
method. The lower of cost or market method is applied to each major category of inventory. The
inventory cost is determined at the acquisition. Replacement cost is used to determine the
market value of raw materials and supplies. Net realizable value is used to determine the market
value of work in process, finished goods, and commodities purchased.
The allowance for inventory loss provision is estimated proportionally based upon the aging
analyses of all inventory in each Fab. The Company reversed the inventory provision when the
inventory was written down in the previous period, written up in the current period and continues
to form part of the Company's inventory at the end of the year; or when the inventory that was
written down in the previous period, written up in the current period and sold in the current
period.
F-13
Table of Contents
Long-Term Investments
Long-term investments in which the Company holds an interest less than 20% and does not
exercise significant influence are recorded at historical cost. Long-term investments in
publicly traded securities are carried at the lower of cost or market method. The losses
resulted from the decline in the market value over the cost of investments in publicly traded
securities is charged against the shareholders' equity at the end of the period. Long-term
investments in non-publicly traded securities are carried at the cost. When an indication of
impairment is identified in an investment, the carrying amount of the investment is adjusted to
reflect the other-than-temporary decline. The related other-than-temporary impairment loss is
charged to current income.
Long-term investments in which the Company exercises significant influence on the operating
and financial decisions or holds 20% and more interests are accounted for under the equity method
of accounting. When the equity investments are made, the difference between the acquisition cost
and the net asset value of the investments is amortized using the straight-line method over 5 to
7 years. When the Company subscribes to additional investee shares un-proportionally, the
carrying amount of the investments differs from the amount of the Company's proportionate share
in the net equity of the investees. The Company records the resulting difference as the
adjustment to long-term investments and capital reserve. When the capital reserve is
insufficient to offset against accumulated adjustments resulted from un-proportionally sequential
stock subscriptions of the investees accounted for using the equity method, the remaining
difference will be debited to retained earnings.
When the Company intends to continue its financial supports to the investees account for using
the equity method, or when there is sufficient indication of the short-term operation recovery in
the investees account for using the equity method, the Company will continuously record the
long-term investment loss with the corresponding amount credited to long-term investment. Other
liabilities are recognized when the net book value of the long-term investments accounted for
using the equity method becomes negative. When the investees account for using the equity method
becomes profitable, the Company will reverse the other liabilities with the corresponding amount
credited to long-term investment gain up to the accumulated balance of other liabilities resulted
from the prior adjustments.
Unrealized
inter-company gains and losses arising from downstream transactions
with investees accounted for under the equity method are eliminated
in proportion to the Group's ownership percentage while those from
transactions with majority-owned (above 50%) subsidiaries are
eliminated entirely. Unrealized inter-company gains and losses
arising from upstream transactions with investees accounted for under
the equity method are eliminated in proportion to the Group's
ownership percentage. Unrealized inter-company gains and losses
arising from transactions between investees accounted for under the
equity method are eliminated in proportion to the multiplication of
the Group's ownership percentage; while those arising from
transactions between majority-owned subsidiaries are eliminated in
proportion to the Group's ownership percentage in the subsidiary
incurred with a gain or loss.
F-14
Table of Contents
proportionally based upon the Company's holding interest on the investees. Unrealized gross
profits are charged against the gross profit while the deferred gains and losses on the
inter-company transactions are recorded in the current liabilities.
The realized gains and losses are recognized at the difference between the selling price and the
net book value of the long-term investments disposed. The current income is recognized in the
proportion of the disposition of long-term investments to offset remaining balance in capital
reserve resulting from the difference between the carrying amount of the investment and the
amount of the Company's proportionate share in the net equity of the investees due to the
un-proportionally sequential stock subscriptions of investees account for using the equity
method.
When an indication of impairment is identified in the investment, the carrying amount of the
investment is reduced to reflect the other-than-temporary decline, with the related impairment
loss charged to current income.
If the investee's functional currency is a foreign currency, translation adjustments
resulted from the translation of the investee's financial statements into the reporting
currency of the Company will be reported as the cumulative translation adjustments under
shareholders' equity.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost less accumulated depreciation.
Depreciation is calculated using the straight-line method over the following estimated useful
lives: 5 to 20 years for buildings; 5 years for production equipment; 3 to 5 years for research
and development equipment; 1 to 15 years for office furniture and fixtures; 5 years for leased
equipment; and 1 to 13 years for leased improvement.
Improvements and replacements are capitalized and depreciated over their estimated useful lives
while ordinary repairs and maintenance are expensed as incurred. Equipment held for
non-operating purposes is re-classified as idle assets or disposal assets and carried based
upon the lower of net realized value or book value. Depreciation of the idle assets is
recorded as non-operating expenses.
Effective January 1, 2005, upon the compliance with R.O.C. SFAS No.35 "Accounting for Impairment
of Assets", when an indication of impairment is identified, any excess of the carrying
amount of an asset over its recoverable amount is recognized as an impairment loss. If the
recoverable amount increases in the future period, the impairment loss would be reversed and
recognized as the gain up to the carrying amount of the impaired assets after net of
depreciation as if no impairment had not incurred.
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Upon disposal or scrap of property, plant and equipment, the related cost and accumulated
depreciation are removed from the corresponding accounts, with any gains or losses adjusted
to non-operating gains or losses in the year of disposal.
Lease agreements
Properties covered by agreements qualifying as capital leases are carried at the lower of market
value of the leased equipment at the lease inception or the present value of minimum lease
payments, with the corresponding amount recorded as capital lease obligation. The properties of
capital leases are amortized over estimated useful lives or the lease term using the
straight-line method. The capital lease obligation is amortized over the lease term using the
effective interest method. The rental expense is recorded for the operating leases at the
incurrence of lease payments.
Intangible Assets
Intangible assets are recorded at cost and are amortized over the estimated useful lives using
the straight-line method. Royalties and issuing cost of corporate bonds are amortized over the
terms of contracts and the bond's maturity, respectively. Computer software is amortized over 2
to 3 years, while other intangible assets are amortized over 1 to 5 years. Goodwill represents
the excess of the consideration paid for the acquisition over the fair value of identifiable net
assets acquired. Goodwill is amortized using the straight-line method over the estimated life of
5 years.
Effective January 1, 2005, upon adopting R.O.C. SFAS No. 35 "Accounting for Impairment of
Assets", when an indication of goodwill impairment is identified, the impairment loss is charged
to current income. No reversal of the impairment loss from the subsequent recovery in the
goodwill is allowed.
Income Taxes
The Company complies with R.O.C. SFAS No. 22, "Accounting for Income Tax" that requires the
Company use an inter-period tax allocation method for income tax. Deferred income tax assets and
liabilities are recognized for the tax effect on temporary differences, net operating loss
carry-forwards and unused tax credits. A valuation allowance is recorded based on the expected
realization of the deferred tax assets. Deferred income tax assets and liabilities are classified
as current and non-current accounts in accordance with the classification of the related assets
and liabilities, or with the expected length of time that the deferred income tax assets and
liabilities are realized or settled.
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The Company complies with R.O.C. SFAS No. 12, "Accounting for Income Tax Credits" that requires
the Company recognize in current year the tax credits arising from purchases of machinery,
equipment and technology, research and development expenditures, personnel training, and
investments in selected technology-based enterprises.
Undistributed earnings generated after 1997 are subject to the 10% tax withholding in compliance
with R.O.C. Income Tax Law. The 10% tax withholding on undistributed earnings is expensed when
the shareholders resolve that the Company's earnings shall be retained in the year subsequent to
the earnings year.
Derivative Financial Instruments
The Company enters into foreign currency forward contracts to manage the foreign exchange
exposures on its assets and liabilities denominated in foreign currencies. The contracts are
recorded in New Taiwan dollars at the spot rates on the contract dates. The differences in the
New Taiwan dollars amounts translated using the spot rates and using the contracted forward rates
on the contract date are accreted or amortized to the statement of operations over the contract
terms using the straight-line method. At the year end, the Company restates the receivables and
payables arising from the forward contracts using the spot rates at the balance sheet date and
records the resulting difference in the statement of operations as foreign exchange gains or
losses. The net balance of receivables and payables arising from the same forward contract is
included in other assets or other liabilities. Gain and losses arising from the settle of
foreign currency forward contracts are recorded in the settlement year.
The foreign currency option contracts entered into for hedging purposes are not recognized as
assets or liabilities on the contract dates. Any gain or losses resulting from settlement are
credited or charged to income in the settlement year. The premium paid for the foreign currency
option contracts are amortized over the terms of related contracts and charged to the statement
of operations.
The Company enters into interest rate swap contracts to manage exposure to changes in interest
rates on existing assets or liabilities. The transactions are accounted for on the accrual
basis, in which the cash settlement receivable or payable is recorded as an adjustment to
interest income or expenses associated with the hedged items. The difference between the spot
rate at the contract date and the contracted forward rate is amortized over the terms of the
contract using the straight-line method. Realized gains and losses from settlement or unrealized
gains and losses resulting from changes in the spot exchange rate at the balance sheet date are
recorded in the statement of operations as foreign exchange gains or losses.
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The gain or loss resulting from the difference between the related floating rate interest and
fixed rate interest at the balance sheet date is recorded in the statement of operations for the
period ending on the balance sheet date. The realized gains and losses upon settlement are
recorded in the statement of operations.
A structured deposit represents a deposit with an embedded currency option placed with a
financial institution to earn higher interest income. At maturity the financial institution that
accepts the deposit has an option to pay the remittance and the pre-determined accrued interest
in the original currency or in an alternative currency based on the terms of the structured
deposit contract. The amount of the pre-determined interest is accrued. The gains and losses
arising from the currency portion of the contracts are recorded in the statement of operations
for the relevant period at the balance sheet date.
Convertible Bonds
The interest premium of convertible bonds, which is the difference between the put price and the
par value of the bonds, is recorded as the interest expenses using the effective interest method
with the corresponding amount credited to the interest premium liability over the period from the
issuance date of the bonds to the expiry date of the put option. If the bondholders do not
exercise the put option, the interest premium liability is amortized over the period from the
expiry date of put options to the maturity date of the convertible bonds using the effective
interest method.
The issuing cost of convertible bonds is recorded as a deferred asset and amortized over the
period between the issuance date of the convertible bonds and the expiration date of the put
option. The amortization of issuing cost for convertible bonds is recorded as the interest
expenses under non-operating expenses.
When bondholders exercised the conversion rights, the Company debited the bonds payable subject
to the adjustment of unamortized discount or premium of the bonds payable, the accrual interest
and interest premium payable, and credited the common stock at the par value with the difference
between the net book value of the convertible bonds and the converted balance of common stock
credited or charged to capital reserve. No gain or loss is recognized upon conversion.
Pension Plans
The Company and its subsidiaries in Taiwan have defined benefit plans under Labor Standard Law
(the "Old Act") that provide benefits based on the employee's length of service and average
monthly salary prior to retirement. For employees under the Old Act, the Company and its
domestic subsidiaries contribute at a certain percentage of the salaries monthly to individual
employee's account under the Labor Retirement Fund (the "Funds"). The Funds are administered by
the Pension Fund Monitoring Committees (the "Committees") and deposited in the Central Trust of
China in Taiwan.
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The Labor Pension Act (the "New Act") became effective on July 1, 2005 and the pension mechanism
under the New Act is deemed a defined contribution plan. The employees who were subject to the
Labor Standards Law prior to July 1, 2005 were allowed to choose either to apply for the defined
contribution plans under the New Act, or the defined benefit plans under the Old Act. For those
employees who apply for the defined contribution plans under the New Act and still work for the
Company on and after July 1, 2005, their length of service prior to July 1, 2005 shall be
accumulated. The New Act prescribes that the Company shall make monthly contribution to the
employees' pension accounts and the rate of the contribution from the Company shall be not less
than 6 percent of the employees' monthly wages.
The Company and its domestic subsidiaries comply with R.O.C. SFAS No. 18, "Accounting for
Pensions". For employees apply for the defined contribution plans under the New Act, pension
costs are recorded as the current expenses based on the actual contribution made to employees'
individual pension accounts. For employees apply for the defined benefit plans under the Old
Act, pension costs are recorded based on actuarial calculation. The pension cost based on
actuarial calculation includes the prior service cost, interest cost, expected returns on the
pension assets and the amortization of unrecorded net transition obligation. The unrecorded net
transition obligation is amortized over the expected average remaining service lives of the
employees or 15 years, whichever is longer.
Employees' Stock Option Plan
Effective from January 1, 2004, the Company complies with the interpretations issued by the
R.O.C. Accounting Research and Development Foundation ("ARDF") and adopted intrinsic value method
for the compensating employees' stock option plans. The excess of the market price over exercise
price at the plan date is recognized as the compensation cost and amortized over grantee's
vesting periods. Disclosure of pro forma information for net income and earnings per share using
fair value method is required.
Treasury Stock
The Company complies with R.O.C. SFAS No.30, "Accounting for Treasury Stock" that require the
Company record the cost of re-acquired stock as treasury stock, a reduction to shareholders'
equity, when the Company buys back its own stocks. Any surplus or deficit on treasury stock
transactions are credited or charged to capital reserves. MXIC's stock held by its subsidiaries
is treated as treasury stock and reclassified from long-term investments to treasury stock.
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Minority Interests
Minority interest in the statements of operations includes interest in the earnings or losses of
less than wholly owned subsidiaries excluding the pre-acquisition earnings of subsidiaries acquired during the year that the Company was not entitled to recognize.
Earnings Per Share
The Company complies with the R.O.C. SFAS No. 24, "Earnings per Share" that requires the Company
discloses basic earnings per share if the capital structure is simple; otherwise, the Company is
required to disclose both the basic earnings per share and diluted earnings per share when the
capital structure is complicated. Basic earnings per share are equal to the net income (loss) of
MXIC attributable to the shareholders divided by the weighted-average number of common shares
outstanding in each period. Dilutive earnings per share is equal to the net income (loss) of
MXIC adjusted for the potential common stock dividends, interest expenses and other income and
expenses resulted in the dilution effects on earnings per share, divided by the weighted-average
number of outstanding common shares and the weighted-average number of outstanding shares
converted from the potential common shares resulted in the dilution effects.
Revenue Recognition and Allowance for Sales Returns and Others
The Company complies with R.O.C. SFAS No. 32, "Accounting for Revenue Recognition" that requires
the Company recognize sales revenue when evidence of an arrangement exists, shipment is made,
price is determined, and the collectibility of billing is reasonably assured. Delivery is
considered to have occurred when title and risk of loss have transferred to the customer.
Sales prices are determined using the fair market value considering the related sales discounts
agreed between the Company and its customers.
Sales
to customers and distributors generally do not contain rights of return, price protection privileges
or other forms of compensation. Payments are typically due 45 days to 90 days after legal title
to the products is passed to the customers and distributors. Delivery terms are typically F.O.B.
shipping point.
In some circumstances, the sales to distributors contain rights of return and price protection
clauses. In the circumstance when the rights of return occur, the Company recognizes revenue
when the Company can reasonably estimates returns. In the circumstance when the sales to
distributors contain price protection clauses, the Company recognizes revenue when the future
price changes can be reasonably estimated. To the extent that these criteria are not met, sales revenue is deferred until the distributor sells
the merchandise or the rights of return and the price protection privileges lapse, whichever occurs first.
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The Company records provisions for estimated sales returns and other allowances in the period the
related revenue is recorded. Provisions for estimated sales returns and other allowances are
generally made based upon historical experience, management's judgment, and any known factors
that would significantly affect the allowance. The Company's management periodically reviews the
adequacy of the percentage used. Due to the nature of estimation, the actual sales returns and
allowances could be significantly different from the Company's estimates. When the actual
returns and allowances are greater than the Company's estimates on sales and allowances, the
Company records additional provisions for sales returns and allowances, which would have a
negative effect on the Company's net sales and gross margin.
Research and Development Subsidies
Government subsidies for research and development are recorded as non-operating income in the
period the qualifying research and development activities are undertaken.
Employee Bonuses
Amounts distributed to employees, directors and supervisors pursuant to the Company's Articles of
Incorporation on the distribution of earnings are recorded as an appropriation from retained
earnings in the period shareholder approval is obtained for the distribution of the Company's
earnings. If such distribution is made in the form of common shares, the amount transferred from
retained earnings is calculated based on the par value of the common shares issued.
Reason and Effect of a Change in Accounting Policies
In July 2004, ADRF issued SFAS No.35 "Accounting for Impairment of Assets", which was required
the Company to comply on January 1, 2005. For all assets, excluding certain assets specified by
SFAS No.35, the Company is required to evaluate holding assets for any indication of impairment.
If there is an indication that an asset may be impaired, the Company is required to estimate the
recoverable amount of assets and to record impairment loss when the carrying value is less than
the recoverable amount of the assets. Subsequent reversal of an impairment loss is allowed when
any indication of the impairment loss recognized in the prior years may no longer exist. The
Company is required to evaluate the goodwill for impairment on the annual basis. The reversal of
an impairment loss for goodwill is not allowed. The changes of the accounting policies for
compliance with R.O.C. SFAS No.35 results in the decreases of goodwill, idle assets, and assets
to be disposed at the amount of NT$3,679, NT$391,497, and NT$510,482 respectively. As of
December 31, 2005, the total assets decreased at the amount of NT$905,658 with the increases of
net losses at the amount of NT$905,658 and the decrease in basic earnings per share at the amount
of NT$0.31 for the Company.
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Effective January 1, 2005, the Company complies with the revised R.O.C. SFAS No. 5, "Accounting
for Long-Term Equity Investment" that requires the Company recognize the investment gains or
losses for the investee companies under the equity method. The changes of the accounting
policies for compliance with R.O.C. SFAS No.5 result in no significant effect on the Company's
net income.
In December 2004, ARDF revised SFAS No.7, "Consolidated Financial Statements", which requires the
Company to comply on June 30, 2005. The Company is required to consolidate all the investees
that the Company held the controlling interest. Controlling interests is presumed not only when
the Company held majority of the investees' voting shares, but also under certain circumstances
specified in the revised R.O.C. SFAS No. 7. Beginning January 1, 2005, the Company consolidated
the accounts of MPI as the Company held a majority of the directors on the board of MPI.
Recent Accounting Pronouncements
In December 2003, the R.O.C. Accounting Research and Development Foundation ("ARDF") issed SFAS
No.34 "Accounting for Financial Instruments", which is required to be applied by the Company on
January 1, 2006. SFAS No.34 will require the Company to classify all financial instruments,
excluding limited financial instruments specified by SFAS No.34, as either trading,
available-for-sale or held-to-maturity. Debt securities that the Company has the positive intent
and ability to hold to maturity are classified as held-to-maturity securities and reported at
amortized cost. Debt and equity securities that are bought and traded for short-term profit are
classified as trading securities and reported at fair value, with unrealized gains and losses
charged to earnings for the current period. Debt and equity securities not classified as either
held-to-maturity or trading are classified as available-for-sale securities and reported at fair
value, with unrealized gains and losses excluded from earnings and reported as a separate
component of shareholders' equity. Furthermore, SFAS No.34 will require the Company to recognize
all derivatives on the balance sheet at fair value. Derivatives that are not deemed as hedges
under SFAS No.34 must be adjusted to fair value through income. If the derivative is deemed a
hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either
be offset against the change in fair value of the hedged assets, liabilities or firm commitments
through earnings, or recognized in other comprehensive income until the hedged item is recognized
in earnings. The Company is currently evaluating the effect of adopting the standard but
expects the implementation will not have a material effect on the Company's financial position or
overall trends in results of operations.
In June 2005, ARDF issued R.O.C. SFAS No. 36, "Financial Instruments: Disclosure and
Presentation", which is also required the Company comply on January 1, 2006. The Company is
required to present the financial instruments, from the perspective of the issuer, into financial
assets, financial liabilities and equity instruments. In addition, the Company is required to
classify the related interests, dividends, losses and gains. The Company is also required to
disclose the information about the nature and extent of the
F-22
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Company's use of financial instruments, the business purposes of the financial instruments, the
risks associated with the financial instruments as well as the management's policies on
controlling those risks. The principles in R.O.C. SFAS No.36, "Financial Instruments: Disclosure
and Presentation" complement the principles for recognizing and measuring financial assets and
financial liabilities in R.O.C. SFAS No. 34, "Accounting for Financial Instruments".
Reclassifications
Certain accounts in the consolidated financial statements as of December 31, 2004 and for the
years ended December 31, 2003 and 2004 have been reclassified to conform to the consolidated
financial statements as of and for the year ended December 31, 2005.
3.
Information Expressed in U.S. Dollars
The Company expresses its consolidated financial statements in N.T. dollars. Translation of
N.T. dollar amounts into U.S. dollar amounts is included solely for the convenience of the
readers and has been made at the rate of NT$32.80 to US$1.00 on the basis of the noon buying
rate in New York for cable transfers as certified for customs purposes by the Federal
Reserve Bank of New York on December 31, 2005. No representation is made that the N.T.
dollar amounts have been, could have been, or could be in the future converted into U.S.
dollars at that or any other rate.
4.
Cash and Cash Equivalents
As of December 31
2004
2005
NT$000
NT$000
US$000
Petty cash
600
1,814
55
Checking and savings accounts
1,948,043
7,246,740
220,938
Time deposits
112,139
2,778,283
84,704
Cash equivalents
8,054,906
1,106,783
33,743
Total
10,115,688
11,133,620
339,440
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Table of Contents
5.
