##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 20-F
 
 (Mark One)
 o
    
    Registration statement pursuant to Section 12(b) or 12(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, 2008.
 or
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 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 000-30702
 
 Siliconware Precision Industries Co., Ltd.
 (Exact Name of Registrant as Specified in Its Charter)
 Taiwan, Republic of China    No. 123, Sec. 3, Da Fong Road, Tantzu, Taichung, Taiwan, R.O.C.
 Eva Chen, telephone: +886 (4) 2534-1525, fax: +886 (4) 2534-6278,
No. 123, Sec. 3, Da Fong Road, Tantzu, Taichung, Taiwan, R.O.C.
 
 Title of Each Class
    
    Name of Each Exchange On Which RegisteredCommon Shares, par value NT$10 per share
    
    The NASDAQ Stock Market LLC(The NASDAQ Global Select Market)
 None
 None
 
  3,152,589,871 Common Shares were outstanding as of December 31, 2008
  þ o
  o þ
  þ o
  o o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
  o
 o þ
 o þ
  o þ




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##### 



SILICONWARE PRECISION INDUSTRIES CO., LTD.
FORM 20-F ANNUAL REPORT
FISCAL YEAR ENDED DECEMBER 31, 2008
 TABLE OF CONTENTS
 PageForward Looking Statements in This Annual Report May Not Be Accurate
    
    
    3PART I
    
    
    3Item 1. Identity of Directors, Senior Management and Advisers
    
    
    3Item 2. Offer Statistics and Expected Timetable
    
    
    3Item 3. Key Information
    
    
    4Item 4. Information on the Company
    
    
    20Item 5. Operating and Financial Review and Prospects
    
    
    32Item 6. Directors, Senior Management and Employees
    
    
    53Item 7. Major Shareholders and Related Party Transactions
    
    
    56Item 8. Financial Information
    
    
    58Item 9. The Offer and Listing
    
    
    59Item 10. Additional Information
    
    
    61Item 11. Quantitative and Qualitative Disclosures About Market Risk
    
    
    74Item 12. Description of Securities Other Than Equity Securities
    
    
    75PART II
    
    
    75Item 13. Defaults, Dividend Arrearages and Delinquencies
    
    
    75Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    
    75Item 15. Controls and Procedures
    
    
    75Item 16A. Audit Committee Financial Expert
    
    
    76Item 16B. Code of Ethics
    
    
    76Item 16C. Principal Accountant Fees and Services
    
    
    76Item 16D. Exemptions from the Listing Standards for Audit Committees
    
    
    77Item 16E. Purchase of Equity Securities by the Issuer and Affiliated Purchasers
    
    
    77Item 16F. Change in Registrants Certifying Accountant
    
    
    77Item 16G. Corporate Governance
    
    
    77PART III
    
    
    79Item 17. Financial Statements
    
    
    79Item 18. Financial Statements
    
    
    79Item 19. Exhibit Index
    
    
    80Exhibit 1.1Exhibit 8.1Exhibit 12.1Exhibit 12.2Exhibit 13.1Exhibit 13.2
   2




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##### Table of Contents



Forward-Looking Statements in This Annual Report May Not Be Accurate
  
    
    the intensely competitive semiconductor and personal computer industries and
markets;
 
    
    risks associated with international business activities;
 
    
    our dependence on key personnel;
 
    
    natural disasters, such as earthquakes and droughts, which are beyond our control;
 
    
    general economic and political conditions, including those related to the
semiconductor and personal computer industries;
 
    
    possible disruptions in commercial activities caused by human-induced disasters,
including terrorist activity and armed conflict, and outbreaks of contagious diseases,
such as avian influenza which 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, or the SEC;
and
 
    
    those other risks identified in Item 3. Key InformationD. Risk Factors of this
annual report.
  
 PART I
 
 Item 1. Identity of Directors, Senior Management and Advisers
  
 Item 2. Offer Statistics and Expected Timetable
   3




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##### Table of Contents



Item 3. Key Information
 A. Selected Financial Data
  Years Ended December 31,2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    US$(6)(in millions, except earnings or dividends per share and per ADS data)Income Statement Data:ROC GAAPNet operating revenues
    
    
    35,252
    
    
    
    43,488
    
    
    
    57,126
    
    
    
    66,177
    
    
    
    62,403
    
    
    
    1,904.8Cost of goods sold
    
    
    (28,871
    )
    
    
    (33,960
    )
    
    
    (41,894
    )
    
    
    (46,759
    )
    
    
    (49,456
    )
    
    
    (1,509.6
    )Gross profit
    
    
    6,381
    
    
    
    9,528
    
    
    
    15,232
    
    
    
    19,418
    
    
    
    12,947
    
    
    
    395.2Operating expenses
    
    
    (2,048
    )
    
    
    (2,279
    )
    
    
    (2,989
    )
    
    
    (3,224
    )
    
    
    (4,003
    )
    
    
    (122.2
    )Operating income
    
    
    4,333
    
    
    
    7,249
    
    
    
    12,243
    
    
    