Short-Term Investments
As of December 31
2004
2005
NT$000
NT$000
US$000
Mutual funds
901,871
—
—
Equity securities
16,169
—
—
Total
918,040
—
—
Less: Allowance for market value decline
—
—
—
Net
918,040
—
—
6.
Notes and Accounts Receivable
As of December 31
2004
2005
NT$000
NT$000
US$000
Notes receivable
100,008
6,028
184
Accounts receivable
2,615,335
2,093,185
63,816
Total
2,715,343
2,099,213
64,000
Less: Allowance for doubtful accounts
(161,833
)
(92,757
)
(2,828
)
Net
2,553,510
2,006,456
61,172
7.
Inventories
As of December 31
2004
2005
NT$000
NT$000
US$000
Merchandise
232,339
184,471
5,624
Finished goods
2,389,000
1,716,412
52,330
Work in process
5,217,347
3,925,020
119,665
Raw materials
150,159
220,930
6,735
Supplies
79,287
119,087
3,631
Others
324
1,899
58
Total
8,068,456
6,167,819
188,043
Less: Allowance for market
value decline and obsolescence
(3,242,215
)
(2,578,374
)
(78,609
)
Net
4,826,241
3,589,445
109,434
The insurance coverage for inventories amounted to NT$6,032,985 and NT$ 6,055,495 (US$184,619) as
of December 31, 2004 and 2005, respectively.
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Table of Contents
8.
Long-Term Investments
As of December 31, 2004
Percent
Shares
NT$000
owned
Accounted for under equity method:
Magic Pixel Inc. ("MPI")
9,264,000
95,032
48.76
%
Biomorphic Microsystems Corporation ("Biomorphic")
14,524,521
76,180
30.08
%
Raio Electronic Co. Ltd. ("Raio")
2,523,210
—
26.28
%
Procomm Inc. ("Procomm")
10,132,513
—
38.38
%
Xinmax Technology Development ("XTD")
—
5,226
45.00
%
Subtotal
176,438
Accounted for under cost method:
Ardentec Corp. ("Ardentec")
30,148,752
309,064
10.64
%
Chien Cheng Venture Capital Co., Ltd. ("Chien")
8,000,000
80,000
15.38
%
Chipbond Technology Corp. ("Chipbond")**
4,749,765
56,122
2.77
%
FueTrek Co., Ltd. ("FueTrek")
480
39,324
16.22
%
Global Strategic Investment Fund ("GSI")
2,000,000
63,420
2.52
%
Honbond Venture Capital Co., Ltd. ("Honbond")
12,000,000
120,000
15.00
%
Pico Netics Inc. ("Pico")
1,000,000
—
2.35
%
Powertech Co., Ltd. ("Powertech")**
3,694,000
34,433
1.09
%
Quality Test System Inc. ("QTS")
4,538,333
—
14.64
%
Tower Semiconductor Ltd. ("Tower")**
8,773,395
2,034,691
13.35
%
United Industrial Gases Co., Ltd. ("UIG")
5,274,212
58,500
3.24
%
Subtotal
2,795,554
Less:
Allowance for market value decline
(1,351,527
)
Net of Long-Term Investment under Cost Method
1,444,027
Total Long-Term Investment
1,620,465
**
Publicly traded
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Table of Contents
As of December 31, 2005
Percent
Shares
NT$000
US$000
owned
Accounted for under equity method:
Raio Technology Co., Ltd. ("Raio")
504,642
—
—
18.32
%
Accounted for under cost method:
Ardentec Corporation ("Ardentec")**
28,679,983
261,192
7,963
8.83
%
Chien Cheng Venture Capital Co., Ltd. ("Chien")
8,000,000
80,000
2,439
15.38
%
Chipbond Technology Inc. ("Chipbond")**
3,871,134
37,799
1,152
1.44
%
FueTrek Co., Ltd. ("FueTrek")**
1,420
30,129
919
6.27
%
Global Strategic Investment Fund ("GSI")
2,000,000
65,700
2,003
2.52
%
Honbond Venture Capital Co., Ltd. ("Honbond")
12,000,000
120,000
3,659
15.00
%
Pico Netics Inc. ("Pico")
1,000,000
—
—
2.23
%
Quality Test System, Inc. ("QTS")
4,538,333
—
—
14.64
%
Tower Semiconductor Ltd. ("Tower")**
8,773,395
540,583
16,481
13.11
%
United Industrial Gases Co., Ltd. ("UIG")
5,274,212
58,500
1,783
3.18
%
Sub-total
1,193,903
36,399
Add: Prepayment of long-term investment — Tower
32,850
1,002
Total
1,226,753
37,401
**
Publicly Traded
For the years ended December 31, 2003, 2004 and 2005, the net investment loss from the investees
accounted for under the equity method was NT$87,219, NT$99,073, and NT$89,525 (US$2,729),
respectively. The carrying amounts and the related equity in earnings of the investees accounted
for under the equity method were determined based upon the audited financial statements of the
investees as of and for the same periods ended December 31, 2004 and 2005.
For the years ended December 31, 2004 and 2005, the unrealized loss from the market value decline
in the long-term investment of Tower was NT$1,349,668 and NT$1,351,527 (US$41,205), respectively.
The Company evaluated the effects on the continuous declines in Tower's stocks to the long-term
investment of the Company. The Company impaired the investment in Tower due to the
other-than-temporary decline of Tower's shares and recorded the impairment loss of US$47,709 for
the year ended December 31, 2005.
As of December 31, 2005, the investment in Procomm carried a negative balance of NT$29,838
(US$910). The Company recorded other liabilities for the investment in Procomm due to the
negative book value of investment in Procomm.
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Table of Contents
In 2005, Ardentec commenced trading on GTSM. The Company was required by GTSM to deposit shares
as the Company represented on Ardentec's Board. Under
GTSM's regulation, such compulsive deposit shares shall not be transferred or pledged. As of December 31, 2005, the Company deposited
25,026,183 shares with book value of NT$227,916 (US$6,949). The Company held 28,679,983 shares
of Ardentec with the book value of NT$261,192 (US$7,963) as of December 31, 2005.
In 2003, Powertech commenced trading on GreTai Securities Market ("GTSM"). The Company was
required by GTSM to deposit Powertech's shares as the Company represented on Powertech's Board.
Under GTSM's regulation, such compulsive deposit shares shall not be transferred or pledged. For
the year ended December 31, 2003, no deposit shares have been withdrawn. For the Year ended
December 31, 2004, 3,077,225 shares have been withdrawn. As of December 31, 2003 and 2004,
6,771,225 shares and 3,694,000 shares, with book value of NT$72,584 and NT$34,433 were deposited,
respectively. In 2005, the Company resigned from the Board of Powertech, re-classified the
investment in Powertech as the short-term investment, and deposed the remaining holding shares of
Powertech.
In 2002, Chipbond commenced trading on GreTai Securities Market ("GTSM"). The Company was
required by GTSM to deposit Chipbond's shares as the Company represented on Chipbond's Board.
Under GTSM's regulation, such compulsive deposit shares shall not be transferred or pledged. For
the year ended December 31, 2003, no deposited shares have been withdrawn. For the year ended
December 31, 2004 and 2005, 1,487,000 and 1,680,000 shares have been withdrawn, respectively. As
of December 31, 2003, 2004, and 2005, 5,574,000 shares, 4,087,000 shares and 2,407,000 shares,
with book value of NT$87,657, NT$59,697 and NT$23,503 were deposited, respectively.
In 2001, QTS proceeded to reduce its paid-in capital to offset accumulated deficit. The Company
evaluated the effects on the reduction of capital of QTS to the long-term investment of the
Company. In 2001, the Company fully impaired the investment in QTS due to the less possibility
to recover the investment loss in QTS.
Except for those shares compulsorily deposited by GTSM, no other long-term investments were
pledged or restricted as of December 31, 2004 and 2005.
9.
Property, Plant and Equipment
For the years ended December 31, 2003, 2004 and 2005, depreciation expenses on property,
plant and equipment were NT$8,614,734, NT$7,092,077, and NT$6,742,955 (US$205,578),
respectively.
As of December 31, 2003, 2004 and 2005, the insurance coverage for property, plant and
equipment was NT$60,701,821, NT$58,910,730 and NT$61,466,524 (US$1,873,979), respectively.
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Table of Contents
For the years ended December 31, 2003, 2004 and 2005, the interest expenses, before deducting
capitalized interest amount of NT$79,114, NT$32,467, and NT$80,744 (US$2,462) for the respective
years, were NT$1,157,012, NT$716,572, and NT$458,005 (US$13,964), respectively. For the years
ended December 31, 2004 and 2005, the capitalized interests and the effective interest rate were
listed as follows:
For the year ended December 31
2003
2004
2005
NT$000
NT$000
NT$000
US$000
Capitalized Interest
Buildings and facilities
1,801
222
862
26
Production equipment
77,313
32,245
79,882
2,436
Total of capitalized interest
79,114
32,467
80,744
2,462
Effective interest rate
4.01
%
3.81
%
3.05
%
3.05
%
For the years ended December 31, 2003, 2004 and 2005, depreciation expenses of the idle assets
were NT$49,868, NT$0, and NT$0, respectively. The Company evaluated the recoverable amount of
idle assets held by the subsidiaries based upon the fair market value of the idle assets. For
the year ended December 31, 2005, the Company recognized the impairment loss on idle assets of
NT$391,497 (US$11,936) under the non-operating expenses. As of December 31, 2004 and 2005, the
details in idle assets were listed as follows:
10.
Idle Assets
As of December 31
2004
2005
NT$000
NT$000
US$000
Cost
Land
—
706,125
21,528
Production equipment
—
13,043
398
Research and development equipment
—
180
5
Office furniture and fixtures
—
353
11
Subtotal
—
719,701
21,942
Accumulated Depreciation
Production equipment
—
(13,043
)
(397
)
Research and development equipment
—
(108
)
(3
)
Office furniture and fixtures
—
(251
)
(8
)
Subtotal
—
(13,402
)
(408
)
Accumulated Impairment Loss
F-28
Table of Contents
As of December 31
2004
2005
NT$000
NT$000
US$000
Land
—
(391,324
)
(11,931
)
Research and development equipment
—
(72
)
(2
)
Office furniture and fixtures
—
(101
)
(3
)
Subtotal
—
(391,497
)
(11,936
)
Net of Idle Assets
—
314,802
9,598
The Company recognizes assets impairment loss amounted to NT$510,482 based on net fair value
of disposing FAB III. Please refer to Note 27 "Other Disclosures". Assets held for
disposition pledged as the collateral for loans will be rescinded in the first quarter of
2006 as the related loans have been discharged as of December 31, 2005. As of December 31,
2004 and 2005, the details in assets held for disposition were listed as follows:
11.
Assets to be Disposed
As of December 31
2004
2005
NT$000
NT$000
US$000
Cost
Building and facilities
—
8,030,938
244,846
Accumulated Depreciation
Building and facilities
—
(2,220,456
)
(67,697
)
Accumulated Impairment Loss
Building and facilities
—
(510,482
)
(15,564
)
Net of assets held for disposition
—
5,300,000
161,585
12.
Short-Term Debts
As of December 31
2004
2005
NT$000
NT$000
US$000
Letter of credit due within 180 days
at variable interest rate
342,282
7,921
241
Working capital loans and secured
loans within 180 days at variable
interest rate
2,554,572
1,885,833
57,495
Total
2,896,854
1,893,754
57,736
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Table of Contents
As of December 31, 2004 and 2005, the weighted average interest rate of the short-term debts was
2.81% and 1.70% to 5.87%, respectively.
As of December 31, 2004 and 2005, the Company's unused line of credit with terms of 180 days
(including unused letter of credit) was NT$5,424,345 and NT$5,179,454 (US$157,910), respectively.
13.
Short-Term Notes
As of December 31, 2004
Interest
Period
NT$000
Commercial Paper
1.43463
%
2004.10.29~2005.1.21
100,000
Less: Discount
(76
)
Net
99,924
There were no short-term notes outstanding as of December 31, 2005. As of December 31, 2004 and
2005, the Company's unused short-term line of credit for short-term notes was NT$80,000 and
NT$180,000 (US$5,488), respectively. There were no assets pledged as collateral for short-term
notes.
14.
Capital Lease Obligations
In 2001, the Company signed a lease agreement with Nintendo for equipment with a cost of
NT$1,750,658. The lease term is from July 31, 2001 to June 30, 2005. The lease obligation was
repayable in 36 monthly installments from July 31, 2002 to June 30, 2005. During the lease
period, the Company was not allowed to modify or sublease the equipment. The ownership of the
equipment must be unconditionally transferred to the Company at the end of lease term.
Accumulated depreciation of assets under capital leases was NT$890,653 and NT$0 (US$0) as of
December 31, 2004 and 2005, respectively. As of June 30, 2005, the lease agreement had expired
and the Company did not have any capital lease obligations.
As of December 31, 2004, capital lease obligations were listed as follows:
2005.01.01 ~ 2005.06.30
NT$000
Capital lease obligations
306,533
Less: unrealized interest expense
(3,087
)
Current portion of lease obligations
303,446
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Table of Contents
15. Long-Term Debts
Interest Rate
Balance
As of December 31
As of December 31
2004
2005
2004
2005
%
%
NT$000
NT$000
US$000
Secured
Medium term loan
from one bank,
repayable in 8
semi-annual
installments from
June 2003 to
December 2006 with
variable interest
rates
5.025
2.92
200,000
100,000
3,049
Medium term loans
from one bank,
repayable in 96
monthly installments
from May 1999 to
April 2007 with
variable interest
rates
4.45
3.47
102,200
58,400
1,780
Medium term loan
from 14 banks,
repayable in 19
quarterly
installments from
July 1999 to
December 2005 with
variable interest
rates
2.684~4.040
—
41,070
—
—
Medium term loan
from 1 bank,
repayable in 156
monthly installments
from May 2003 to
April 2016 with
variable interest
rates
4.45
3.47
775,024
706,638
21,544
Medium term loan
from 1 bank,
repayable in 17
quarterly
installments from
April 2002 to April
2006 with variable
interest rates
5.255
—
94,120
—
—
Medium term loan
from 20 banks,
repayable in 10
semi-annual
installments from
March 2005 to
September 2009 with
variable interest
rates
2.579
2.66
7,060,000
5,648,000
172,195
Medium term loan
from 1 bank,
repayable in full at
maturity with
variable interest
rates
1.50
1.75
800,000
800,000
24,390
Medium-term loan
from 1 bank,
repayable in 9
quarterly
installments from
December 2006 with
variable interest
rates
—
2.81
—
100,000
3,049
SB II Debentures,
5-year secured
debentures repayable
in full at maturity
in October 2006 with
interest paid
annually at a fixed
interest rate
3.30
3.30
3,000,000
3,000,000
91,464
F-31
Table of Contents
Interest Rate
Balance
As of December 31
As of December 31
2004
2005
2004
2005
%
%
NT$000
NT$000
US$000
Unsecured
ECB IV Debentures,
5-year unsecured
convertible
debentures puttable
in August 2004
0.50
—
3,171
—
—
DCB I Debentures,
5-year unsecured
convertible
debentures puttable
in December 2005
—
—
209,200
—
—
ECB V Debentures,
5-year unsecured
convertible
debentures puttable
in February 2004
—
—
202,944
—
—
Subtotal
12,487,729
10,413,038
317,471
Add: Reserve for
redemption of
convertible bonds
21,778
—
—
Less: Current portion
(2,196,469
)
(4,635,295
)
(141,320
)
Net
10,313,038
5,777,743
176,151
The Company's unused line of credit for long-term debts was NT$0 and NT$500,000 (US$15,244) as of
December 31, 2004 and 2005, respectively.
16. Convertible Bonds
The non-interest bearing 5-year unsecured convertible debentures ("DCB I") due December 2007. The
initial conversion price was NT$11. The conversion price was subject to adjustment and was reset to
NT$8.8 and NT$8.7 on June 27, 2003 and December 31, 2004, respectively. As of December 31, 2005,
an aggregate principal amount of NT$2,990,800 (US$91,183) has been converted. In 2005, the Company
repurchased the outstanding DCB I at the amount of NT$73,700 (US$2,247) and called back the
outstanding DCBI at the amount of NT$20,400 (US$622). The bondholders put back the outstanding DCB
I at the amount of NT$115,100 (US$3,509) in 2005. As of December 31, 2005, the outstanding DCB I
has been fully redeemed. The debt extinguishment gain was NT$778 (US$24) for the year ended
December 31, 2005.
On October 29, 2001, the Company issued NT$3,000,000 of five-year secured debentures ("SB II"), due
in October 2006 with a stated interest rate of 3.3%. SB II was guaranteed by 20 banks in total of
NT$3,099,000. The interest expense is repayable annually while the bonds will be paid in full at
maturity.
The 0.5% 5-year unsecured convertible debentures due in February 2007 ("ECB IV"). The initial
conversion price was NT$31.32 per share. The conversion price was subject to adjustments in the
events that certain changes occurred to the Company's capital structure was reset to NT$28.2329.
The holders of the ECB IV had the right to put the debentures at predetermined price. As of
December 31, 2004 and 2005, the Company
F-32
Table of Contents
repurchased and canceled outstanding balance of ECB IV at the amount of US$169,124 and US$166,124,
respectively. In 2005, the Company called back the outstanding ECB IV at the aggregate amount of
US$100 while the bondholders put back the remaining outstanding ECB IV at the amount of US$3,000.
For the year ended December 31, 2003, 2004 and 2005, the related debt extinguishment gain was NT$0,
NT$63,070 and NT$422 (US$13) recorded as non-operating income, respectively.
The non-interest bearing 5-year unsecured convertible debentures ("ECB V") due February 2008. The
initial conversion price was NT$12.06. The conversion price was subject to adjustments in the
events that certain changes occurred to the Company's capital structure was reset to NT$11.9584.
As of December 31, 2004, the bondholders has put back and converted the outstanding ECB V at the
amount of US$78,100 and US$5,500, respectively. As of December 31, 2005, the bondholders has put
back and converted the remaining outstanding ECB V at the amount of US$84,500 and US$5,500,
respectively. For the year ended December 31, 2003, 2004 and 2005, the extinguishment gain was
NT$0, NT$0 and NT$300 (US$9), respectively.
As of December 31, 2005, the future principal repayments for the Company's long-term bank loans and
bonds were listed as follows:
Years
NT$000
US$000
2006
4,635,295
141,320
2007
2,339,428
71,324
2008
1,524,829
46,489
2009
1,480,384
45,134
2010
68,384
2,085
After 2010
364,716
11,119
Total
10,413,036
317,471
The Company pledged the assets as collateral for security for foreign labor, customs clearance
deposits, deposit for technology with government, compensated deposits, secured loans and capital
leases as of December 31, 2004 and 2005 were listed as follows:
As of December 31
2004
2005
NT$000
NT$000
US$000
Restricted investments-current
2,429,606
1,928,913
58,808
Property, plant and equipment
15,644,550
6,656,690
202,948
Held-for-Sale
4,939,213
150,586
Total
18,074,156
13,524,816
412,342
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Table of Contents
17. Pension Plan
The Labor Pension Act of the R.O.C. (the Act), which adopts a defined contribution plan, became
effective on July 1, 2005. Employees may choose to elect either the Act, by retaining their
seniority before the enforcement of the Act, or the pension mechanism of the Labor Standards Law.
According to the Act, the rate of contribution by any employer to an employee's pension account per
month shall not be less that 6% of each employee's monthly salary or wage. The Company and the
domestic subsidiaries have made monthly contributions based on each individual employee's salary or
wage to employees' pension accounts since July 1, 2005, and amounting to NT$56 million as of
December 31, 2005.
The defined benefit plan under the Labor Standards Law is disbursed based on the units of service
years and the average salary in the last month of the service year. Two units per year are
entitled for the first 15 years of services while one unit per year is entitled after the
completion of the fifteenth years. The total units shall not exceed 45 units. In accordance with
the plan, the Company contributes an amount equivalent to 2% of the employee's total salaries and
wage on a monthly basis to the pension fund deposited at the Central Trust of China in the name of
an administered pension fund committee. Government authority will collect the fund as a Labor
Retirement Fund and determine the allocation and investment policy of the assets. The unrecognised
net asset or obligation at transition based on actuarial valuation is amortized on a straight-line
basis over 25 years.
The changes in benefit obligation and plan assets for the years ended December 31, 2004 and
2005 were listed as follows:
As of December 31
2004
2005
NT$000
NT$000
US$000
Benefit obligation
Projected benefit obligation at beginning of the year
870,495
1,077,317
32,845
Service cost
119,969
83,782
2,554
Interest cost
30,326
37,281
1,137
Unrecognized actuarial loss (gain)
61,643
(135,411
)
(4,128
)
Benefit paid to retirees
(3,324
)
(1,965
)
(60
)
Others
(1,792
)
5,010
153
Projected benefit obligation at end of the year
1,077,317
1,066,014
32,501
Plan assets
Plan assets at beginning of the year
636,062
679,505
20,717
Actual return on plan assets
7,727
10,075
307
Employer's Contributions
39,040
42,025
1,281
Benefit paid to retirees
(3,324
)
(1,965
)
(60
)
Plan assets at end of the year
679,505
729,640
22,245
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Table of Contents
Reconciliation of funded status of the plans and accrued pension costs was listed as follows:
As of December 31
2004
2005
NT$000
NT$000
US$000
Pension obligation
Vested benefit obligation
—
—
—
Non-vested benefit obligation
(649,133
)
(650,810
)
(19,842
)
Accumulated benefit obligation
(649,133
)
(650,810
)
(19,842
)
Additional benefits based on future salary increases
(428,184
)
(415,204
)
(12,659
)
Projected benefit obligation
(1,077,317
)
(1,066,014
)
(32,501
)
Plan assets at fair value
679,505
729,640
22,245
Projected benefit obligation in excess of plan assets
(397,812
)
(336,374
)
(10,256
)
Unrecognized net transition obligation
49,475
47,363
1,444
Unrecognized prior service cost
25,504
24,202
738
Unrecognized actuarial loss (gain)
38,396
(78,831
)
(2,403
)
Other
5,781
—
—
Accrued pension under LPA
(28,152
)
(858
)
Accrued pension cost
(278,656
)
(371,792
)
(11,335
)
The components of net pension costs for the years ended December 31, 2003, 2004 and 2005 were
listed as follows:
For the year ended December 31
2003
2004
2005
NT$000
NT$000
NT$000
US$000
Service cost
118,257
119,969
132,450
4,038
Interest cost
26,963
30,326
37,281
1,137
Expected return on plant assets
(24,483
)
(22,906
)
(22,990
)
(701
)
Amortization of prior service costs and unrecognized
4,394
4,394
4,469
136
Curtailment
gain
—
—
(48,668)
(1,484)
Net pension cost
125,131
131,783
102,542
3,126
F-34
Table of Contents
Actuarial assumptions for Years ended December 31, 2003, 2004 and 2005 were listed as follows:
For the year ended December 31
2003
2004
2005
Discount rate
3.5
%
3.5
%
2.5%–3.75
%
Rate of increase in future compensation
3.0
%
3.0
%
3.0
%
Expected long-term rate of return on
plan assets
3.5
%
3.5
%
2.5%–2.75
%
Expected future benefit payments were listed as follows:
Years ended December 31
NT$
2006
6,432
2007
6,658
2008
14,659
2009
13,384
2010
12,272
2011-2015
129,445
The Company expects to contribute NT$40,726 to the pension funds in 2006.
18. Income Taxes
The statutory tax rate is 25%. The Company is entitled to a four-year income tax exemption period
on income generated from the cost of the expansion of operations located in the HCSP. Such
exemption period must start within four years from the date the expanded operations begin
operational activities. Alternatively, the Company may irrevocably elect to utilize tax credits
at 15% of the cost of the expansion operations located in the HSP during a five year period
beginning in the year taxable income is first generated from the expanded operations. The Company
has elected to start the four-year tax exemption period to run from January 1, 2001 to December
31, 2004.
As of December 31, 2005 unused tax credits available to reduce future taxable income were
NT$3,003,591 (US$91,573). The available tax credit in each year is limited to 50% of the
corporate tax payable in that year, except in the last of such five-year period when there is no
such limit.
F-36
Table of Contents
As of December 31, 2005, the available tax credits were listed as follows:
Expiration Years
NT$000
US$000
2006
1,361,171
41,499
2007
600,688
18,314
2008
569,102
17,351
2009
472,630
14,409
Total
3,003,591
91,573
Under the rules of the R.O.C. Income Tax Law, operating losses can be carried forward for five
years. As of December 31, 2005, the Company had the following unutilized loss carry-forwards:
Expiration Years
NT$000
US$000
2007
6,059,315
184,735
2008
8,604,045
262,319
2009
338,469
10,319
2010
2,762,561
84,224
Total
17,764,390
541,597
The components of income tax expense (benefit) were listed as follows:
As of December 31
2003
2004
2005
NT$000
NT$000
NT$000
US$000
Current
(27,116
)
32,867
18,054
551
Deferred
48,143
1,914
197,360
6,017
Total
21,027
34,781
215,414
6,568
F-37
Table of Contents
The reconciliation of book income tax expense (benefit) to income tax expense (benefit) recorded
is summarized below:
For the year ended December 31
2003
2004
2005
NT$000
NT$000
NT$000
US$000
Expected income tax expense (benefit)
(2,044,259
)
61,785
(1,720,531
)
(52,455
)
Undistributed earnings tax
—
—
—
—
Investment credits (earned) expired
829,546
(294,120
)
611,131
18,632
Change in valuation allowance
1,256,140
1,349,198
1,656,582
50,506
Permanent differences
317,135
43,884
(84,630
)
(2,580
)
Effect of rate change
(373,681
)
(1,156,129
)
(246,630
)
(7,519
)
Others
36,146
30,163
(508
)
(16
)
Income tax expense
21,027
34,781
215,414
6,568
Deferred income tax assets and liabilities consisted of:
As of December 31
2004
2005
NT$000
NT$000
US$000
Deferred tax liabilities
Tax depreciation in excess of book depreciation
282,970
174
5
Unrealized foreign exchange gains
—
—
—
Total deferred tax liabilities
282,970
174
5
Deferred tax assets
Investment tax credits
3,530,772
2,919,641
89,013
Inventory provision
804,719
617,120
18,815
Bad debt allowance
33,979
21,439
654
Unrealized royalty expense
175,443
153,669
4,685
Book amortization in excess of tax amortization
2,194
—
—
Unrealized foreign exchange loss
82,619
7,278
222
Loss carry-forwards
3,485,110
4,345,568
132,487
Unrealized pension expense
39,635
112,215
3,421
Unrealized equity investment loss
819,931
1,425,991
43,475
Unrealized interest expense
15,093
16,908
515
Unrealized production variance
8,711
112,595
3,433
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Table of Contents
As of December 31
2004
2005
NT$000
NT$000
US$000
Book depreciation in excess of tax depreciation
—
313,003
9,543
Impairment loss
—
127,621
3,891
Others
24,082
25,667
782
Total deferred tax assets
9,022,288
10,198,715
310,936
Valuation allowance
(6,843,018
)
(8,499,600
)
(259,134
)
Net deferred tax assets
2,179,270
1,699,115
51,802
Total net deferred tax assets
1,896,300
1,698,941
51,797
Net deferred tax assets-current
18,951
19,494
594
Net deferred tax assets- non-current
1,877,349
1,679,447
51,203
Total net deferred tax assets
1,896,300
1,698,941
51,797
The
Company may lose some of its investment tax credits as a result of
its selling of FAB III in 2006.
19. Shareholders' Equity
Common Stocks
As of January 1, 2004, the Company's authorized and issued common shares, with par value of NT$10
per share, at the total amount of NT$65,500,000 for 6,550,000,000 shares (including 650,000,000
shares and 972,241,695 shares reserved for future exercise of stock options and conversion of
convertible bonds, respectively) and NT$44,027,583 for 4,402,758,305 shares, respectively.
328,078,360 common shares, with the par value of NT$10 per share, were issued for conversion of
MXIC's domestic convertible bonds ("DCB I") as of December 31, 2005. On October 27, 2004, MXIC's
BOD approved to change the authorized common shares reserved for convertible bonds to 864,703,672
common shares.
On June 27, 2003, the Board of Directors approved a resolution to issue 525,000,000 common shares
with NT$10 at par by means of 13,125,000 Global Depositary Shares ("GDS"). Each GDS represents
40 common shares. The GDS offering was listed on Luxembourg Stock Exchange on April 5, 2004 and
issued at a premium of NT$10.87317 per common share. After April 13, 2004, GDS holders may elect
to convert GDS into common shares.
15,941,093 common shares, with the par value of NT$10 per share, were issued for conversion of
MXIC's ECB IV as of December 31, 2005.
On August 8, 2005, the BOD approved to cancel 40,000,000 common shares for treasury stocks bought
back in 2002. The record date for the cancellation of treasury stock was August 8, 2005.
Capital reserve
According to the R.O.C. Company Law, the capital reserve can only be used to offset a deficit.
However, the capital surplus generated from donations and the excess of the issue rice over the
par value of capital stock, including the stock issued for new capital, mergers, convertible
bonds and the surplus from treasury stock transactions, may be appropriated as stock dividends,
which are restricted to a certain percentage of the paid-in capital of the Company. The Company
cannot use the capital reserve to offset accumulated deficits unless the legal capital reserve
and special capital reserve are insufficient for offsetting such deficits.
On June 27, 2003, the MXIC's shareholders approved a resolution at the annual meeting to use the
capital reserve of NT$2,630,621 to offset its accumulated deficits.
On May 25, 2005, the MXIC's shareholders approved a resolution at the annual meeting to use
the capital reserve of NT$315,704 to offset its accumulated deficits.
Legal Capital Reserve
According to the R.O.C. Company Law, the appropriation of legal capital reserve shall be
made until the reserve equals to the Company's paid-in capital. The reserve can be used to
offset a deficit. When the reserve reached 50% of the paid-in capital, up to 50% of the reserve
may be transferred to capital.
On June 27, 2003, the MXIC's shareholders resolved in the annual meeting to use the legal
capital reserve of NT$1,708,689 to offset its accumulated deficit.
F-39
Table of Contents
On November 16, 2005, the GSM authorized the BOD to cancel 2,079,474,542 common shares at the
amount of NT$20,794,745 for the accumulated losses.
As of December 31, 2005, MXIC authorized and issued, with the par value of NT$10 per share,
NT$65,500,000 for 6,550,000,000 common shares (including 650,000,000 shares and 864,703,672
shares reserved for future exercise of stock options and conversion of convertible bonds,
respectively) and NT$49,952,963 for 4,995,296,328 common shares, respectively.
As of December 31, 2005, the company had 3,100,000 and 21,761,093 common shares outstanding in
the forms of 77,500 GDSs and 2,716,109 ADSs trading in the Luxemburg Stock Exchange and NASDAQ,
respectively.
Capital reserve
According to the R.O.C. Company Law, the capital reserve can only be used to offset a deficit.
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 are restricted to a certain percentage of the paid-in capital of the Company. The Company
cannot use the capital reserve to offset accumulated deficits unless the legal capital reserve
and special capital reserve are insufficient for offsetting such deficits.
On June 27, 2003, the MXIC's shareholders approved a resolution at the annual meeting to use the
capital reserve of NT$2,630,621 to offset its accumulated deficits.
On May 25, 2005, the MXIC's shareholders approved a resolution at the annual meeting to use
the capital reserve of NT$315,704 to offset its accumulated deficits.
Legal Capital Reserve
According to the R.O.C. Company Law, the appropriation of legal capital reserve shall be made
until the reserve equals to the Company's paid-in capital. The reserve can be used to offset a
deficit. When the reserve has reached 50% of the paid-in capital, up to 50% of the reserve may be
transferred to capital.
On June 27, 2003, the MXIC's shareholders resolved in the annual meeting to use the legal capital
reserve of NT$1,708,689 to offset its accumulated deficit.
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Table of Contents
Special Capital Reserve
According to the R.O.C. Security Exchange Law, the special capital reserve equivalent to the net
debit balance of the other components of shareholder's equity, normally arising from unrealized
losses on long-term investments or cumulative translation adjustments but excluding treasury
stock, shall be made from un-appropriated earnings pursuant to existing regulations promulgated
by the Securities and Futures Bureau ("SFB"). Any special capital reserve appropriated may be
reversed to the extent that the net debit balance reverses.
On June 27, 2003, the MXIC's shareholders resolved in the annual meeting to use the special
reserve of NT$378,657 to offset its accumulated deficits.
Earnings Distribution
MXIC's Articles of Incorporation as revised on June 18, 2004 provided that, when allocating
the net profits for each fiscal year, MXIC shall first offset its accumulated losses in previous
years, set aside the legal capital reserve at 10% of the profits left over until the accumulated
legal capital reserve has equaled to MXIC's total capital, set aside the special reserve in
accordance with relevant laws and regulations, and then distributed the remaining distributable
profits according:
a. Shareholder's dividend to shareholders equals to 83% of the Company's distributable earnings;
b. Employee bonuses equals to 15% of distributable earnings; and
c. Remuneration for directors and supervisors' services equal to 2% of distributable earnings
The shareholder's dividend, after the approval of the General Shareholder's Meeting ("GSM"),
shall be retained, proportionally or in whole, as the undistributed earnings and subject to
the future distribution to the shareholders. The earnings of MXIC may be distributed by way
of cash dividend or stock dividend. However, the distribution of earnings shall be made
preferably by way of stock dividend. Distribution of earnings may also be made by way of
cash dividend; provided however, the ratio for cash dividend shall not exceed 20% of the
total distributable earnings. MXIC may issue stock bonuses to employees of an affiliated
company meeting the conditions set by MXIC's Board of Directors ("BOD").
As of December 31, 2005, the Company had accumulated losses and did not have any
distributable earnings available. The information about the appropriations of bonus to
employees, directors and supervisors and earnings distribution is available at the Market
Observation System website.
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20. Employees' Stock Option Plans
MXIC has five employees' stock option plans ("2001 plan", "2002 plan", "2003 plan", "2004 plan"
and "2005 plan") approved by the Stock Futures Board ("SFB"). The maximum number authorized to
be granted under the 2001 plan, 2002 plan, 2003 plan, 2004 plan and
2005 plan was 80,000 thousand shares, 170,000 thousand shares, 200,000 thousand shares, 200,000 thousand shares and 200,000
thousand shares, respectively, with each option unit eligible to subscribe for one common share
when exercisable. The Company will issue additional common shares for the options exercised.
Unless the granted options were cancelled when the qualified employees violated the Company's
Code of Conducts, the aforementioned options are valid in six years subsequent to the grant dates
and exercisable up to 50%, 75% and 100% of the shares granted subsequent to the second
anniversary, the third anniversary and the fourth anniversary of the grant date, respectively.
The options are granted at the exercise price equal to the closing price of MXIC's common shares
listed on the Taiwan Stock Exchange ("TSE") on the grant date. Exercise price is subject to
adjustments for changes of capital structure in accordance with the plans. As of December 31,
2005, none of the employees' stock options had been exercised.
As of December 31, 2005, information about MXIC's outstanding and exercisable options was as
follows:
a. 2001 plan
Grant Dates
Units Issued
Units Outstanding
Exercise Price
2002.01.16
71,768,500
—
20.10
2002.05.06
560,000
—
19.80
2002.10.01
1,507,000
112,000
11.10
2002.12.16
6,164,500
217,000
11.30
Total
80,000,000
329,000
Total units authorized: 80, 000,000
b. 2002 plan
Grant Dates
Units Issued
Units Outstanding
Exercise Price
2002.10.01
150,000,000
87,286,500
11.10
2002.12.16
10,284,500
4,149,000
11.30
2003.04.07
2,753,500
1,802,500
9.20
Total
163,038,000
93,238,000
Total units authorized: 170,000,000
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Table of Contents
c. 2003 plan
Grant Dates
Units Issued
Units Outstanding
Exercise Price
2003.06.13
193,212,000
138,906,453
7.75
2003.11.04
829,000
496,000
9.00
2004.03.11
685,000
314,000
12.90
2004.03.30
785,000
553,000
12.20
2004.04.27
749,000
749,000
14.10
Total
196,260,000
141,018,453
Total units authorized: 200,000,000
d. 2004 plan
Grant Dates
Units Issued
Units Outstanding
Exercise Price
2004.04.09
176,972,000
151,214,500
14.55
2004.04.27
4,919,000
2,626,000
14.10
2004.06.02
2,176,000
1,780,000
11.00
2004.08.11
5,015,500
4,054,500
9.25
2004.10.27
4,466,000
3,393,000
7.05
2005.01.28
4,428,500
3,988,500
7.05
2005.03.07
1,172,000
888,000
6.88
Total
199,149,000
167,944,500
Total units authorized: 200,000,000
e. 2005 plan
Grant Dates
Units Issued
Units Outstanding
Exercise Price
2005.08.08
188,958,500
186,129,500
5.84
2005.08.29
7,978,500
7,530,500
5.83
2005.10.25
2,372,000
2,372,000
5.81
Total
199,309,000
196,032,000
Total units authorized: 200,000,000
As of December 31, 2005, none of the stock options has been exercised. Total outstanding
units were lesser than total issued units resulted from the cancellation of stock options
for the employees' resignation or voluntary abstention from the stock options.
F-43
Table of Contents
The information on MXIC's stock options that had never been granted or had been granted and
subsequently cancelled under the 2001 plan, 2002 plan, 2003 plan and 2004 plans was listed as
follows:
Expiration Date of Issuance
Units Cancelled
2001 plan
2002.12.17
—
2002 plan
2003.04.08
6,962,000
2003 plan
2004.04.28
3,740,000
2004 plan
2005.03.08
851,000
The information on MXIC's outstanding stock options for the years ended December 31, 2003, 2004
and 2005 was listed as follows:
2003
Units
Weighted-Average Exercise Price
Outstanding units at beginning of the year
217,741,800
14.77
Units granted
196,794,500
7.78
Units cancelled
(129,545,675
)
16.56
Outstanding units at end of the year
284,990,625
9.13
Units exercisable
—
—
Weighted-average fair value
4.48
2004
Units
Weighted-Average Exercise Price
Outstanding units at beginning of the year
284,990,625
9.13
Units granted
195,767,500
14.18
Units cancelled
(47,979,907
)
10.89
Outstanding units at end of the year
432,778,218
11.21
Units exercisable
49,938,950
11.11
Weighted-average fair value
6.59
2005
Units
Weighted-Average Exercise Price
Outstanding units at beginning of the year
432,778,218
11.21
Units granted
204,909,500
5.87
Units cancelled
(39,125,765
)
10.75
Outstanding units at end of the year
598,561,953
9.42
Units exercisable
139,425,852
9.42
Weighted-average fair value
2.55
F-44
Table of Contents
The aforementioned stock options granted on and after January 1, 2004 were accounted for under
intrinsic value method required by the R.O.C. Accounting Research and Development Foundation
("ARDF").
For the years ended December 31, 2004 and 2005, no compensation expense was recognized under the
intrinsic value. The assumption and pro forma information under fair value method using
Black-Scholes Options Pricing Model was listed as follows:
Expected dividend yield
0%
Expected volatility
57.50% – 52.10%
Risk-free interest rate
2.05% – 1.55%
Expected weighted-average life
4.38 Years
Fair value
6.77 – 1.10
For the
years ended December 31, 2004 and 2005, the compensation expense recognized under fair
value method would have been NT$338,091 and NT$513,301 (US$15,649), respectively. The MXIC's
pro-forma information of net income and earnings per share was listed as follows:
For the year ended December 31
2004
2005
Basic EPS
Diluted EPS
Basic EPS
As reported
Net income (loss)
217,692
217,692
(7,027,189
)
Earnings per share
0.08
0.08
(2.41
)
Pro forma
Net income (loss)
(120,399
)
(120,399
)
(7,540,490
)
Earnings per share
(0.04
)
(0.04
)
(2.59
)
MPI has the employees' stock option plan ("MPI 2004 plan") approved by its Board of Directors on
March 12, 2004. The maximum units of options authorized to be granted under the MPI 2004 plan
was 1,000 thousand units, with each option unit eligible to subscribe for one common share at the
exercise price of NT$11. The exercise price is subject to the
adjustment to reflect the changes in capital structure or the appropriation of cash dividend in
accordance with the plan. The option is exercisable 30 days subsequent to the grant date.
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Table of Contents
The information on the aforementioned stock option plans for MPI was listed as follows:
Grant Date
Units Issued
Exercise Price
2004.06.25
180,000
11.00
2004.11.29
167,000
11.00
2005.02.21
124,000
11.00
2005.06.20
417,000
11.00
2005.08.15
112,000
11.00
The information on MPI's outstanding stock options for the year ended December 31, 2004 and 2005
was listed as follows:
2004
Units
Weighted-Average Exercise Price
Outstanding units at beginning of the year
—
—
Units granted
347,000
11.00
Units cancelled
—
—
Outstanding units at end of the year
347,000
11.00
Units exercisable
—
—
Weighted-average fair value
—
2005
Units
Weighted-Average Exercise Price
Outstanding units at beginning of the year
347,000
11.00
Units granted
653,000
11.00
Units exercised
(900,000
)
11.00
Units cancelled
(100,000
)
11.00
Outstanding units at end of the year
—
—
Units exercisable
—
—
Weighted-average fair value
—
The aforementioned stock options granted on and after January 1, 2004 were accounted for under
intrinsic value method required by the R.O.C. Accounting Research and Development Foundation
("ARDF").
F-46
Table of Contents
For the year ended December 31, 2004 and 2005, no compensation expense was recognized under
the intrinsic value method. The assumption and pro forma information
to value stock compensation expenses using minimum value method is as
follows:
Expected dividend yield
0
%
Risk-free interest rate
1.15% – 0.99
%
Expected weighted-average life
0.25 year
Fair value
—
MPI is a private holding company and carries no historical data for volatility.
For the year ended December 31, 2004 and 2005, the compensation expense recognized under fair
value method would have been NT$0 and NT$0, respectively. The pro-forma information of net
income and earnings per share under consolidated basis was as follows:
For the year ended December 31
2004
2005
As reported
Basic EPS
Diluted EPS
Basic EPS
Net income (loss)
217,692
217,692
(7,027,189
)
Earnings per share
0.08
0.08
(2.41
)
Pro forma
Net income (loss)
217,692
217,692
(7,027,189
)
Earnings per share
0.08
0.08
(2.41
)
Biomorphic has the employees' stock option plan ("BIO 2004 plan") approved by its Board of
Directors on July 26, 2004. The maximum units of options authorized to be granted under the BIO
2004 plan was 1,717,826 units, with each option unit eligible to subscribe for one common share.