    16,194
    
    
    
    8,944
    
    
    
    273.0Equity investment income
(loss)(1)
    
    
    308
    
    
    
    448
    
    
    
    1,154
    
    
    
    246
    
    
    
    
    
    
    
    Other non-operating income(1)
    
    
    732
    
    
    
    853
    
    
    
    1,099
    
    
    
    3,381
    
    
    
    776
    
    
    
    23.7Other non-operating expenses
    
    
    (1,548
    )
    
    
    (941
    )
    
    
    (218
    )
    
    
    (193
    )
    
    
    (3,196
    )
    
    
    (97.6
    )Income before income tax(1)
    
    
    3,825
    
    
    
    7,609
    
    
    
    14,278
    
    
    
    19,628
    
    
    
    6,524
    
    
    
    199.1Income tax benefit (expense)
    
    
    457
    
    
    
    (16
    )
    
    
    (949
    )
    
    
    (2,139
    )
    
    
    (210
    )
    
    
    (6.4
    )Income from continuing operations
    
    
    4,282
    
    
    
    7,593
    
    
    
    13,329
    
    
    
    17,489
    
    
    
    6,314
    
    
    
    192.7Cumulative effects of changes in
accounting principles
    
    
    
    
    
    
    651
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income(1)(2)
    
    
    4,282
    
    
    
    8,244
    
    
    
    13,329
    
    
    
    17,489
    
    
    
    6,314
    
    
    
    192.7Earnings per share(3)Basic
    
    
    1.65
    
    
    
    3.09
    
    
    
    4.63
    
    
    
    5.66
    
    
    
    2.03
    
    
    
    0.06Diluted
    
    
    1.29
    
    
    
    2.91
    
    
    
    4.36
    
    
    
    5.63
    
    
    
    2.01
    
    
    
    0.06Shares used in per share calculation
(average, as adjusted)(2)Basic
    
    
    2,594
    
    
    
    2,662
    
    
    
    2,873
    
    
    
    3,092
    
    
    
    3,115
    
    
    
    3,115Diluted
    
    
    3,049
    
    
    
    3,102
    
    
    
    3,066
    
    
    
    3,115
    
    
    
    3,139
    
    
    
    3,139Earnings (loss) per ADS(3)Basic
    
    
    8.25
    
    
    
    15.45
    
    
    
    23.15
    
    
    
    28.30
    
    
    
    10.15
    
    
    
    0.30Diluted
    
    
    6.45
    
    
    
    14.55
    
    
    
    21.80
    
    
    
    28.15
    
    
    
    10.05
    
    
    
    0.30Dividends per share(4)
    
    
    1.35
    
    
    
    1.55
    
    
    
    2.62
    
    
    
    3.55
    
    
    
    4.60
    
    
    
    0.14ADSs used in per ADS calculation
(average, as adjusted)(3)Basic
    
    
    519
    
    
    
    532
    
    
    
    575
    
    
    
    618
    
    
    
    623
    
    
    
    623Diluted
    
    
    610
    
    
    
    620
    
    
    
    613
    
    
    
    623
    
    
    
    628
    
    
    
    628US GAAPNet operating revenues
    
    
    35,252
    
    
    
    43,488
    
    
    
    57,126
    
    
    
    66,177
    
    
    
    62,403
    
    
    
    1,904.9Operating Income
    
    
    3,442
    
    
    
    6,004
    
    
    
    10,293
    
    
    
    12,552
    
    
    
    7,360
    
    
    
    224.7Income from continuing operations
    
    
    3,671
    
    
    
    3,971
    
    
    
    8,413
    
    
    
    13,099
    
    
    
    4,394
    
    
    
    134.1Net income
    
    
    3,671
    
    
    
    3,971
    
    
    
    8,413
    
    
    
    13,099
    
    
    
    4,394
    
    
    
    134.1Earnings (loss) per share(5)Basic
    
    
    1.47
    
    
    
    1.54
    
    
    
    3.02
    
    
    
    4.33
    
    
    
    1.42
    
    
    
    0.04Diluted
    
    
    1.13
    
    
    
    1.53
    
    
    
    3.01
    
    
    
    4.32
    
    
    
    1.42
    
    
    
    0.04Shares used in per share calculation
(average, as adjusted)(5)Basic
    
    
    2,513
    
    
    
    2,570
    
    
    
    2,783
    
    
    
    3,026
    
    
    
    3,089
    
    
    
    3,089Diluted
    
    
    2,734
    
    
    
    2,592
    
    
    
    2,798
    
    
    
    3,032
    
    
    
    3,103
    
    
    
    3,103Earnings (loss) per ADSBasic
    
    
    7.35
    
    
    
    7.70
    
    
    
    15.10
    
    
    
    21.65
    
    
    
    7.10
    
    
    
    0.22Diluted
    
    
    5.65
    
    
    
    7.65
    
    
    
    15.05
    
    
    
    21.60
    
    
    
    7.10
    
    
    
    0.22ADSs used in per ADS calculation
(average, as adjusted)(5)Basic
    
    
    503
    
    
    