Exercise price is subject to adjustments for changes of capital structure in accordance with the
plans. Biomorphic will issue additional common shares for the options exercised. The
aforementioned options are valid in six years subsequent to the grant dates and exercisable up to
50%, 75% and 100% of the shares granted subsequent to the second anniversary, the third
anniversary and the fourth anniversary of the grant date, respectively. As of December 31, 2005,
none of the employees' stock options had been exercised.
F-47
Table of Contents
The information on the aforementioned stock option plan for Biomorphic was listed as follows:
Grant Dates
Units Issued
Units Outstanding
Exercise Price
2004.07.26
660,000
660,000
12.00
2005.12.09
1,054,000
1,054,000
10.00
Total
1,714,000
1,714,000
Total units authorized: 1,717,826
Under the intrinsic value method, the compensation expense of NT$653 and NT$1,567 (US$48) was
recognized for the year ended December 31, 2004 and 2005, respectively. The assumption and pro
forma information to value stock compensation expenses using minimum value method is as
follows:
Expected dividend yield
4.88
%
Risk-free interest rate
2.10% – 1.55
%
Expected weighted-average life
4.38 Years
Fair value
8.07  – 1.88
Biomorphic is a private holding company and has no historical data for the volatility.
For the year ended December 31, 2004 and 2005, the compensation expense recognized by Biomorphic
under fair value method would have been NT$878 and NT$2,173 (US$66), respectively. The pro-forma
information of net income and earnings per share under the consolidated basis was as follows:
For the year ended December 31
2004
2005
As reported
Basic EPS
Diluted EPS
Basic EPS
Net income (loss)
217,692
217,692
(7,027,189
)
Earnings per share
0.08
0.08
(2.41
)
Pro forma
Net income (loss)
217,467
217,467
(7,027,521
)
Earnings per share
0.08
0.08
(2.41
)
F-48
Table of Contents
21. Treasury Stock
For the year ended December 31, 2004 and 2005, the details in shares of treasury stock were
listed as follows:
Beginning Balance
Addition
Disposal
Ending Balance
For the year ended December 31, 2004
MXIC's stocks held by Hui Ying
6,023,152
—
—
6,023,152
Repurchase under share buyback plan
40,000,000
—
—
40,000,000
Subtotal of Treasury Stocks
46,023,152
—
—
46,023,152
For the year ended December 31, 2005
MXIC's stocks held by Hui Ying
6,023,152
—
—
6,023,152
Repurchase under share buyback plan
40,000,000
—
40,000,000
—
Subtotal of Treasury Stocks
46,023,152
—
40,000,000
6,023,152
As of December 31, 2004 and 2005, the book value of MXIC's treasury stocks was NT$1,188,436
and NT$142,365 (US$4,340), respectively. The market value of MXIC's treasury stocks was
NT$333,208 and NT$27,036 (US$824), respectively.
MXIC's stocks held by Hui Ying were reclassified to MXIC's treasury stocks and Hui Ying was
entitled to the rights of shareholders, except that starting from June 24, 2005, pursuant to
the revised Company Law, the holders are no longer entitled to the right to vote.
On April 24, 2002, the Company's BOD approved the buyback plan to repurchase 335,934,621
shares of MXIC's common stocks listed on the TSE. The Company repurchased 40,000,000 shares
for the total cost of NT$1,046,071 in 2002. The treasury shares held by MXIC from the
repurchase cannot be pledged, nor MXIC was entitled to the rights of shareholders for those
buyback shares. All the treasury stock repurchased under the buyback plan was retired on
August 8, 2005.
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Table of Contents
22. Earnings per Share
The weighted average numbers of outstanding common shares for the calculation of basic earnings per
share were computed as follows:
For the year ended December 31
2003
2004
2005
Beginning balance of common shares outstanding
3,651,276,875
4,390,251,943
4,995,296,328
Retroactive adjustment for cancellation of
common stock on February 16, 2006
(1,606,084,898
)
(2,015,097,916
)
(2,079,474,542
)
Issuance of 475,000,000 common shares for
cash on November 11, 2003
66,369,863
Bonds converted to common shares for the year
ended December 31, 2003
134,088,222
Retroactive adjustment for bonus element
included in the rights offering on
November
3, 2003 (0.1688%)
6,388,732
Issuance of 525,000,000 common shares for
Global Depositary Shares on April 5, 2004
—
388,729,508
Bonds converted to common shares for the year
ended December 31, 2004 (80,044,385 shares)
—
61,669,886
Subtotal
2,252,038,794
2,825,553,421
2,915,821,786
Treasury stock owned by subsidiaries
(3,515,795
)
(3,515,795
)
(3,515,795
)
Retroactive adjustment of treasury stock
owned by the subsidiary for bonus element
included in the rights offering on November
11, 2003
(5,935
)
—
—
Weighted average common shares outstanding
2,248,517,064
2,822,037,626
2,912,305,991
Dilutive effect of employee stock options
—
18,900,447
—
Dilutive weighted average common shares
outstanding
2,248,517,064
2,840,938,073
2,912,305,991
F-50
Table of Contents
Consolidated
EPS were calculated as follows: (The following EPS presentation
for the years of 2003 and 2004 are retroactively adjusted to reflect
the cancellation of common stock on February 16, 2006.)
For the year ended December 31
2003
2004
2005
Income before tax available to MXIC's shareholders
(8,197,745
)
217,692
(6,829,227
)
Weighted average common shares outstanding
2,248,517,064
2,822,037,626
2,912,305,991
Basic EPS before tax
(3.65
)
0.08
(2.34
)
Net income (loss) available to MXIC's shareholders
(8,197,745
)
217,692
(7,027,189
)
Weighted average common shares outstanding
2,248,517,064
2,822,037,626
2,912,305,991
Basic EPS after tax
(3.65
)
0.08
(2.41
)
Income before tax available to MXIC's shareholders
(8,197,745
)
217,692
(6,829,227
)
Effect of dilutive potential common shares -options
—
—
—
Income before tax available to common shares
(including the effect of dilutive potential common
stock)
(8,197,745
)
217,692
(6,829,227
)
Dilutive weighted average common shares outstanding
2,248,517,064
2,840,938,073
2,912,305,991
Diluted EPS before tax
(3.65
)
0.08
(2.34
)
Net income (loss) available to MXIC's shareholders
(8,197,745
)
217,692
(7,027,189
)
Effect of dilutive potential common shares -options
—
—
—
Net income (loss) available to common shares
(including the effect of dilutive potential common
stock)
(8,197,745
)
217,692
(7,027,189
)
Dilutive weighted average common shares outstanding
2,248,517,064
2,840,938,073
2,912,305,991
Diluted EPS after tax
(3.65
)
0.08
(2.41
)
Assuming that the Company's shares owned by its subsidiaries were not treated as treasury
stock for the years ended December 31, 2004 and 2005, the net income (loss) and earning (loss)
per share would be listed as follows: (The following
EPS presentation for the years of 2003 and 2004 are retroactively adjusted to reflect the cancellation of common stock on February 16, 2006.)
For the year ended December 31
2004
2005
NT$000
NT$000
US$000
Net income (loss)
217,692
(7,027,189
)
(214,244
)
Unrealized short-term investment income (loss)
4,095
(16,572
)
(505
)
Net income
(loss) — pro forma
221,787
(7,043,761
)
(214,749
)
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Table of Contents
Amount (numerator)
Shares
Net loss per share
EPS
Before tax
After tax
(Denominator)
Before tax
After tax
For the year ended 12/31/2004
Basic EPS
Net loss
$
221,787
$
221,787
2,825,553,421
$
0.08
$
0.08
Diluted effect:
Employee Stock Options
—
—
18,900,447
Diluted EPS
$
221,787
$
221,787
2,844,453,868
$
0.08
$
0.08
For the year ended 12/31/2005
Basic EPS
Net income
$
(6,845,799
)
$
(7,043,761
)
2,915,821,786
$
2.35
$
2.42
Diluted EPS equaled to basic EPS as the potential common shares would have anti-diluted effect
on the Company's net loss for the year ended December 31, 2005.
23. Related Party Transactions
a. Related Parties and Relationships
Related parties
Relationship
Procomm Inc. ("Procomm")
The Company's equity investee
Prominent Communications, Inc. ("Prominent")
Procomm's equity investee
Raio Technology Co., Ltd. ("Raio")
A subsidiaries' equity investee
(Raio has not been a related party since
December, 2005)
Tower Semiconductor Ltd. ("Tower")
A subsidiary served under the Board
FueTrek Co., Ltd. ("FueTrek")
A subsidiary served under the Board
Ardentec Corporation ("Ardentec")
The Company served under the Board
Macronix Education Foundation ("MXIC Education")
The Company's executive director served as the
chairman
MegaChips Corporation("MegaChips")
One of its sister company served under the Board
MegaChips LSI Solutions Inc. ("MagaChips LSI")
A subsidiary under MegaChips
MegaChips
LSI Solutions Inc. Taiwan Branch
("MagaChips LSI Taiwan Branch")
Taiwan Branch of MegaChips
F-52
Table of Contents
b.
Major transactions with related parties
Sales to related parties were listed as follows:
For the year ended December 31
2003
2004
2005
NT$000
NT$000
NT$000
US$000
BC
—
239,748
—
—
MPI
—
175,894
—
—
Raio
174,466
18,065
11,087
338
Biomorphic
45,953
2
—
—
FueTrek
5,591
11,674
3,329
101
PCI
341
428
—
—
MegaChips LSI
—
—
5,620,371
171,353
Others
—
9
141,016
4,299
Total
226,351
445,820
5,775,803
176,091
Sales prices to MegaChips LSI, FueTrek and Raio are not comparable with those of regular
customers because the Company is the sole provider for them. The payment term with the related
parties is between 30 to 60 days, similar to that with regular customers.
c.
Manufacturing processing charges to related parties for the years ended December 31, 2003,
2004 and 2005 were summarized as follows:
For the year ended December 31
2003
2004
2005
NT$000
NT$000
NT$000
US$000
Powertech
211,188
—
—
—
Ardentec
130,270
260,199
218,274
6,655
Total
341,458
260,199
218,274
6,655
d.
The Company purchased industrial gases from UIG at NT$100,016 for the year ended December 31,
2003. Such purchases were included in cost of good sold. There are no purchases of industrial
gases from UIG for the years ended December 31, 2004 and 2005, respectively.
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e.   Wafer purchased from related parties was as follows:
For the year ended December 31
2003
2004
2005
NT$000
NT$000
NT$000
US$000
Tower
36,600
19,959
188,562
5,749
MegaChips LSI Taiwan
Branch
—
—
53,380
1,627
Total
36,000
19,595
241,942
7,376
Such purchases are included in cost of goods sold. Prices for wafer purchased from Tower and
MegaChips LSI Taiwan Branch were not comparable with prices for other vendors since we purchased
the customized wafers from both companies. For the years ended December 31, 2003, 2004 and 2005,
the payment term to Tower and MegaChips LSI Taiwan Branch was Net 30 days and Net 45 days,
respectively.
f.
Merchandise purchased from related parties was as follows:
For the year ended December 31
2003
2004
2005
NT$000
NT$000
NT$000
US$000
Raio
3,257
1,570
1,285
39
PCI
63,798
—
3,496
107
Biomorphic
53,935
—
—
—
Total
120,990
1,570
4,781
146
g.
Operating leases to related parties were listed as follows:
For the year ended December 31
2003
2004
2005
NT$000
NT$000
NT$000
US$000
MPI
—
3,835
—
—
Raio
587
1,295
1,649
50
Total
587
5,130
1,649
50
The lease income from the related parties was charged monthly and recorded as other income under
non-operating income.
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h.
The Company entered into IP license agreements with FueTrek in 2002 and 2004 and obtained
related technology. The contractual amount of NT$ 13,502 (JPY45,800) and NT$19,743 (JPY66,650)
has been paid as of December 31, 2004 and 2005, and was recorded as deferred charges and
amortized over the contract terms. For the year ended December 31, 2004 and 2005, the amount
of research and development expenses paid to FueTrek was NT$0 and NT$3,780 (US$115),
respectively.
i.
The Company donated NT$22,360, NT$16,300 and NT$10,166 (US$310) to Macronix Education
Foundation for the years ended December 31, 2003, 2004 and 2005, respectively.
j.
For the year ended December 31, 2004 and 2005, the amount of research and development
expenses paid to Tower was NT$213 and NT$43,832 (US$1,336), respectively.
k.
For the year ended December 31, 2005, the amount of research and development expenses and the
sales expenses paid to MegaChips was NT$63 (US$2) and NT$1,452 (US$44), respectively. The
Company did not pay any research and development expenses and the sales expenses to MegaChips
for the year ended December 31, 2004.
l.
Accounts receivable from related parties as of December 31, 2004 and 2005 were listed as
follows:
As of December 31
2004
2005
NT$000
NT$000
US$000
BC
95,443
MPI
29,447
FueTrek
4,836
—
—
Procomm
4,125
17,722
541
Raio
1,879
8,432
257
MegaChips
—
3,453
105
MegaChips LSI
—
570,814
17,403
MegaChips LSI Taiwan Branch
—
126,876
3,868
Others
—
188
6
Total
135,730
727,485
22,180
Less: Allowance for doubtful accounts
(3,444
)
(20,390
)
(622
)
Net
132,286
707,095
21,558
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m.
Other receivables from related parties as of December 31, 2004 and 2005 were listed as
follows:
As of December 31
2004
2005
NT$000
NT$000
US$000
MegaChips LSI
—
49,911
1,522
Less: Allowance for doubtful accounts
—
(11,532
)
(352
)
Net
—
38,379
1,170
The other receivables were reclassified from the accounts receivable over the due dates.
n.   Payables to related parties as of December 31, 2004 and 2005 were listed as follows:
As of December 31
2004
2005
NT$000
NT$000
US$000
Ardentec
38,335
16,298
497
MPI
2,898
—
—
Tower
1,364
56,701
1,729
PCI
107
—
—
Others
72
6,414
195
Total
42,776
79,413
2,421
24. Commitments and Contingencies
As of December 31, 2005, the significant commitments and contingencies of the Company were as
follows:
a.
Amount available under unused letters of credits was NT$17,959 (US$548).
b.  The Company's significant construction and machinery contracts totaled approximately
NT$1,857,463 (US$56,629). As of December 31, 2005, the Company has paid NT$1,607,005
(US$48,994) pursuant to these contracts. Future irrevocable payment
is NT$250,459(US$7,636).
c.
MXIC leases parcels of land from the SPA located in HCSP. The lease term is from 1990 to 2022
and renewable at the Company's option.
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Future minimum payments under these irrevocable operating leases as of December 31, 2005 were as
follows:
Operating Leases
NT$000
US$000
2006
69,348
2,114
2007
65,029
1,983
2008
65,029
1,983
2009
65,029
1,983
2010
65,029
1,983
2011
65,029
1,983
Thereafter
198,503
6,051
Total minimum lease payments
592,996
18,080
Rental expenses under the operating leases were NT$70,160, NT$73,221 and NT$78,267 (US$2,386) for
the years ended December 31, 2003, 2004 and 2005, respectively.
d.
MXIC entered into an operating lease agreement of US$2,608 for R&D software. The lease term
is from 2003 to 2006. The lease obligations shall be paid annually in four installments,
starting from November 20, 2003 to April 20, 2006. As of December 31, 2005, the Company has
paid US$2,131 pursuant to the agreements. Future irrevocable payment in 2006 is US$477.
e.
MXIC with Company A and Company B entered into the product royalty agreements for the terms
from January 2002 to December 2006, and from January 2001 to December 2006, respectively. The
total royalty fee was US$46,000 (NT$1,460,040). As of December 31, 2005, the Company has paid
US$41,000 (US$1,344,800) pursuant to the agreements. Future irrevocable payment in total is
US$5,000 (NT$164,000).
f.
MXIC and Company C entered into the product license agreement. The total license fee was
US$2,907 (NT$95,350). As of December 31, 2005, the Company has paid the total license fee in
full pursuant to the agreement. Future running royalties will be charged based on percentage
of net sales from licensed products as determined under the aforementioned agreement. For the
year ended December 31, 2005, no royalty was paid to Company C as the licensed products had
not been commercialized.
g.
MXIC and Company D entered into the technology agreement. As of December 31, 2005, the
Company has paid the total license fee in full pursuant to the aforementioned agreement.
Future running royalties will be charged based on percentage of net sales from the licensed
products pursuant to the agreement. According to the aforementioned agreement, the Company is
required to prepay US$24,000 of running royalty. As of
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December 31, 2005 US$24,000 has been paid. As of December 31, 2005, the unused running
royalty was NT$629,538 (US$19,193), of which NT$135,364 (US$4,127) was recorded under prepaid
expenses, while NT$494,174 (US$15,066) was recorded under deferred charges.
h.
In 2004, MXIC and Company D entered into two addendums to the aforementioned technology
agreement with the agreed license fee of US$7,500 in the contract term. As of December 31,
2005, the Company has paid the license fee of US$1,250 and accrued the license fee of US$250.
For the year ended December 31, 2005, no royalty was paid to Company D for the aforementioned
addendums as the licenses products had not been commercialized.
i.
In August 1997, Atmel Corporation ("Atmel") filed a complaint against MXA for infringement of
Atmel's patents No. 096 and 747. MXA applied for Motion for Summary Judgment for both patents.
On January 14, 2002, the Court issued an order denying Atmel's motion to correct inventorship
of the 747 patents. Based on the order, MXA had sought a ruling of invalidity of the 747
patents due to incorrect inventorship, and kept awaiting the Court's decision. On May 14,
2003, the Court granted the Company's Motion for Summary Judgment of invalidity of the 747
patent due to nonjoinder of co-inventor. Specifically, the Court's Order found that all claims
of the 747 patent were invalid for nonjoinder of a co-inventor. The Court has also granted the
Company's Motion for Summary Judgment against three of the four asserted claims of the 096
patent, leaving only one claim to be litigated on the 096 patent. Both parties applied for
summary judgment for infringement of the 096 patent. On February 23, 2004, the court revoked
both parties' summary judgments as the evidence was insufficient. However, the court's
explanation of inventorship was in favor of MXA. On April 16, 2004, MXA applied "Renewed
Motion for Summary Judgment of Non-infringement" according to the court explanation of the
patents' scope. After Atmel applied the counterplea on May 26, 2004, MXA replied to Atmel'
counterplea on June 18, 2004. On September 9, 2004, Atmel and MXA reached a settlement that
both parties agree to withdraw from the issue with no claim of loss reimbursement. The Court
dismissed the case accordingly.
j.
On April 1, 2002, certain shareholders of Tower Semiconductor Ltd. ("Tower") filed a
lawsuit in U.S., naming Tower, several shareholders (including the Company), and Board
members (including Miin Wu, one of the Board member and the Chairman of the Company) as
defendants, alleging the defendants for violation of U.S. Securities Exchange Act of 1934
Section 14(a), Section 20(a) and Rule 14a-9. The Court overruled the alleging in August 19,
2004. One of the shareholders has further appealed. The Company believes it has meritorious
defense to the case.
k.
The Company entered into an agreement with Tower Semiconductor Ltd. ("Tower"), an Israeli
public company whose shares are quoted on the NASDAQ, to purchase silicon wafers to be
manufactured by Tower ("Wafer") in an amount of 25% of then available quarterly manufacturing
capacity of a specified production line, after it passes qualification testing, but not more
than 4,750 Wafer outs per month (the "Minimum Loading Obligation") commencing on the date
manufacturing on a specified production line commences and
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ending 12 months following the expected production date, the Minimum Loading Obligation shall,
from the third quarter of the expected production date, be reduced by 950 wafer outs per month
each quarter. The minimum Loading Obligations may be limited to 15% of Tower's capacity before
Tower proves to the Company that the one time programmable or multiple time programmable pass the
production qualification. If the Company maintains specified levels of investment in Tower's
shares, the Company will receive favorable pricing terms on the first 3,800 wafers purchased each
month until the contract expires in 2011. In conjunction with the foundry agreement, the Company
entered into share purchase agreements in December 2000 with Tower whereby the Company agreed to
invest US$75 million (NT$2,460 million) in Tower. Following an initial payment of US$20 million
(NT$656 million) for 866,551 shares (US$11,215 or NT$367,852) and US$8,785 (NT$288,148) of
prepaid credits made in January 2001, upon completion by Tower of certain milestones specified in
the agreement, payments to Tower are made in five equal installments of US$11 million each. Upon
satisfaction of each milestone, the Company is required to purchase 733,380 shares of Tower.
Payments for the first milestone and the second milestone were made in March and April 2001,
respectively. The Company acquired a total of 733,380 shares and increased its prepaid credit
account by US$12,564 (NT$412,099) with the first two payments. The prepaid credit account is held
on deposit with Tower. Pursuant to the terms applicable to the credits issued in connection with
the various milestone payments, the prepaid credit account may be applied against wafer purchases
by 7.5% to 15% of each wafer purchase amount. In addition, this account may in certain
circumstances be applied towards the purchase of additional unregistered ordinary shares or
credited against other amounts payable by the Company to Tower, including certain payments to be
made by the Company and Tower under the SCM Waiver Agreement dated December 12, 2000 between the
Company and Tower.
In 2001, the initial investment and the first and the second milestone payment were undertaken to
a total amount of US$42,001 (NT$1,377,633), of which US$21,349 (NT$700,247) was reserved as
prepaid credit for future wafer purchase. In September 2001, the Company utilized US$16 million
(NT$525 million) of its prepaid credit account to purchase 1,255,848 Tower shares for US$12.75
(NT$418) per share.
On March 22, 2002, an amendment to the above-mentioned share purchase agreements was implemented.
According to this amendment, the Company is required to make the third and fourth milestone
payments no later than April 2002 and October 2002, respectively, without regard to whether each
milestone is achieved. For 60% of each of the third and fourth milestone payment, Tower is
required to issue shares based on the average closing price of Tower's shares on the NASDAQ in
the 30 trading days preceding the date of payments, provided, however, the average price per
share shall not exceed US$12.50. (NT$410) For the remaining 40%, Tower is required to increase
the Company's prepayment account. Accordingly, the Company made the third and the forth milestone
payment on April 23 and October 1, 2002, respectively. For these payments, the Company acquired
1,071,497 and 1,344,829 of Tower's shares, respectively, at US$6.16 (NT$202) and US$4.908
(NT$161) per share, respectively, and aggregately increased its prepaid credit account by
US$8,800. In addition, the Company participated in Tower's shares offering on October 21, 2002
and acquired 660,000 shares at US$5 (NT$164) per share.
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In February 2003, the board of Tower agreed to further amend the shares purchase agreement. The
terms of the amendment require the payment of US$11,000 (NT$360,800) for the fifth and also the
final milestone and this payment will be made in two installments. The first installment of
approximately US$6,600 (NT$216,480) will be due five business days after the amendment is
approved by Tower, the Company and certain shareholders of Tower; the second installment of
approximately US$4,400 (NT$144,320) will be due five business days after Tower has raised
additional funds equal to approximately US$22,000 (NT$721,600), referred to as the Minimum
Financing. In addition, under the terms of the amendment, the Company is granted an option to
convert all or a portion of its unused prepaid credit account associated with the fourth
milestone payment in the aggregate amount of NT$304,524 into Tower's unregistered shares based on
the average closing price of Tower's common shares during the 30 consecutive days preceding
December 31, 2005. On May 16, 2003, the Company paid US$3,600 (NT$118,080) for the first
installment, obtaining 1,206,839 shares of Tower's at the price of US$2.983 (NT$98) per share.
There was US$3,000 (NT$98,400) of the first installment remained unpaid as of June 30, 2003.
In November 2003, the Company agreed to amend the shares purchase agreement with Tower to, among
other things, (a) advance the entire amount of the remaining fifth milestone payment of US$7,400
(NT$242,720), (b) defer the use of the Company's wafer credits in Tower, and (c) extend the
lock-up period for the Company's Tower shares. Specifically,
(a)
The Company agreed to waive all terms of Tower's milestones and advance to Tower in one
aggregate lump sum the remaining portion of the first installment (US$3,000 or NT$98,400) and
the entire second installment (US$4,400 or NT$144,320). With respect to the remaining portion
of the first installment, the Company will be issued non-assessable ordinary shares equivalent
to the aggregate of its remaining portion of the first installment divided by US$2.983
(NT$98). With respect to the second installment, the Company will be issued non-assessable
ordinary shares equal to the second installment divided by the price per share in a certain
public offering, provided, however, that such public offering is not consummated within 180
days from the date of the amendment, the Company will be issued non-assessable ordinary shares
equal to the second installment divided by the average trading price for Tower's shares during
the 15 consecutive trading days preceding the payment of the second installment.
(b)
The Company agreed not to use wafer credits until January 1, 2007, except with respect to
purchase orders issued before the date of the amendment utilizing wafer credits. However, the
amendment provides an option for the Company to convert credits it would have otherwise been
able to utilize per quarter into non-assessable ordinary shares of Tower. Unconverted credits
will accrue interest at a rate per annum equal to three-month LIBOR plus 2.5% through December
31, 2007. Interest payments will be made quarterly and the aggregate principal amount of the
unconverted credits will be repaid in one lump sum on December 31, 2007.
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(c)
The Company agreed not to sell the Tower shares until January 29, 2006, except the Company
may sell 30% of the Tower shares held by it as of January 29, 2004.
In December 2003, the Company advanced to Tower the remaining portion of the fifth milestone
payment in the amount of US$4,400 (NT$144,320).
As of December 31, 2005, the Company owned approximately 13.11 % of Tower's shares and held
NT$463,726 or about US$14,138 of prepaid credit account. As of December 31, 2004 and 2005, the
Company provided an allowance of US$14,138 (NT$46,726) and US$14,138(NT$46,726), respectively,
for such prepaid credit account after assessing the impairment.
25.
Financial Instruments
The Company's derivative financial instruments are entered into for hedging and trading purposes.
The purposes of forward exchange contracts, option contracts and cross currency swaps for hedging
purpose were to hedge exchange rate risks resulting from assets, liabilities or commitments
denominated in foreign currency. The Company's hedging strategies were to mitigate into market
price risks. Derivative financial instruments selected for hedging purposes are reviewed
and inversely correlated with the fluctuation of the fair value of derivatives hedges. Derivatives are
evaluated periodically. In addition, the primary purposes of holding structured deposit contracts
are to earn higher interest revenue within a fixed range of foreign exchange rates, while premium
received from written option contracts is offset by that paid for purchased option contracts. To
mitigate the credit risk associated with financial instruments, all the counter-parties of the
contracts entered into by the Company are reputable global financial institutions.
For the years ended December 31, 2003, 2004 and 2005, the foreign exchange gains or losses
resulted from the derivatives in aggregate were NT$236, NT$(13,442),
and NT$9,061 (US$297,201),
respectively.
As of December 31, 2004 and 2005, the details of outstanding derivatives were listed as follows:
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Table of Contents
a.
Forward exchange contracts
As of December 31, 2005, the Company did not have any outstanding forward exchange
contracts. As of December 31, 2004, the outstanding forward exchange contract was listed as
follows:
Maturity
Amount to Pay
Amount to Receive
2005.01.18
US$ 2,000
NT$ 64,624
2005.01.31
US$ 2,000
NT$ 63,828
2005.02.03
US$ 2,000
NT$ 63,946
Total
US$ 6,000
NT$ 192,398
The receivable from forward exchange contracts was recorded as other receivables under current
assets.
As of December 31, 2004 and 2005, the net receivables or payables resulted from forward exchange
contracts were listed as follows:
As of December 31
2004
2005
NT$
NT$
US$
Receivable from forward exchange contracts
192,398
—
—
Payables from forward exchange contracts
(190,260
)
—
—
Premium for forward exchange contracts
304
—
—
Net Receivables (Payables) from forward
exchange contracts
2,442
—
—
The net exchange (gains) or losses arising from forward exchange contracts for the years ended
December 31, 2003, 2004 and 2005 were NT$0, NT$11,695 and
NT$(11,851) (US$388,713), respectively.
b.
Option contracts
As of December 31, 2005, the Company did not have any outstanding foreign currency option
contracts. As of December 31, 2004, the outstanding foreign currency option contracts were
listed as follows:
Purchase
Sale
Transaction Type
Settlement Date
Amount
Amount
Sell
2005.01.10
NT$
50,550
US$
1,500
Sell
2005.01.10
US$
1,500
NT$
47,700
Total
NT$
50,550
US$
1,500
US$
1,500
NT$
47,700
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The gains or losses resulted from the foreign currency option contracts were recorded as the
non-operation income or losses when the option contracts were exercised. For the year ended
December 31 2003, 2004 and 2005, the (gains) or losses recorded upon exercise of the foreign
currency option contracts were NT$(311), NT$1,503 and NT$0, respectively.
c.
Cross currency and interest rate swaps
To hedge against certain of the Company's long-term debts denominated in U.S. dollars which
bear interest at floating three-month SIBOR, the Company entered into cross currency and
interest rate swaps which effectively converted the debts into Japanese Yen and the floating
interest rate into a fixed interest rate. Since most of the Company's receivables are
denominated in Japanese Yen, the conversion from U.S. dollar to Japanese Yen mitigates the
foreign exchange exposure.
As of December 31, 2004 and 2005, the Company did not have any outstanding cross currency
and interest rate swap contracts. The gains or losses resulted from the cross currency and
interest rate swaps were recorded as the non-operating income or losses. For the year ended
December 31, 2003, 2004 and 2005, the gains or losses from cross currency and interest rate
swaps were NT$(20,220), NT$0 and NT$0, respectively.
d.
Structured deposits
The Company entered into certain structured deposits, or dual currency deposits, to earn
higher interest rates, but they exposed the Company to foreign exchange risk. The Company placed
deposits with certain financial institutions, which entitled the Company to earn interest rates
in excess of the market rates for a "basic" deposit. However, the financial institutions have the
option to settle the deposit and accrued interest in the original currency or settle the deposit
and accrued interest with an alternative currency other than the original currency. The
conversion rate is stated in the contracts. These contracts are entered into for hedging
purposes.
As of December 31, 2004 and 2005, the Company did not have any outstanding structure
deposits. The gains or losses resulted from the structure notes were recorded as the
non-operating income or losses. For the year ended December 31, 2003, 2004 and 2005, the (gains)
or losses from structure notes NT$(20,296), NT$(3,249) and NT$2,790, respectively.
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e.
Transaction Risk
i)
Credit risk: Credit risk represents the positive net settlement amount of those
contracts with positive fair values at the balance sheet date. The positive net
settlement amount represents the loss to be incurred by the Company if the counter-parties
breached the contracts. The counter-parties to the foregoing derivative financial
instruments are the reputable financial institutions. The Company believes its exposure
related to the potential default by the counter-parties is minimized.
ii)
Market price risk: All derivatives are intended to hedge for fluctuation in foreign
exchange rates and interest rates. The Company believes the market price risk related to
the derivatives is minimal as gains or losses from the derivative contracts for hedging
purpose are likely to be offset by gains or losses from the underlying assets and
liabilities denominated in foreign currencies.
iii)
Cash flow risk: The Company has sufficient Japanese and US dollar assets to meet the
cash requirements for the future needs. Further, there will be corresponding cash inflow
for the cash outflow. The Company believes the cash flow risk related to the derivative
contracts is minimal.
f.
Fair values of the financial instruments were listed as follows:
As of December 31
2004
2005
Carrying amount
Fair value
Carrying amount
Fair value
NT$000
NT$000
NT$000
US$000
NT$000
US$000
Non-Derivatives
Cash and cash equivalents
10,115,688
10,115,688
11,133,620
339,440
11,133,620
339,440
Short-term investments
918,040
934,197
—
—
—
—
Long-term investments
1,620,465
2,036,402
1,226,753
37,401
2,497,109
76,131
Short-term debts and notes
(2,996,778
)
(2,996,778
)
(1,893,754
)
(57,736
)
(1,893,754
)
(57,736
)
Long-term debts
(12,509,507
)
(12,550,359
)
(10,413,038
)
(317,470
)
(10,451,654
)
(318,648
)
Credit balance of long
term equity investments
—
—
(29,838
)
(910
)
(29,838
)
(910
)
Derivatives
Forward
—
1,477
—
—
—
—
Options
—
(165
)
—
—
—
—
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The fair value of financial instruments were determined as follows:
i)
The fair value of the Company's short-term financial instruments was based on the book
value of the instruments at the report date due to the short maturities. The aforementioned
short-term financial instruments included cash and cash equivalents, restricted cash,
receivables, payables, short-term debts and notes.
ii)
The fair value of the Company's marketable securities was based on the market price of
the marketable securities at the reporting date when the market price is available. If
there is no market price for the marketable securities, the fair value of the Company's
marketable securities was based on the financial or other related information available.
iii)
The fair value of the Company's long-term debts included current portion bearing variable
interest rates was estimated using the book value of the debt at the report date.
g.
Derivatives
On May 5, 1998, the Company issued convertible debentures in an aggregate principal amount of
US$150,000 (NT$4,761,000), which were privately placed with a financial institution. A wholly
owned subsidiary (the "Subsidiary") of the Company subsequently entered into a call option
contract with the financial institution, the underlying reference being the convertible
debentures. The terms of the contract provided that the notional amount of US$150,000
(NT$4,761,000) is divided into fifteen options and the Subsidiary is entitled to exercise the
options separately, at the discretion of the Subsidiary during the life of the contract, but at a
minimum number of two and a maximum number fifteen. The Company simultaneously entered into
currency swaps, based on the notional amount of the debt, converting Japanese Yen was combined
into one contract. The Subsidiary exercised two options and five options on January 22, 2000 and
June 26, 2000, respectively. In April 2003, the Company settled the remaining eight options by
paying US$13,147 (NT$417,286). The related settlement gain was US$1,207 (NT$38,310).
In June 2000, the Company entered into a contract with a financial institution for the settlement
of five options relating to a zero coupon convertible debenture due 2003 with the underlying
reference being 47,727,535 of the Company's common shares. The contract, as amended, expires in
May 2003. However, in April 2003, the Company extended the contract to May 2004, which was
subsequently extended to May 2005. As of December 31, 2004, the remaining underlying reference
was 53,253,964 of the Company's common shares. If the share price was lower than the
predetermined contract price, then the Company would pay the difference between the two amounts
to the financial institution. The contract rate at which the contract is settled is based on U.S.
dollars, and the Company's share price is converted into U.S. dollars using current N.T. dollars
to U.S. dollars exchange rates in order to determine the settlement amount. The
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predetermined contract price and the share price converted into U.S. dollars using current
exchange rate were US$1.37 (NT$43) and US$0.23 (NT$7) per share, respectively. The carrying
amount of this contract as of December 31, 2004 was a receivable of US$1.7 million (NT$54
million), while the fair value was a receivable of US$1.4 million (NT$44 million).
26.
Segment Information
The Company operates predominantly in one industry segment, the design, manufacturing, and
supply of integrated circuits. The Company's chief operating decision maker is the Chief
Executive Officer, who reviews consolidated results of manufacturing operations when making
decisions about allocating resources and assessing performance of the Company. The Company
believes it operates in one segment, and all financial segment information can be found in the
consolidated financial statements.
The geographic Information was listed as follows:
2003
Domestic
Others
Elimination
Consolidated
NT$000
NT$000
NT$000
NT$000
Sales to unaffiliated customers
15,799,829
1,912,358
—
17,712,187
Sales between geographic areas
1,782,732
391,747
(2,174,479
)
—
Net Sales
17,582,561
2,304,105
(2,174,479
)
17,712,187
Operating income (loss),
including other expenses
(7,289,636
)
(1,198,463
)
1,285,113
(7,202,986
)
Interest revenue
103,847
Interest expense
(1,077,898
)
Income before taxes
(8,177,037
)
Tax expense
(21,027
)
Minority interest
319
Net loss
(8,197,745
)
Identifiable assets
57,769,932
6,288,840
(4,140,075
)
59,918,697
Capital expenditures
1,598,526
7,522
—
1,606,048
Depreciation and amortization
9,278,878
10,553
(2,420
)
9,287,011
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2004
Domestic
Others
Elimination
Consolidated
NT$000
NT$000
NT$000
NT$000
Sales to Unaffiliated Customers
18,485,417
4,894,306
—
23,379,723
Sales between geographic areas
4,515,956
13,793
(4,529,749
)
—
Net Sales
23,001,373
4,908,099
(4,529,749
)
23,379,723
Operating income (loss)
including other expenses
561,410
168,718
99,471
829,599
Interest revenue
101,646
Interest expense
(684,105
)
Income before taxes
247,140
Tax expense
(34,781
)
Minority interest
5,333
Net income
217,692
Identifiable assets
52,401,768
4,492,353
(2,498,445
)
54,395,676
Capital expenditures
2,551,655
2,838
—
2,554,493
Depreciation and Amortization
7,557,032
7,562
(2,434
)
7,562,160
2005
Domestic
Asia
Others
Elimination
Consolidated
NT$000
NT$000
NT$000
NT$000
NT$000
Sales to unaffiliated Customers
15,440,265
1,928,043
1,539,828
—
18,908,136
Sales between geographic areas
3,445,552
—
—
(3,445,552
)
—
Net Sales
18,885,817
1,928,043
1,539,828
(3,417,261
)
18,908,136
Operating income (loss)
including other expenses
(7,197,081
)
46,596
(2,240,903
)
2,786,667
(6,604,721
)
Interest revenue
99,860
Interest expense
(377,261
)
Income before taxes
(6,882,122
)
Tax expense
(215,414
)
Minority interest
70,347
Net income
(7,027,189
)
Identifiable assets
21,877,132
363,210
991,301
(548,725
)
22,682,918
Capital expenditures
1,578,868
7,327
8,868
—
1,595,063
Depreciation and amortization
7,251,710
4,601
3,670
(7,448
)
7,252,533
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Major customers
Revenues from customers representing over 10% of total net sales were listed as follows:
For the year ended December 31
2003
2004
2005
NT$000
%
NT$000
%
NT$000
%
US$00
Customers
Nintendo
4,256,764
24.03
5,239,963
22.41
5,574,616
29.48
169,958
Exports
The Company's export sales accounted for 68.94%, 66.47% and 70.24% of total net sales for the
years ended December 31, 2003, 2004 and 2005, respectively.
Export sales from the R.O.C. were listed as follows:
For the year ended December 31
2003
2004
2005
NT$000
NT$000
NT$000
US$000
Japan
7,269,548
8,363,806
7,706,521
234,955
Singapore and Hong Kong
3,487,250
5,119,396
4,076,395
124,280
United States
823,145
980,911
629,235
19,184
Europe
453,641
1,077,416
888,687
27,094
Total
12,033,584
15,541,529
13,300,838
405,513
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Products
The Company's principal products and services consist of memory products, SOC products and
services, and multimedia products. The following table sets forth the amounts of total net sales
revenue from external customers represented by these products for the years ended on December 31,
2003, 2004 and 2005:
For the year ended December 31
2003
2004
2005
NT$000
NT$000
NT$000
US$000
ROM
7,463,464
8,372,758
8,712,060
265,611
Flash
5,810,494
10,714,857
6,870,378
209,463
SMS*
2,359,687
1,732,539
1,661,678
50,661
SLC**
1,286,807
1,786,711
1,191,553
36,328
EPROM
303,519
162,573
16,883
515
Others
488,216
610,285
455,584
13,890
Total net sales Revenue
17,712,187
23,379,723
18,908,136
576,468
*
SMS (Strategic Manufacturing Service) refers to value added service of memory and wafer
manufacturing to strategic alliance.
**
SLC (Systematic Logic Chip) refers Logic and Core SOC products.
27.
Other Disclosures
a.
Significant Subsequent Events
The Company's shareholders approved and authorized in the Special Shareholder's Meeting ("SSM"),
held on November 16, 2005, the Company's BOD to cancel 2,079,474,542 common shares at the amount
of NT$20,795 million. On February 7, 2006, the Company's BOD resolved to issue, by private
placement, 100,000 common shares at the discount price of NT$8.07 per share. The record dates
for cancellation and issuance of common shares were February 16, 2006 and February 17, 2006,
respectively. As of April 21, 2006, the registration has been completed.
On January 18, 2006, the Company's BOD resolved to sell the FAB III building with the clean room
and adjunctive facilities to Powerchip Semiconductor Corporation at the amount of NT$5,300
million.
On February 7, 2006, the Company's BOD resolved to issue 691,000 units of employee stock options
as the 4
th
issuance under 2005 Plan. The grant date of the issuance was set on
February 7, 2006 with the exercise price at the amount of NT$5.72 per unit.
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On March 7, 2006, Spansion, Inc. filed an action against Macronix International Co., LTD. and
Macronix America Inc. in the U.S. District Court for the Northern District of California (Case
No. C 06-1733 MJJ). The original Complaint asserted causes of action for false advertising,
trademark dilution and unfair competition. The Complaint further sought $100 million in
enhanced damages, attorneys' fees, and injunctive relief. On May 19, 2006, Spansion filed a
First Amended Complaint alleging an additional claim for copyright infringement. All claims
asserted by Spansion arise out of the comparative advertising and marketing of the Macronix
NBit
Ô
flash memory chips. On June 5, 2006, Macronix International and Macronix America
filed Answers to the first Amended Complaint denying the allegations of the First Amended
Complaint and asserting a number of affirmative defenses. A Case Management Conference was
held on June 13, 2006, and the trial date was set on April 16, 2007. The parties are currently
in the beginning stages of discovery. Macronix International and Macronix America deny any
liability to Spansion and intend to vigorously defend the action. The management
considered the outcome of the judgment on and the expenditures from the lawsuit to be quite
uncertain. Therefore, no provision was made for any losses that may arise on the lawsuit.
b.
Significant Disaster Losses
No significant disasters occurred during the year ended December 31, 2005.
28.
Summary of Significant Differences between Accounting Principles Followed by the Company and
Accounting Principles Generally Accepted in the United States of
America (Restated)
Subsequent to the filing of our initial consolidated financial statements on Form 20-F for the
year ended December 31, 2004 and through the process of addressing financial statement comments
raised by the US SEC, we noted that certain US GAAP financial
information as disclosed in Note 22
to our previously issued financial statements were miscalculated for the years ended
December 31, 2002, 2003 and 2004.
The Company restated the consolidated financial statements pursuant to US GAAP for a
convertible bond which contains embedded derivatives which were
previously inappropriately accounted for as a
convertible bond with a beneficial conversion feature. The error resulted in an
overstatement/(understatement) to US GAAP net loss of NT$167 million, NT$850 million and NT$(40)
million for the years ended December 31, 2002, 2003 and 2004, respectively.
The effects arising from the amendments to the consolidated financial statements under US GAAP are
summarized as follows:
As of December 31, 2002
(In million NT dollars)
As reported
Restatement
As restated
Shareholders' equity
28,351
167
28,518
For the year ended December 31, 2003
(In million NT dollars, except per share amounts)
As reported
Restatement
As restated
Net Loss
8,877
(850
)
8,027
Basic loss per share (in dollars)
2.28
(0.22
)
2.06
Diluted loss per share (in dollars)
2.28
(0.22
)
2.06
Basic loss
per share with reverse stock split retroactively adjusted
(in dollars)
3.91
(0.38
)
3.53
Diluted loss per share with
reverse stock split retroactively
adjusted (in dollars)
3.91
(0.38
)
3.53
As of December 31, 2003
(In million NT dollars)
As reported
Restatement
As restated
Shareholders' equity
28,195
(46
)
28,149
For the year ended December 31, 2004
(In million NT dollars, except per share amounts)
As reported
Restatement
As restated
Net Loss
429
40
469
Basic loss per share (in dollars)
0.09
0.01
0.10
Diluted loss per share (in dollars)
0.09
0.01
0.10
Basic loss
per share with reverse stock split retroactively adjusted
(in dollars)
0.15
0.02
0.17
Diluted loss per share with
reverse stock split retroactively
adjusted (in dollars)
0.15
0.02
0.17
As of December 31, 2004
(In million NT dollars)
As reported
Restatement
As restated
Shareholders' equity
32,760
(5
)
32,755
The accompanying consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the Republic of China ("R.O.C. GAAP") that differ in
the following respects from accounting principles generally accepted in the United States of
America ("U.S. GAAP"):
a.
Reclassification of time deposits
Under R.O.C GAAP, cash and cash equivalents include time
deposits regardless of original maturity. Under U.S. GAAP, cash
equivalents are short-term, highly liquid investments that are readily convertible to cash with
original maturities of 3 months or less. Therefore, time deposits with original maturities of
more than 3 months would not be considered cash and cash
equivalents under U.S. GAAP. As of
December 31, 2005 and 2004, time deposits with original maturities of
more than 3 months amounted to NT$1,520 million
(US$46.3 million) and NT$0, respectively.
b.
Marketable Securities
Under R.O.C. GAAP, the Company carries the short-term marketable equity securities at the
lower of aggregate cost or market value. The unrealized losses of short-term marketable
equity securities are recorded as investment losses in the statement of operations, while
unrealized gains of short-term marketable equity securities are not recognized. The
Company carries the long-term marketable equity securities at the lower of aggregate cost
or market value if market price is available. The unrealized losses of long-term marketable
equity securities are reported as a deduction of shareholders' equity, while the unrealized
gains are not recognized. Until January 1, 2005, the Company does not evaluate the marketable equity securities
for an other-than-temporary decline in value since the evaluation is not specifically
required under R.O.C. GAAP. The Company's policy is to account for all unrealized losses on
long-term investments as a charge to shareholders' equity. Beginning January 1, 2005, the Company is required by ROC GAAP SFAS No.35 to evaluate
holding assets for any indication of impairment. If there is an indication that an asset may
be impaired, the Company is required to estimate the recoverable amount of assets and to record
impairment loss when the carrying value is less than the recoverable amount of the assets.
Subsequent reversal of an impairment loss is allowed when any indication of the impairment loss
recognized in the prior years may no longer exist.
Under U.S. GAAP, SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities", debt and equity securities that have readily determinable fair values are to be
classified as either trading,
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available-for-sale or held-to-maturity securities. Debt securities that the Company has the
positive intent and ability to hold to maturity are classified as held-to-maturity securities
and reported at amortized cost. Debt and equity securities that are bought and traded for
short-term profits are classified as trading securities and reported at fair value, with
unrealized gains and losses included in earnings of the current period. Debt and equity
securities not classified as either held-to-maturity or trading are classified as
available-for-sale securities and reported at fair value, with unrealized gains and losses
excluded from earnings and reported in a separate component of shareholders' equity; however,
unrealized losses relating to declines in fair value deemed to be other-than-temporary are
recorded in earnings for both available-for-sales and held to maturity
securities. The Company did not have any investments classified as trading securities
or held-to-maturity securities during the periods presented.
Under U.S. GAAP, the available-for-sale securities as of December 31, 2004 and 2005 were as
follows:
As of December 31
2004
2005
Market value
Cost
Market value
Cost
NT$000
NT$000
NT$000
US$000
NT$000
US$000
Classified as short-term investments:
Open-end mutual funds, marketable
securities
904,190
901,871
—
—
—
—
Equity securities
31,660
16,169
—
—
—
—
Subtotal of short-term investments
935,850
918,040
—
—
—
—
Classified as long-term investments:
Equity securities
1,049,921
719,296
2,245,220
68,452
747,019
22,775
Realized gains from sale of securities classified as available-for-sale for the years ended
December 31, 2003, 2004 and 2005 were NT$111,957, NT$243,497 and NT$531,378 (US$16,201),
respectively. For the purpose of determining realized gains and losses, the cost of securities
sold was based on specific identification.
The following table shows the gross unrealized losses and fair value of the Company's investment
with unrealized losses that are not deemed to be other-than-temporary impaired, aggregated by
investment category and length of time that individual securities have been in a continuous
unrealized loss position, on December 31, 2005:
Less than 12 months
12 months or more
Total
Fair value
Unrealized loss
Fair value
Unrealized loss
Fair value
Unrealized loss
Classified as
short-term
investments:
Open-end mutual
funds, marketable
securities
—
—
—
—
—
—
Equity securities
Classified as
long-term
investments:
Equity securities
—
—
—
—
—
—
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The Company accounts for the investments either on the cost basis or equity basis. The Company
regularly reviews its cost and equity investments to determine whether a significant event or
changes in circumstances has occurred that may have an adverse effect on the fair value of the
each investment. In the event a decline in fair value of an investment is determined, the
Company will evaluate if the decline in value is other than temporary.
The Company generally considers its investments to be strategic and long-term in nature, so the
Company will evaluate if the fair value decline is recoverable within a reasonable period of
time. For investments accounted for using cost or equity method of accounting, the Company
evaluates fair value based on specific information available. Factors indicative of
other-than-temporary decline include, but are not limited to, recurring operating losses, credit
defaults and subsequent rounds of financing with pricing that is below the cost basis of the
investment. The Company considered all available quantitative and qualitative factors in
determining if an other-than-temporary decline in value of an investment has occurred. In the
event the carrying value of an investment exceeds its fair value and the decline in fair value
is determined to be other than temporary, the Company writes down the value of the investment to
its fair value. The Company generally believes when the fair value of an investment is below the
carrying value for six consecutive months, a rebuttable presumption exists that such decline is
other than temporary.
As of December 31, 2005, the market price of Tower of US$1.45 was significantly below our
average cost basis of US$2.26 for a prolonged period of time without indicators of a near-term
recovery. Accordingly, the Company concluded the decline in the market value of Tower's shares
was other-than-temporary. On a U.S. GAAP basis, an impairment charge of NT$210,843(US$6,428) was
recognized, based on the difference between Tower's market price of US$1.45 per share and
average cost of Tower's share of US$2.26 per share on
December 31, 2005. An other-than-temporary impairment from
decline in the market value of Tower's shares of NT$0 and
NT$447,995 was recognised, in 2003 and 2004, respectively.
The aggregate cost of the Company's cost method investments totaled NT$324,200 as of December
31, 2005 and were not evaluated for impairment because (a) the Company did not estimate the fair
value of those investments in accordance with paragraphs 14 and 15 of Statement 107 and (b) the
Company did not identify any events or changes in circumstances that may have had a significant
adverse effect on the fair value of those investments.
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c.
Purchase accounting
Under ROC GAAP SFAS No. 5, when an investor purchased newly issued shares from an investee such
that its holding interest on the investee increases after the purchase, the investor shall book
the difference between net assets acquired and purchase consideration as an equity adjustment.
When allocating net assets acquired, ROC GAAP did not provide guidance over recognition of
intangible assets.
Under US GAAP SFAS No. 141, "Business Combinations", Goodwill arises when purchase consideration
exceeds net assets acquired. In addition, Statement 141 requires that intangible assets
be recorded apart from goodwill if they meet one of the criteria established in Statement 141
(i.e., either the contractual-legal criterion or the separability criterion.
In September 2005, the Company purchased additional shares from its then equity investee,
Biomorphic Microsystems Corporation (Biomorphic), and increased its holding interest on
Biomorphic from 30.08% to 54.77%. The transaction leads to an
adjustment to equity of NT$147,894
under ROC GAAP.
The Company is in the process of obtaining third-party
valuations of certain intangible assets; thus, the allocation of
purchase price is subject to change. The Company's goodwill under US GAAP is
currently valued at NT$147,894 for US GAAP purposes but is subject to
change from the allocation of the purchase price.
d.
Goodwill impairment
Under R.O.C. GAAP, the Company recorded the excess of the investment cost over the fair value of
acquired net assets as goodwill and amortizes the goodwill over 5 to 20 years. Effective
January 1, 2005, the Company reviews goodwill for impairment whenever an event occurs or
circumstances change to reduce the fair value of goodwill below its carrying amount.
Effective January 1, 2002, the Company adopted U.S. SFAS No. 142, "Goodwill and Other Intangible
Assets" and ceased amortization of goodwill which is now assessed for impairment annually or
more frequently if impairment indicators arise. Statement 142 requires that all goodwill be
assigned to one or more reporting units as of the acquisition date. The Biomorphic goodwill has,
however, not yet been allocated to a reporting unit as of
December 31, 2005, because the allocation of purchase price is not
finalized
e.
Impairment of long-term assets
Under R.O.C. GAAP SFAS No. 35, effective January 1, 2005 the Company is required to recognize an
impairment loss when there is an indication that the carrying amount
of an asset or an asset group is not recoverable from the expected future cash flows. However, if the recoverable
amount increases in a
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future period, the amount previously recognized as impairment would be reversed and recognized
as a gain. The adjusted amount may not exceed the carrying amount that would have been
determined, net of depreciation, as if no impairment loss had been
recognized. In addition, ROC GAAP SFAS No.
35 requires an asset to be assessed for impairment individually when
an indication of
impairment exists for the individual asset.
Under U.S. GAAP SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets",
an impairment loss is recognized when the carrying amount of an asset or a group of assets is
not recoverable from the expected future cash flows and an impairment loss is measured as the
difference between fair value and carrying amount of the asset or group of assets. The
impairment losses are recorded in current period earnings and cannot be reversed subsequently.
Long-lived assets (excluding goodwill and other indefinite-lived assets effective January 1,
2002) held and used by the Company are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. US GAAP SFAS
No. 144 requires a company to group its assets at the lowest
level of identifiable cash flows for determining possible impairment.
In 2005 the Company has two assets where indicators of impairment exist and are required to be
assessed for impairment individually, and the Company wrote-off a
total of NT$901M impairment loss under R.O.C. GAAP. Under US GAAP such assets are either grouped or
considered entity-wide assets and are evaluated for impairment as
part of the group compared with the group's expected future cash flows. No
impairment under US GAAP is required and the Company reversed the impairment loss
under US GAAP.
f.
Pension benefits
As permitted under R.O.C. GAAP, prior to 1996, the pension expense recorded by the Company in
connection with its defined benefit plans was based on the amount of the contributions made by
the Company to the pension plans required by government regulations. In 1996, the Company
adopted R.O.C. SFAS No. 18 that is similar in many respects to U.S. SFAS No. 87, "Employer's
Accounting for Pensions".
U.S. SFAS No. 87, "Employer's Accounting for Pensions" requires the Company to determine the
accumulated pension obligation and the pension expense on an actuarial basis. The difference in
the dates of adoption gives rise to a U.S. GAAP difference in the actuarial computation for
transition obligation pension expense and is allocated directly to
equity. The Company believes
the amount of the transition obligation is insignificant.
g.
Derivative Financial instruments
Under R.O.C. GAAP, foreign currency forward contracts are accounted for in a manner similar
to the requirement under U.S. SFAS No. 52. All other derivative financial instruments are
recorded based upon the accounting policies stated in Note 2.
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Differences between R.O.C. GAAP and U.S. GAAP in accounting for derivative financial instruments
were listed as follows:
Currency option contracts
Under R.O.C. GAAP, the Company recorded gains or losses from the currency option contracts upon
settlement. Effective in October 2004, the Company complied with R.O.C. SFAS No. 32, "The
Accounting Treatment of Foreign Exchange Option Contracts Before the Effectiveness of Financial
Accounting Standards No. 34", issued by the ARDF, and accounted for the option at the fair
values on the balance sheet date with the differences recorded in the net income.
Under U.S. GAAP, the Company is required to record the gains or losses resulted from the
difference of the fair value at the balance sheet dates for the option contracts that do not
qualify for hedge accounting. The option contracts entered into by the Company did not
qualify as hedges for financial reporting purpose under U.S. GAAP; therefore, the Company
carried the option contracts at the fair value and recorded the gain
or losses resulting from
the changes in fair value at the balance sheet dates.
Structured deposits
Under R.O.C. GAAP, the Company recorded the interest on the structure deposits on the accrual
basis. The gains and losses arising from the settlement of the structure deposit contracts are
recorded in the statement of operations.
Under U.S. SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". The
Company is required to recognize the derivatives including embedded
derivatives not qualifying for hedge accounting at fair value on the
balance sheet with the difference recognized as gains or losses in the statement of operation.
Subsequent to December 31, 2000, none of the Company's derivatives contracts qualified for
hedges purpose under U.S. GAAP.
h.
Convertible bonds
Under ROC GAAP, when convertible bonds are issued, the entire instrument is recorded as a
liability at an amount equal to the proceeds received. Any discount or premium to the par value
of the convertible bond is amortized to the statement of income by using the effective interest
rate method. If the convertible bonds contain a redemption premium above its par value amount,
the excess is accrued, using the effective interest rate method, over the period to redemption as
a charge to interest expense. Upon conversion, the carrying value of the bond is credited to
common stock at its par value and the difference between the carrying value of the bond and the
par value of stock is recorded to capital reserve. No gain or loss is recognized. Effective
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from January 1, 2006, ROC SFAS No. 34 and ROC SFAS No. 36, "Financial Statement Presentation and
Disclosure of Financial Instruments" ("ROC SFAS 36") require derivative embedded in hybrid
instrument, if not clearly and closely related to the host contract, to be bifurcated and
accounted for at fair value.
The Company issued certain convertible debt instruments that contained embedded derivatives
based upon the features set in the convertible bond contracts. Under R.O.C. GAAP, there is no
accounting guidance specific to the embedded derivatives and beneficial conversion features. The
Company accounted for the convertible bonds with the aforementioned features in the manner
similar to the conventional bonds without the aforementioned features.
Under U.S. GAAP, the Company considered whether the convertible bonds contain embedded
derivative features using the guidance provided in U.S. SFAS No. 133. Convertible bonds with
premium put options contain embedded derivatives subject to bifurcation in accordance with EITF
85-29.
To the extent the embedded derivatives are determined to exist, the embedded derivatives
are bifurcated and accounted for in accordance with SFAS No. 133. If there are no
embedded derivatives present, the Company then considers whether there are beneficial
conversion features. To the extent the beneficial conversion features exist, the Company
would account for the beneficial conversion features in accordance with EITF 98-5 and EITF 00-27.
Under U.S. GAAP, in accordance with EITF 00-27 "Application of EITF98-5 Accounting for
Convertible Securities with Beneficial Conversion Features" (EITF 00-27), convertible securities
with beneficial conversion features or contingently adjustable conversion ratios are recognized
and measured by allocating a portion of the proceeds equal to the intrinsic value of that
feature to additional paid-in capital. The amount to be allocated should be calculated at the
commitment date as the difference between the conversion price and the fair value of the common
stock into which the security is convertible, multiplied by the number of shares into which the
security is convertible. The resulting discount on the convertible security is accreted, as
interest expense, from the date the beneficial conversion feature is fixed to the stated
redemption date.
All convertible bonds outstanding as of December 31,
2003, 2004 and 2005 contained embedded derivatives features that
require bifurcation in accordance with SFAS No. 133 and the
Company bifurcated the embedded derivatives from the host contracts
for these convertible bonds. The host bond contract was then accreted
from the initial amount to the maturity amount over the period from
the date of issuance to the maturity date using the effective
interest method. The net difference between R.O.C. GAAP and
U.S. GAAP represents 1) change in fair value of embedded
derivatives, and 2) difference between accretion period under both GAAP, and premium or discounts subject to accretion under both GAAP.
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i.
Stock appreciation rights
R.O.C. GAAP has no specific accounting provisions for Stock Appreciation Rights ("SAR") plans
and the
Company only recognizes compensation expense for SAR to the extent it is not covered by the gain
on the derivative financial instruments intended to fund the costs of the SAR. The Company
allocates a portion of the gains or losses from a derivative contract designated as a hedge of
the SAR program for R.O.C. GAAP purposes by correlating the number of shares in the SAR plan
that have vested with a number of shares referenced in the derivative contract. The Company
records gains or losses on the portion of the derivative contract related to the SAR based on
the difference between the strike price in the derivative contract and the employees' exercise
price. Under R.O.C. GAAP basis the derivative contract related to the SAR in now accounted for
as a derivative contract not held for hedging and that therefore the U.S. GAAP differences for
derivatives now include any differences related to the SAR contract.
U.S. GAAP requires the Company to account for its stock appreciation rights granted to employees
in accordance with Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting for Stock
Issued to Employees." Under APB 25, the Company recognizes compensation expense for the plan
based on the amount by which the quoted market value of the shares of the Company's stock
covered by the grant exceeds the exercise price of the rights. Compensation is accrued as a
charge to expense over the vesting period based on current market values of the SAR at the end
of each period. As of December 31, 2003, all shares under SAR totaling 72,208,948 were expired
and cancelled.
j.
Employees' stock option plans
Under R.O.C. GAAP, there were no specific regulations with respect to the accounting for stock
options prior to 2004. Effective January 1, 2004, the Company is required to use either the
fair value method or the intrinsic value method to account for the employees' stock option plan.
Under the fair value method, stock options are stated on the fair value calculated by pricing
models such as Black-Scholes or binomial model. Under the intrinsic value method, stock options
are recorded by the excess of the market price of the underlying shares at the grant date over
the exercise price of the stock option. The fair value method is encouraged but not required. If
the intrinsic value is used, the Company is required to disclose pro-forma net income and
earnings per share assuming the fair value method is used. The Company chose the intrinsic value
method to account for the employees' stock option plans. Under R.O.C. GAAP, no compensation
expense was recognized for the year ended December 31, 2003, 2004 and 2005.
Under U.S. GAAP, the Company elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") and related interpretations to
account for the employees' stock option plans. Under U.S. APB Opinion No. 25 and its
related interpretations, the Company is required to record the compensation expense over
the vesting period based on the difference between the exercise price and the current
market price at the end of each period. The Company did not record any compensation
expense on the U.S. GAAP basis as the exercise price of the stock options was equal to the
market price of the underlying common stock on the grant date.
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Under U.S. SFAS No. 123, "Accounting for Stock-Based Compensation", the Company is required to
disclose the pro forma information regarding the options granted to the employees as if the fair
value method has been applied.
For purposes of pro forma disclosures, the estimated fair value of the options is amortized
over the vesting period. For the year ended December 31, 2003, 2004 and 2005, the
compensation expense recognized under fair value method would have been NT$84,913,
NT$338,091 and NT$513,301, respectively. The Company's pro-forma information is as follows:
For the year ended December 31
2003 (Restated)
2004 (Restated)
2005
NT$000
NT$000
NT$000
US$000
Net income (loss) under U.S. GAAP
(8,026,653
)
(468,884
)
(4,635,555
)
(141,328
)
Total compensation expense of employees' stock options
(84,913
)
(338,091
)
(513,301
)
(15,650
)
Pro forma net income (loss)
(8,111,566
)
(806,975
)
(5,148,856
)
(156,978
)
The pro-forma of EPS for the Company was as follows:
For the year ended December 31
2003 (Restated)
2004 (Restated)
2005
NT$
NT$
NT$
US$
As reported
Basic EPS
(3.53
)
(0.17
)
(1.59
)
(0.05
)
Diluted EPS
(3.53
)
(0.17
)
(1.59
)
(0.05
)
Pro forma
Basic EPS
(3.57
)
(0.29
)
(1.77
)
(0.05
)
Diluted EPS
(3.57
)
(0.29
)
(1.77
)
(0.05
)
A summary of the Company's stock option activity and related information for the years ended
December 31, 2004 and 2005 is as follows:
As of December 31, 2004
As of December 31, 2005
Weighted-Average
Options
Weighted-Average
Options
Exercise
(in thousand)
Exercise Price
(in thousand)
Price
Outstanding-beginning of year
290,300
9.31
432,779
11.21
Granted
195,768
14.18
204,909
5.87
Exercised
—
—
—
—
Forfeited
(53,289
)
10.83
(39,126
)
10.75
Outstanding-end of year
432,779
11.21
598,562
9.42
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Table of Contents
Weighted-average fair value of options granted for the year ended December 31, 2004 and 2005 was
NT$6.59 and NT$2.55 per unit, respectively. The weighted average remaining contractual life of those options
for the year ended December 31, 2004 and 2005 is 5.29 years
and 4.32 years, respectively.
k.
Purchase and Sale of the Company's Own Shares
Under R.O.C. GAAP, the net gains or losses resulting from the purchase and sale of the Company's
own shares for trading purposes are recorded as non-operating income or losses in the statements
of operations. Effective January 1, 2002, purchases or sales of the Company's own shares are
treated as treasury stock transactions.
U.S. GAAP requires that if the Company acquires shares of its own capital stock for purposes
other than retirement, the cost of the acquired stock should be shown separately as a
deduction from the total of capital stock, additional paid-in capital, and retained
earnings, or accorded the accounting treatment appropriate for retired stock. Gains on
sales of the repurchased stock not previously accounted for as constructively retired
should be credited to additional paid-in capital; losses should be charged to additional
paid-in capital to the extent that previous net gains from sales or retirements of the same
class of stock are included therein, otherwise the losses are charged to retained earnings.
l.
Reclassification of Capital Account to Accumulated Deficit
Under R.O.C. GAAP, under the approval of shareholders, a company may reclassify its additional
paid-in capital account to accumulated deficit.
Under U.S. GAAP, according to SAB Topic 5S, the SEC staff believes a deficit reclassification of
any nature is considered to be quasi-reorganization. As such, a company may not reclassify or
eliminate a deficit in retained earnings unless all requisite conditions for a
quasi-reorganization are satisfied. For the year ended December 31, 2003 and 2005, the Company
reclassified NT$2,630,621 and NT$315,704 of its additional paid-in capital to accumulated
deficit account, respectively. Under U.S. GAAP, this reclassification
is reversed.
F-79
Table of Contents
m.
Rights issues and earnings per share
Under R.O.C. GAAP, the portion of rights issues that are offered to employees contain a bonus
element, basic and diluted EPS shall be adjusted retroactively for the bonus element for
all periods presented. However, under
U.S. GAAP, such retroactive adjustment is required for all rights issues containing bonus
element, regardless whether the rights issuance is offered to employees or existing
shareholders.
Under U.S. GAAP, earnings per share is calculated by dividing net income by the
weighted-average number of shares outstanding in each period, adjusted retroactively for
any stock dividends and stock splits issued subsequently. Other shares issued from
un-appropriated earnings, such as stock bonus to employees, are included in the calculation
of weighted-average number of shares outstanding from the date of occurrence. Earnings per
equivalent American Depository Share ("ADS") are calculated by multiplying earnings per
share by 10 since one ADS represents 10 common shares. Under U.S. GAAP, Earnings per share
after retroactively adjusted by the capital reduction was NT$(3.53), NT$(0.17) and
NT$(1.59) for the year ended December 31, 2003, 2004 and 2005,
respectively.
The number of weighted average shares outstanding under U.S. GAAP is presented below:
For the year ended December 31
2003
2004
2005
Number of common shares outstanding on January 1
2,154,648,056
2,585,997,762
2,939,170,325
Weighted average number of treasury stock
(3,515,795
)
(3,515,795
)
(3,515,795
)
Cancellation of treasury stock
(23,348,539
)
(23,348,539
)
(23,348,539
)
Bonds converted to common for the years ended
December 31, 2003 (263,975,068 shares)
78,269,103
—
—
Issuance of common shares for cash on November 11,
2003 (475,000,000 shares*51/365)
38,740,984
—
—
Issuance of 525,000,000 common shares for Global
Depositary Shares on April 5, 2004
—
226,906,653
—
Bonds converted to common shares for the year ended
December 31, 2004 (80,044,385 shares)
—
35,997,545
—
Retroactive adjustment for bonus element included
in the rights offering on November 3, 2003
(1.2462%)
27,491,830
—
—
Basic and dilutive weighted-average number of shares
2,272,285,639
2,822,037,626
2,912,305,991
Note: all shares presented above have been retroactively adjusted
for the capital reduction effect as discussed under footnote 19 and 27a.
F-80
Table of Contents
n.
Inventory cost basis
Under ROC GAAP, it is allowed to subsequently reverse inventory reserve and recognize a gain
even when said inventory is not sold yet. Under US GAAP, ARB43 requires that when inventory
is written down below cost, such reduced amount is to be
considered the cost for subsequent
accounting purposes. SEC Topic 5BB further states that a write-down of inventory to the lower of
cost or market at the close of a fiscal period creates a new cost basis that subsequently cannot
be marked up based on changes in underlying facts and circumstances.
o.
Plant capacity variances
As permitted under R.O.C. GAAP, all plant capacity expense variances can either be charged to
the statement of operations or allocated between cost of goods sold and inventory using an
appropriate allocation method. The Company's policy is to expense such variances.
Under U.S. GAAP, such plant capacity variances can only be allocated between cost of goods sold
and inventory. This has resulted in additional inventory allowances by NT$740,416, NT$24,823
and NT$28,144 as of December 31, 2003, 2004 and 2005, respectively.
p.
Gross profit and operating income
Under R.O.C. GAAP, a number of operating income and expenses are presented under the non-operating
income/expenses in the statement of operations, including the government subsidies for research and
development, inventory loss provision, allowance for prepaid expenses and the reversal of bad debt
expense. Under U.S. GAAP, the government subsidies for research and development, allowance for
prepaid expenses and the reversal of bad debt expense are included in operating income. The
inventory loss provision is included in the gross profit.
q.
Employee bonuses
Under R.O.C. GAAP, the employee bonuses and the remuneration to directors and supervisors, paid
in accordance with the provisions of the Company's articles of incorporation applicable to the
distribution of earnings, are recorded as an appropriation from retained earnings in the period
shareholder approval is obtained for the distribution of the Company's earnings. If the employee
bonuses are settled through the issuance of common shares of the Company, the amount transferred
from retained earnings is based on the par value of the common shares issued. The remuneration
to directors and supervisors may not be settled through the issuance of common shares.
U.S. GAAP requires that such bonuses and remuneration to employees, directors and supervisors be
recorded as compensation expense in the period to which they relate. In addition, if the
employee bonuses are paid in the form of common shares, the fair value of the shares issued is
used to determine the amount of the expense. However, since the form of the payment of the
compensation expense is only determinable at the annual shareholders' meeting, which is
generally after the issuance of the Company's annual financial
F-81
Table of Contents
statements, the compensation
expense is initially accrued in accordance with the Company's articles of incorporation in the
period to which it relates. The difference between the compensation expense initially
recorded and the fair value of the shares issued to settle the accrual, if any, is recorded in
the period in which shareholder approval is obtained.
r.
Research and Development Expense
Under R.O.C. GAAP, the Company recorded royalty expenses as the research and development
expense in operating expenses. Under U.S. GAAP, the Company stated the royalty
expenses as selling expenses or administrative expenses, based upon the nature of the
royalty expenses. Accordingly, U.S. GAAP basis research and development expenses
were NT$2,535,259 in 2003, NT$2,418,208 in 2004 and NT$2,784,483
(US$84,893) in 2005.
s.
10% tax on undistributed earnings
Under R.O.C. Tax Law, the undistributed earnings generated after 1997 are subject to a 10%
tax. Under R.O.C. GAAP, the Company recorded the 10% tax on undistributed earnings in the
year of shareholders' approval on the retained earnings.
Starting from 2002, the American Institute of Certified Public Accountants International
Practices Task Force (the "Task Force") concluded that, in accordance with Emerging Issues
Task Force ("EITF") 95-10, "Accounting for Tax Credits Related to Dividends in Accordance
with U.S. SFAS No. 109", the 10% tax on undistributed earnings shall be accrued during the
period the earnings arise and adjusted to the extent that distributions are approved by the
shareholders in the following year. The U.S. GAAP policy had no effect on the income tax
expenses for the year ended December 31, 2003, 2004 and 2005 as the Company had the net
losses for tax purpose in the respective year.
Under U.S. GAAP, if a company has experienced cumulative losses in recent years, it is not
generally able to consider subjective projections of future operating profits for the
purpose of determining the valuation allowance for deferred income tax assets. A valuation
allowance is provided on deferred tax assets to the extent that it is not "more likely than
not" that such deferred tax assets will be realized. Under U.S. GAAP, the Company's
valuation allowance for deferred tax assets was NT$10,302,448 and NT$12,096,445 as of
December 31, 2004 and 2005, respectively.
t.
Consolidated entities
R.O.C. SFAS No.7 requires a company to consolidate all investees that a company has a controlling
interest in. Such control can be established by the company's majority representation in the Board
of Directors even if a company does not have a controlling financial interest through direct or
indirect ownership of a majority voting interests.
Under U.S. GAAP, a company is required to consolidate all investees in which a company has a
controlling financial interest through direct or indirect ownership of a majority voting interest.
A company would not have a controlling financial interest in its investee by majority
representation in the Board of Directors alone. Magic Pixel Inc. was consolidated by the Company
in 2005 under R.O.C. GAAP. The Company did not have a controlling financial interest in Magic
Pixel Inc. and it should not be consolidated under U.S. GAPP. The deconsolidation of Magic Pixel Inc.
resulted in a reduction in cash and cash equivalents of NT$183,278
and revenues of NT$33,699.
Change in capital structure
Under R.O.C. GAAP, a company is not required to retroactively adjust its shares for capital
reduction, except for purpose of EPS calculation.
Under U.S. GAAP, SEC Topic 4C requires the effect of a capital structure change to a stock
dividend, stock split or reverse split which occurs after the date of the latest reported balance
sheet but before the release of the financial statements be given retroactive effect in the balance
sheet.
As disclosed in Note 19 and 27a, on February 16, 2006, the Company cancelled 2,079 million common
shares proportionately amongst existing shareholders. The cancellation is effectively a reverse
stock split and accordingly has been given retroactive effect in the balance sheet under U.S. GAAP. The
number of common shares outstanding under U.S. GAAP amounted to 2,585,997,762, 2,939,170,325 and
2,915,821,786 in 2003, 2004 and 2005, respectively.
F-82
Table of Contents
The following reconciles net income and shareholders' equity under R.O.C. GAAP as reported in
the consolidated financial statements to the net income and shareholders' equity amounts
determined under U.S. GAAP, giving effect to the differences listed above.
Net income (loss) for U.S. GAAP purposes is reconciled as follows:
For the year ended December 31
2003
2004
(Restated)
(Restated)
2005
NT$000
NT$000
NT$000
US$000
Net income (loss) as reported under R.O.C. GAAP
(8,197,745
)
217,692
(7,027,189
)
214,243
)
Additional pension gain on an actuarial basis
2,696
2,696
2,696
82
Plant capacity loss
268,671
(257,565
)
368
11
Unrealized (losses) gains on marketable securities
4,444
(21,659
)
—
—
Other-than-temporary decline in value on marketable
securities
—
(447,995
)
1,325,640
40,416
Derivative financial instrument
Net gains
(losses) on derivative financial instruments, including embedded
derivatives in convertible bonds
378,615
34,005
(31,879
)
(972
)
Gain on embedded derivative in share purchase
agreement
225,753
—
—
—
Adjustment for taxes
48,143
1,914
197,359
6,017
Accrued compensated absences
—
—
(4,356
)
(133
)
Fixed asset impairment
—
—
901,806
27,494
Amortization of goodwill
—
2,028
—
—
Net income (loss) in accordance with U.S. GAAP
(8,026,653
)
(468,884
)
(4,635,555
)
(141,328
)
Other comprehensive income:
Unrealized gains (losses) on available-for-sale securities
1,642,167
(1,519,910
)
618,388
18,853
Change in translation adjustment
(30,182
)
(127,670
)
(26,516
)
(808
)
Reclassification adjustment for realized gains (losses)
on available-for-sale securities
19,318
243,497
531,378
16,201
Comprehensive income (loss) in accordance with U.S.
GAAP
(6,395,350
)
(1,872,967
)
(3,512,305
)
(107,082
)
F-83
Table of Contents
For the year ended December 31, 2003, 2004 and 2005, the earnings per share under U.S. GAAP was
listed as follows:
2003
2004
(Restated)
(Restated)
2005
NT$
NT$
NT$
US$
Basic net income (losses) per share
(3.53
)
(0.17
)
(1.59
)
(0.05
)
Diluted net income (losses) per share
(3.53
)
(0.17
)
(1.59
)
(0.05
)
The diluted earnings per share calculation excludes the statement of operations impact of
NT$240,708 and NT$88,181 related to the assumed conversion of convertible bonds into 659,968,955
weighted average shares and 61,094,172 weighted average shares for
years 2003 and 2004
respectively. In addition, 1,996,820 and 32,379,507 weighted average shares assumed exercise of
stock options for year 2003 and 2004 respectively were also excluded in the diluted earnings per
share calculation. The impact of the assumed conversion and exercise of stock options has been
excluded for year 2003, 2004 and 2005 due to the anti-dilutive effect.
Gross profit (losses) for U.S. GAAP purposes is reconciled as follows:
$
For the year ended December 31
2003
2004
(Restated)
(Restated)
2005
NT$000
NT$000
NT$000
US$000
Gross profit (loss) reported under R.O.C. GAAP
(2,941,649
)
4,387,976
241,764
7,371
Reversal of inventory losses provision
1,185,227
918,545
478,129
14,577
Pension gain on actuarial basis
2,696
2,696
2,696
82
Depreciation of idle assets
(49,869
)
—
—
—
Impairment of idle assets
(41,661
)
—
—
—
Vacation Accrual
—
—
(3,652
)
(111
)
Deconsolidation
—
—
(31,797
)
(969
)
Plant capacity loss
268,671
(257,565
)
368
11
Gross profit (loss) in accordance with U.S. GAAP
(1,576,585
)
5,051,652
(687,508
)
(20,961
)
F-84
Table of Contents
Operating income (loss) for U.S. GAAP purposes is reconciled as follows:
For the year ended December 31
2003
(Restated)
2004
(Restated)
2005
NT$000
NT$000
NT$000
US$000
Operating income (losses) under R.O.C. GAAP
(7,683,989
)
(348,688
)
(4,874,559
)
(148,615
)
Pension gain on actuarial basis
2,696
2,696
2,696
82
Government subsidy
5,125
18,125
21,918
668
Allowance for prepaid expenses
(334,971
)
—
(141,711
)
(4,320
)
Depreciation of idle assets
(49,869
)
—
—
—
Impairment of idle assets
(41,661
)
—
478,129
14,577
Reversal of inventory loss provision
1,185,227
918,545
—
—
Accounts
receivable provision
34,476
2,028
50,712
1,546
Vacation
accrued
—
—
(4,356
)
(133
)
Deconsolidation
—
—
69,740
2,126
Plant capacity loss
268,671
(257,565
)
368
11
Other reclassification
—
—
(40,701
)
(1,241
)
Operating income (losses) under U.S. GAAP
(6,614,295
)
335,141
(4,356,362
)
(132,817
)
Shareholders' equity for U.S. GAAP purposes is reconciled as follows:
As of December 31
2003
(Restated)
2004
(Restated)
2005
NT$000
NT$000
NT$000
US$000
Shareholders' equity under R.O.C. GAAP
29,247,534
34,344,673
28,558,400
870,683
Accrual for pension cost under actuarial method
(35,039
)
(32,343
)
(29,647
)
(904
)
Net unrealized gain (losses) on
available-for-sale Securities
682,837
294,013
1,375,517
41,937
Net losses
on derivative financial instruments, including embedded derivatives in convertible bonds
(116,598
)
(31,881
)
—
—
Goodwill on investment
(356
)
2,028
149,923
4,571
Additional tax on undistributed additional tax
(1,898,214
)
(1,896,300
)
(1,698,941
)
(51,797
)
Plant capacity loss
268,671
11,106
11,474
350
Accrued compensated absences
—
—
(4,356
)
(133
)
Fixed asset impairment
—
—
901,806
27,494
Shareholders' equity under U.S. GAAP
28,148,835
32,755,058
29,264,176
892,201
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Table of Contents
Shareholders' equity under U.S. GAAP consists of the following:
As of December 31
2004
(Restated)
2005
NT$000
NT$000
US$000
Common shares
29,391,703
29,158,218
888,970
Additional paid-in capital
13,982,563
14,003,985
426,951
Accumulated deficits
(9,991,069
)
(15,272,695
)
(465,631
)
Accumulated other comprehensive income
410,477
1,533,728
46,760
Treasury stock
(1,038,616
)
(159,060
)
(4,849
)
Reserves
—
—
—
Total of shareholders' equity
32,755,058
29,264,176
892,201
Accumulated other comprehensive income consists of the following:
As of December 31
2004
2005
NT$000
NT$000
US$000
Unrealized gain (losses) on marketable securities
348,435
1,498,202
45,677
Cumulative translation adjustments
62,042
35,526
1,083
Total
410,477
1,533,728
46,760
Domestic and international components of pre-tax income (loss) are as follows:
For the year ended December 31
2003
(Restated)
2004
(Restated)
2005
NT$000
NT$000
NT$000
US$000
Domestic
(6,786,384
)
(83,898
)
(4,089,772
)
(124,688
)
International
(1,267,704
)
(357,452
)
(554,896
)
(16,918
)
Total
(8,054,088
)
(441,350
)
(4,644,668
)
(141,606
)
A reconciliation of the significant differences between the expected income tax expense
(benefit) and the income tax expense (benefit) is as follows:
For the year ended December 31
2003
(Restated)
2004
(Restated)
2005
NT$000
NT$000
NT$000
US$000
Expected income tax expense (benefit)
(2,013,522
)
(110,338
)
(1,171,962
)
(35,731
)
Additional income tax due to different tax rate
under U.S. GAAP
674,687
(587,498
)
(559,397
)
(17,055
)
Tax credit forfeited (earned)
829,546
(294,120
)
611,131
18,632
Change in valuation allowance
468,595
1,997,992
1,793,997
54,695
Net losses (gain) on long-term equity investment
317,135
43,884
(84,630
)
(2,580
)
Non-taxable/deductible net losses (gain) on
financial instruments
38,216
108,913
(331,943
)
(10,120
)
Effects of rate change
(373,681
)
(1,051,035
)
(246,630
)
(7,519
)
Others
31,908
(74,931
)
7,488
228
Income tax expense (benefit)
(27,116
)
32,867
18,054
550
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Table of Contents
Concentration of Risk
The Company designs, develops, manufactures and markets a variety of semiconductor products.
The Company's revenues are derived primarily from the sale of mask ROMs and Flash. The
Company's other products include SLC, logic products and wafers. The Company distributes its
products on a global basis but mainly to customers in Asia. The Company's largest customer,
Nintendo, and the Company's largest three customers accounted for 29.15% and 38.24% of the
Company's total net sales, respectively, for the period ended December 31, 2004. The Company's
sales are primarily denominated in currencies other than N.T. Dollars, primarily U.S. Dollars
and Japanese Yen.
Financial instruments that potentially subject the Company to significant concentrations of
credit risk consist principally of cash investments and trade accounts and notes receivable.
The Company maintains cash and cash equivalents with various financial institutions. Most of
these financial institutions are located in the R.O.C. and Company policy is designed to limit
exposure to any one institution.
Substantially all of the Company's accounts receivable are due from companies in high
technology industries located primarily in Asia. Further, as of December 31, 2004 and 2005, the
three largest accounts receivable balances amounted NT$1,010,033 and NT$1,245,117 (US$37,961),
respectively. The Company performs periodic credit evaluations of its customers' financial
condition and generally does not require collateral. Receivables generally are due within 45 to
60 days.
Valuation and Qualifying Accounts
The summary of the changes in the allowance for accounts and notes receivable, inventory and
royalty accruals was listed as follows:
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Table of Contents
At December 31
2003
2004
2005
NT$000
NT$000
NT$000
US$000
Allowance for doubtful accounts at the beginning
210,883
165,257
165,277
5,039
Bad debt expense (reversal)
(33,059
)
787
(50,712
)
(1,546
)
Bad debts written Off
(12,567
)
—
—
—
Other adjustments
—
(767
)
9,515
290
Balance at the end of the year
165,257
165,277
124,080
3,783
Allowance for inventory losses at the beginning
5,751,735
4,380,019
3,242,215
98,848
Amount expensed (reversal)
(1,185,227
)
(923,686
)
(487,070
)
(14,850
)
Write-off of inventories
(186,489
)
(211,092
)
(316,068
)
(9,636
)
Change in
consolidated entities
—
—
133,874
4,082
Other adjustments
—
(3,026
)
3,525
107
Balance at the end of the year
4,380,019
3,242,215
2,576,476
73,525
Royalty accruals at the beginning
672,604
675,457
683,918
20,851
Amount expensed
195,000
140,468
218,051
6,648
Payment made
(192,147
)
(132,007
)
(289,495
)
(8,826
)
Balance at the end of the year
675,457
683,918
612,474
18,673
29
Summarized Financial Information of Equity Investees
The following table presents summarized financial information in accordance with U.S. GAAP for
equity investees with an ownership percentage between 20-50% as of December 31, 2004 and 2005
and for the years ended December 31, 2003, 2004 and 2005:
Year ended December 31
2003
2004
2005
NT$000
NT$000
NT$000
US$000
Current assets
215,390
435,455
211,515
6,449
Non-current assets
46,820
85,088
58,102
1,771
Current liabilities
176,643
167,460
87,097
2,655
Non-current liabilities
326
18,423
1,690
52
Total shareholders' equity
85,241
334,660
180,830
5,513
Year ended December 31
2003
2004
2005
NT$000
NT$000
NT$000
US$000
Net sales
311,391
466,717
209,908
6,400
Sales less cost of sales
38,969
158,614
78,062
2,380
Net income (loss)
(284,591
)
(154,804
)
(116,445
)
(3,550
)
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30.
New Accounting Pronouncements
U.S. GAAP
In March 2004, the FASB approved the consensus reached on the Emerging Issues Task Force (EITF)
Issue No. 03-1, "The Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments." The Issue's objective is to provide guidance for identifying
other-than-temporarily impaired investments. EITF 03-1 also provides new disclosure requirements
for investments that are deemed to be temporarily impaired. In September 2004, the FASB issued a
FASB Staff Position (FSP) EITF 03-1-1 that delays the effective date of the measurement and
recognition guidance in EITF 03-1 until further notice. In November 2005, the FASB issued a FASB
Staff Position (FSP) FAS 115-1/124-1 that addresses the measurement and recognition guidance for
identifying other-than-temporarily impaired investments. This FSP also includes accounting
consideration subsequent to the recognition and requires certain disclosures about unrealized
losses that have not been recognized as other-than-temporary impairment. The disclosure
requirements of EITF 03-1 and FSP 115-1/124-1 are effective with this annual report for fiscal
2004 and 2005.
In November 2004, FASB issued FASB Statement No. 151, which amended the guidance in ARB No. 43,
Chapter 4, "Inventory Pricing," to clarify the accounting for abnormal amounts of idle facility
expense, freight, handling costs, and wasted material (spoilage). SFAS No. 151 requires that
those items be recognized as current-period charges and requires the allocation of fixed
production overheads to inventory based on the normal capacity of the production facilities. The
guidance is effective for inventory costs incurred during fiscal years beginning after June 15,
2005. The Company expected to adopt the guidance on January 1, 2006. The adoption of this
Statement is expected to increase cost of goods sold and reduce inventory balance on a US GAAP
basis.
On December 16, 2004, the Financial Accounting Standards Board (FASB) issued FASB Statement No.
123 (revised 2004), Share-Based Payment, which is a revision of FASB Statement No. 123,
Accounting for Stock-Based Compensation. Statement 123(R) supersedes APB Opinion No. 25,
Accounting for Stock Issued to Employees, and amends FASB Statement No. 95, Statement of Cash
Flows. Generally, the approach in Statement 123(R) is similar to the approach described in
Statement 123. However, Statement 123(R) requires all share-based payments to employees,
including grants of employee stock options, to be recognized in the income statement based on
their fair values. Pro forma disclosure is no longer an alternative.
Statement 123(R) originally required adoption no later than July 1, 2005. In April 2005, the
Securities and Exchange Commission ("SEC") issued a release that amends the compliance dates for
Statement 123(R). Under the SEC's new rule, the Company will be required to apply Statement
123(R) as of January 1, 2006. Early adoption will be permitted in periods in which financial
statements have not yet been issued. We expect to adopt Statement 123(R) on January 1, 2006.
Statement 123(R) permits public companies to adopt its requirements using one of two methods:
A "modified prospective" method in which compensation cost is recognized beginning with the
effective date (a) based on the requirements of Statement 123(R) for all share-based payments
granted after the effective date and (b) based on the requirements of Statement 123 for all
awards granted to employees prior to the effective date of Statement 123(R) that remain unvested
on the effective date.
A "modified retrospective" method which includes the requirements of the modified prospective
method described above, but also permits entities to restate, based on the amounts previously
recognized under Statement 123 for purposes of pro forma disclosures, either (a) all prior
periods presented or (b) prior interim periods of the year of adoption.
The company plans to adopt Statement 123 using the modified-prospective method.
As permitted by Statement 123, the company currently accounts for share-based payments to
employees using Opinion 25's intrinsic value method and, as such, generally recognizes no
compensation cost for employee stock options. Accordingly, the adoption of Statement 123(R)'s
fair value method will have a significant impact on our result of operations, although it will
have no impact on our overall financial position. The impact of adoption of Statement 123(R)
cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had we adopted Statement 123(R) in prior periods,
the impact of that standard would have approximated the impact of Statement 123 as described in
the disclosure of pro forma net income and earnings per share in Note 28(j) to our consolidated
financial statements. Statement 123(R) also requires the benefits of tax deductions in excess of
recognized compensation cost to be reported as a financing cash flow, rather than as an
operating cash flow as required under current literature. This requirement will reduce net
operating cash flows and increase net financing cash flows in periods after adoption. While the
company cannot estimate what those amounts will be in the future (because they depend on, among
other things, when employees exercise stock options), the amount of operating cash flows
recognized in prior periods for such excess tax deductions were $-, $-, and $- in 2005, 2004 and
2003, respectively.
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In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets, an amendment
of APB Opinion No.29." APB Opinion No.29, "Accounting for Nonmonetary Transactions," is based on
the principle that exchanges of nonmonetary assets should be measured based on the fair value of
the assets exchanged. SFAS No. 153 amends APB Opinion No. 29, eliminating the exception to fair
value accounting for nonmonetary exchanges of similar productive assets and replaces it with a
general exception to fair value accounting for nonmonetary exchanges that do not have commercial
substance if the future cash flows of the entity are expected to change significantly as a
result of the exchange. The statement is effective for non-monetary asset exchanges occurring in
fiscal periods beginning after June 15, 2005. The Company does not expect this statement to have
a material impact on the financial condition or results of operation.
In May 2005, the FASB issued SFAS No. 154 "Accounting Changes and Error Corrections". SFAS No.
154 replaces APB Opinion No. 20 "Accounting Change", and SFAS No. 3 "Reporting Accounting
Changes in Interim Financial Statements" and changes the requirements for the accounting for and
reporting of a change in accounting principle. SFAS No. 154 also applies to all voluntary
changes in accounting principle and changes required by an accounting pronouncement in the
unusual instance that the pronouncement does not include specific transition provision. The
statement also defines "retrospective application" and "restatement". The retrospective
application of a change in accounting principles is limited to the direct effects of the
changes. The statement should be affective for accounting changes made in fiscal years beginning
after December 15, 2005. The Company does not expect this statement to have a material impact on
the financial condition or results of operation.
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In February 2006, the FASB issued SFAS No. 155 "Accounting for Certain Hybrid Financial
Instruments –
An Amendment of SFAS No. 133 and 140". The Statement permits fair value remeasurement for any
hybrid financial instrument that contains an embedded derivative that otherwise would require
bifurcation; establish a requirement to evaluate interests in securitized financial assets and
allow a qualifying special-purpose entity from holding a derivative financial instrument that
pertains to a beneficial interest other than another derivative financial instrument. The
statement is effective for all financial instruments acquired or issued after the beginning of
an entity's first fiscal year that begins after September 15, 2006. The Company is currently
evaluating the potential impact of this standard on its financial position and the result of
operations, but does not believe the adoption of SFAS No. 155 will have a material effect on the
result of operations or financial position of the Company.
R.O.C. GAAP
In December 25, 2003, the R.O.C. Accounting Research and Development Foundation ("ARDF") issued
Statement of Financial Accounting Standards No. 34, "Accounting for Financial Instruments",
which is effective for financial statements with fiscal years ending on or after December 31,
2006. Early adoption of this statement is not allowed. SFAS No. 34 requires that all financial
instruments, excluding certain financial instruments specified in this statement, as either
trading, available-for-sale or held-to-maturity. Debt securities owned with positive intent and
ability to hold to maturity are classified as held-to-maturity securities and reported at
amortized cost. Debt and equity securities that are purchased and traded for short-term profit
are classified as trading securities and reported at fair value, with unrealized holding gains
and losses reported as part of net income. Debt and equity securities not classified as either
held-to-maturity or trading are classified as available-for-sale securities, which should be
reported at fair value, with unrealized gains and losses reported as a separate component of
stockholders' equity. In addition, all derivatives are required to be reported at fair value.
The Company is currently evaluating the effect of the adoption of this statement.
In July 1, 2004, the R.O.C. ARDF issued SFAS No. 35, "Accounting for Impairment of Assets",
which is effective for financial statements with fiscal years ending on or after December 31,
2005. This statement requires that impairment loss should be recognized whenever events or
changes in circumstance indicate the carrying amount of an asset may be lesser than its
recoverable amount. The Company is currently evaluating the effect of the adoption of this
statement.
In December 9, 2004, the R.O.C. ARDF issued the revision for SFAS No. 5(R), "Accounting for
Long-Term Equity Investment", which is effective for financial statements with fiscal years
beginning on or after January 1, 2005. This revision of the guidance requires that operating
losses of investees evaluated under equity method be allocated between controlling and
non-controlling interest until those losses exceed the non-controlling interest's investment. In
that event, the excess of any further losses are charged to the
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controlling interest except to
the extent that the minority interest has a binding obligation to, and is able to undertake the
losses. The Company does not expect SFAS No. 5(R) have a material impact on the financial
condition or results of operation.
In December 9, 2004, the R.O.C. ARDF issued the revision for SFAS No. 7(R), "Consolidated
Financial Statements", which is effective for financial statements with fiscal years beginning
on or after January 1, 2005. This revision of the guidance requires the Company to consolidate
all investees under the control of the Company. Control is not only presumed when the parent
company owns over 50% of voting rights of the investee but also evidenced by control under
certain situations specified in SFAS No. 7(R). In addition, the threshold for the determination
of whether to consolidate an investee was revoked. Before the adoption of SFAS No. 7(R), the
Company was not required to file consolidated financial statements to SFC in Taiwan, as none of
the investees of the Company pass the threshold for consolidation. However, after the adoption
of this revised statement, the Company will be required to file the semi-annual consolidated
financial statements to SFC in Taiwan.
In June 2005, the R.O.C. ARDF issued SFAS No. 36 "Financial Instruments: Disclosure and
Presentation", which is also required to be applied by the Company on January 1, 2006. SFAS No.
36 will require the Company for the presentation of financial instruments and identifies the
information that should be disclosed about them. The presentation requirements apply to the
classification of financial instruments, from the perspective of the issuer, into financial
assets, financial liabilities and equity instruments; the classification of related interest,
dividends, losses and gains; and the circumstances in which financial assets and financial
liabilities should be offset. The guidance requires disclosure of information about factors that
affect the amount, timing and certainty of an entity's future cash flows relating to financial
instruments and the accounting policies applied to those instruments. The guidance also requires
disclosure of information about the nature and extent of an entity's use of financial
instruments, the business purposes they serve, the risks associated with them, and management's
policies for controlling those risks. SFAS No. 36 complements the principles for recognizing
and measuring financial assets and financial liabilities in SFAS No. 34 "Accounting for
Financial Instruments".
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APPENDIX A
GLOSSARY OF TECHNICAL TERMS
AND circuit
A circuit which has two or more
input signal gates and which
delivers an output only if and when
every input signal gate is energized
simultaneously.
ASIC
Application Specific Integrated
Circuit. A custom designed
integrated circuit that performs
specific functions which would
otherwise require a number of
commodity integrated circuits to
perform. The use of an ASIC in place
of a conventional integrated circuit
reduces product size and cost and
also improves reliability.
ASSP
Application Specific Standard
Product. A standard integrated
circuit designed for a specific
product or application, such as a
VCR or microwave.
ATA
AT attachment, or Advanced
Technology Attachment. The
specification for an Integrated
Device Electronics interface which
is a type of hardware interface
widely used to connect various
peripheral devices to a personal
computer.
BIOS
Basic Input Output System. This
software controls the basic power-up
functioning of a computer system.
CD-ROM
Compact Disc used for data storage
on a read-only basis.
CD-R/W
CD-recordable and rewritable.
Originally called CD-erasable",
CD-RW can be erased and new
information can be re-recorded onto
the same physical location on the
disc by a CD-RW recorder.
DAM
Digital Answering Machine.
Die
A piece of a semiconductor wafer
containing the circuitry of a single
chip.
DINOR
Divided bit-line NOR
Mitsubishi-patented Flash
architecture used in its Flash
memory product line. DINOR offers
the high-speed random-access
capability of the NOR architecture,
without NOR's over-erase problems or
the need to set all bits to zero
before erase. It also offers the
high-density and single power-supply
characteristics of the NAND Flash
architecture. Programming occurs at
a lower threshold voltage than erase
in the DINOR Flash architecture, the
opposite of the NOR architecture.
DRAM
Dynamic Random Access Memory. A type
of volatile memory product that is
used in electronic systems to store
data and program instructions. It is
the most common type of RAM and must
be refreshed with electricity
thousands of times per second or
else it will fade away.
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DSP
Digital Signal Processor. A type of
integrated circuit that processes
and manipulates digital information
after it has been converted from an
analog source. DSPs are parallel
processors used for high complexity,
high-speed real-time computations in
a wide variety of applications,
including digital cell telephone
systems and data compression
systems. A device which incorporates
Flash memory on which other devices
rely for access to a computer
Embedded Flash controller
system. A disk controller, for
example, controls access to one or
more disk drives, managing physical
and logical access to the drive or
drives.
EPROM
Erasable Programmable ROM.
Nonvolatile memory which can be
reprogrammed by removing the device
from the system, erasing the data
through exposure to ultraviolet
light and reprogramming and
reinstalling the device in the
system.
EEPROM
Electrically Erasable Programmable
ROM. Similar to EPROM, except that
it can be erased electronically
before being reprogrammed.
Ethernet
A type of LAN.
Flash Memory
A type of non-volatile memory, similar to an EEPROM in
tint it is erasable and reprogrammable. The difference
is that it can be erased and reprogrammed in the
electronic system into which the Flash memory chip has
been incorporated.
GPS
Global Positioning Satellite System. A network of
satellites that provides precise location determination
to receivers.
GSM
Global System for Mobile Communications. A standard for
digital mobile telephone networks.
GUI
Graphics User Interface. An interface which allows
operation of a computer by manipulating graphical icons
and windows (usually by pointing and clicking a mouse)
rather than using text commands.
HDD
Hard Disk Drive. An electro-mechanical device that
records data onto spinning rigid magnetic disks in
discrete data blocks each of which can be randomly
accessed. The primary mass storage device of a
computer.
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Integrated Circuit
A combination of two or more transistors on a base
material, usually silicon. All semiconductor chips,
including memory chips and logic chips, are just very
complicated integrated circuits with thousands of
transistors.
LAN
Local Area Network. A short distance network designed
to connect computers within a localized environment to
enable the sharing of databases and other
communications.
LCD
Liquid Crystal Display. A type of display that uses a
liquid compound with a polar molecular structure,
sandwiched between two transparent electrodes. When an
electric field is applied, the molecules align with the
light passing through it. A polarized filter laminated
over the electrodes can selectively "turn on" a cell or
a pixel, containing the liquid crystal material,
turning it dark.
Logic Product
A product that contains digital integrated circuits
that process, rather than store, information.
Mask
A piece of glass on which an integrated circuit's
circuitry design is laid out. Integrated circuits may
require up to 20 different layers of design each with
its own Mask. In the integrated circuit production
process a light shines through the Mask leaving an
image of the design on the wafer.
Mb
Mega Bit. One million (or 1,048,576) bits as a unit of
data size or memory capacity.
Memory
A group of integrated circuits that a computer uses to
store data and programs, such as ROM, RAM, DRAM and
SRAM.
MHz
Megahertz. One million cycles per second. Typically
measures the clock speed of microprocessors.
Micron
1/25,000 of an inch. Circuitry on an integrated circuit
typically follows lines that are less than one micron
wide.
Motherboard
The main piece of circuitry inside a personal computer.
MP3
Motion Picture Experts Group-I, Audio Layer 3. A
digital data compression and storage technology for
music.
NAND circuit
Not AND. A logic circuit whose output signal is a
logical 1 if any of its input signals is a logical 0
and the output signal of which is a logical 0 if all of
its input signals are logical 1s.
Nonvolatile memory
Memory products which retain their data content without
the need for constant power supply.
NOR circuit
Not OR. A logic circuit in which an output signal appears
only when a signal is absent from all of its input gates.
OR circuit
A logic circuit in which the output signal is a logical 1
if any one or more of its input signals is a logical 1.
PAC
Paired Array Contact.
PCMCIA cards
Personal computer cards, standardized by Personal Computer
Memory Card International of San Jose, California or
credit card sized, removable modules for portable
computers.
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PDA
Personal Digital Assistant. A hand-held multifunctional
minicomputer used for, among other things, word
processing, name card retention and appointment calendars.
PHS
Personal Hand Set. A lower capability but less expensive
mobile telephone communications system currently achieving
substantial consumer acceptance in Japan.
PROM
Programmable Read-Only Memory. Similar to ROM in that once
programmed it can be "read only" and not changed.
Programmable ROM enables customers to program the
integrated circuits themselves, rather than it being
programmed when it is manufactured. The programming is
possible because of a series of fuses in the circuitry
that can be selectively blown to create a unique type of
data.
RAM
Random Access Memory. A type of volatile memory, forming
the main memory of a computer where applications and files
are run.
ROM
Read-Only Memory. Memory that is programmed by the
manufacturer and cannot be changed. Typically, ROM is used
to provide start-up data when a computer is first turned
on.
Semiconductor
A material with electrical conducting properties in
between those of metals and insulators. (Metals always
conduct and insulators never conduct, but semiconductors
sometimes conduct.) Essentially, semiconductors transmit
electricity only under certain circumstances, such as when
given a positive or electric charge. Therefore, a
semiconductor's ability to conduct can be turned on or off
by manipulating those charges and this allows the
semiconductor to act as an electric switch. The most
common semiconductor material is silicon, used as the base
of most semiconductor chips today because it is relatively
inexpensive and easy to create.
SMIF Box System
Standard Mechanical Interface Box System. A system which
links process microenvironments so that a wafer is never
exposed to room air. With a SMIF Box System, traditional
environmental conditions are replaced with a
microenvironment that can be pressurized with air or
nitrogen to keep out room air.
SRAM
Static Random Access Memory. A type of volatile memory
product that is used in electronic systems to store data
and program instructions. Unlike the more common DRAM, it
does not need to be refreshed.
STB
Set top box. A device to differentiate signals from
television and multimedia service providers.
SXGA
Super Extended Graphics Array. An enhanced set of Video
Graphics Array standards that is capable of displaying an
image ranging from 768 x 1024 pixels to 1024 x 1280
pixels.
Transistor
An individual circuit that can amplify or switch electric
current. This is the building block of all integrated
circuits and semiconductors.
VCD
Video Compact Disk.
Volatile memory
Memory products which lose their data content when the
power supply is switched off.
Wafer
Thin, round, flat piece of silicon that is the base of
most integrated circuits.
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Signatures
The registrant hereby certifies that it meets all the requirements for filing on Form 20-F and
that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
MACRONIX INTERNATIONAL CO., LTD.
(Registrant)
Date:
July 17, 2006
By:
/s/
Miin Wu
Name: Miin Wu
Title: President
Table of Contents
EXHIBIT INDEX
Exhibit
Number
Description
2b.1
The Company hereby agrees to furnish to the Securities and
Exchange Commission, upon request, copies of instruments defining
the rights of holders of long-term debt of the Company and its
subsidiaries.
3.1
Articles of Incorporation of the Company (English translation)*.
8.1
List of subsidiaries of the Company*.
12.1
Certifications of our President pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*
12.2
Certifications of our Associate Vice President, Finance
Department, pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.*
13.1
Certifications of our President pursuant to 18 U.S.C. Section 1350
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.*
13.2
Certifications of our Associate Vice President, Finance
Department, pursuant to 18 U.S.C. Section 1350 as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.*
14.1
Amended and Restated Deposit Agreement, dated as of February 7,
2002, among the Company, The Bank of New York, as depositary, and
Holders from time to time of American Depositary Receipts issued
thereunder, including the form of American Depositary Receipt(1).
14.2
Indenture, dated as of February 10, 2003, by and between the
Company and The Bank of New York, as trustee(2).
14.3
Land Lease Agreement, dated as of March 3, 1990, by and between
the Company and the Hsinchu Science-Based Industrial Park
Administration, in relation to Office Building and Fab I Site(3).
14.4
Land Lease Agreement, dated as of August 1, 1994, by and between
the Company and the Hsinchu Science-Based Industrial Park
Administration, in relation to Auxiliary Vehicular Facilities(4).
14.5
Land Lease Agreement, dated as of January 1, 1994, by and between
the Company and the Hsinchu Science-Based Industrial Park
Administration, in relation to Back-End Operation Plant(5).
14.6
Land Lease Agreement, dated as of June 1, 1995, by and between the
Company and the Hsinchu Science-Based Industrial Park
Administration, in relation to Fab II and Fab III Site (6).
14.7
Deposit Agreement, dated as of April 5, 2004, among the Company,
Citibank, N.A., as depositary, and Holders from time to time of
Global Depositary Receipts issued thereunder, including the form
of Global Depositary Receipt(8).
Table of Contents
Exhibit
Number
Description
*
Filed with this Form 20-F.
(1)
Incorporated by reference to Exhibit 3.1 to the Company's Form 20-F filed with the Commission on June 29, 2004.
(2)
Incorporated by reference to Exhibit 3(a) to the Company's Registration Statement on Form F-6 (File No. 333-8602) filed with the Commission on February 7, 2002.
(3)
Incorporated by reference to Exhibit 10.2 to the Company's Form 20-F filed with the Commission on July 1, 2003.
(4)
Incorporated by reference to Exhibit 10.6 to the Company's Registration Statement on Form F-1 (File No. 333-1870) filed with the Commission on March 1, 1996.
(5)
Incorporated by reference to Exhibit 10.7 to the Company's Registration Statement on Form F-1 (File No. 333-1870) filed with the Commission on March 1, 1996.
(6)
Incorporated by reference to Exhibit 10.8 to the Company's Registration Statement on Form F-1 (File No. 333-1870) filed with the Commission on March 1, 1996.
(7)
Incorporated by reference to Exhibit 10.9 to the Company's Registration Statement on Form F-1 (File No. 333-1870) filed with the Commission on March 1, 1996.
(8)
Incorporated by reference to Exhibit 14.9 to the Company's Form 20-F filed with the Commission on June 29, 2004.
100