    514
    
    
    
    557
    
    
    
    605
    
    
    
    618
    
    
    
    618Diluted
    
    
    547
    
    
    
    518
    
    
    
    560
    
    
    
    606
    
    
    
    621
    
    
    
    621
  4




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##### Table of Contents



Years Ended December 31,2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    US$(6)(in millions, except earnings or dividends per share and per ADS data)Other Data:ROC GAAPCapital expenditures
    
    
    9,785
    
    
    
    8,245
    
    
    
    11,039
    
    
    
    12,151
    
    
    
    10,048
    
    
    
    306.7Depreciation and amortization
    
    
    6,153
    
    
    
    6,572
    
    
    
    7,294
    
    
    
    8,169
    
    
    
    9,432
    
    
    
    287.9
 As of December 31,2004
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    US$(6)(in millions, except earnings or dividends per share and per ADS data)Balance Sheet Data:ROC GAAPCash and cash equivalents
    
    
    10,922
    
    
    
    12,341
    
    
    
    14,731
    
    
    
    22,625
    
    
    
    18,841
    
    
    
    575.1Working capital
    
    
    13,492
    
    
    
    15,475
    
    
    
    18,741
    
    
    
    26,363
    
    
    
    18,481
    
    
    
    564.1Total assets
    
    
    58,962
    
    
    
    67,175
    
    
    
    78,991
    
    
    
    85,773
    
    
    
    73,380
    
    
    
    2,239.9Short-term debt and
current portion of
long-term debt
    
    
    4,013
    
    
    
    1,885
    
    
    
    446
    
    
    
    529
    
    
    
    1,404
    
    
    
    42.9Long-term debt
    
    
    16,639
    
    
    
    14,644
    
    
    
    5,801
    
    
    
    2,996
    
    
    
    2,248
    
    
    
    68.6Total liabilities
    
    
    25,469
    
    
    
    26,350
    
    
    
    16,055
    
    
    
    16,865
    
    
    
    14,066
    
    
    
    429.4Total stockholders equity
    
    
    33,493
    
    
    
    40,825
    
    
    
    62,936
    
    
    
    68,908
    
    
    
    59,314
    
    
    
    1,810.6US GAAPTotal assets
    
    
    65,118
    
    
    
    81,167
    
    
    
    83,770
    
    
    
    90,836
    
    
    
    78,365
    
    
    
    2,392.1Total liabilities
    
    
    26,020
    
    
    
    29,776
    
    
    
    18,911
    
    
    
    19,140
    
    
    
    14,448
    
    
    
    441.0Total stockholders equity
    
    
    39,098
    
    
    
    51,391
    
    
    
    64,859
    
    
    
    71,696
    
    
    
    63,917
    
    
    
    1,951.1
 
 (1)
    
    Prior to January 1, 2005, the R.O.C. Securities and Futures Bureau allowed us to delay our
recognition of investment income or loss in certain investee companies accounted for under the
equity method until the following accounting year. In addition, in 2004, we delayed the
recognition of investment income of NT$668 million, in relation to the financial results of
ChipMOS, until 2004 and 2005, respectively, and recorded the above-mentioned amount of NT$668
million as cumulative effects of changes in accounting principles in 2005. From January 1,
2005, we adopted R.O.C. Statement of Financial Accounting Standards No. 5, Accounting for
Long-term Equity Investment, pursuant to which we ceased to defer the recognition of
investment income or loss of investees accounted for under the equity method until the
subsequent year, and recognized investment income or loss from all investees accounted for
under the equity method based on investees audited financial statements for the same periods.
We recognized investment income of NT$433 million and NT$1,125 million for the years ended
December 31, 2005 and 2006, respectively, and NT$246 million for the period between January 1,
2007 and March 27, 2007 from ChipMOSs financial results. In 2005, 2006 and 2007, our
investment incomes under US GAAP from ChipMOS were NT$469 million, NT$1,045 million and NT$253
million, respectively.Pursuant to a Share Purchase and Subscription Agreement entered into among us, ChipMOS
Technologies (Bermuda) Ltd., or ChipMOS Bermuda and ChipMOS, on March 27, 2007, we sold, and
ChipMOS Bermuda and ChipMOS purchased, all of the common shares of ChipMOS, at par value NT$10
per share, owned by us for a total cash consideration of US$191,147,464. In addition, we
subscribed for 12,174,998 newly issued common shares of ChipMOS Bermuda, at par value US$0.01
per share, for an aggregate consideration of US$76,458,987, representing a purchase price of
US$6.28 per common share of ChipMOS Bermuda. Upon the completion of the transaction, we owned
14.7% of ChipMOS Bermuda. From the date of the completion of the sale and purchase, we are
required under both R.O.C. GAAP and US GAAP to recognize our ownership in ChipMOS Bermuda as
available-for-sale financial assets and evaluate their fair market value on a quarterly basis
(under R.O.C. GAAP) and on an annual basis (under US GAAP) and reflect any difference in
evaluation from the previous quarter as an addition in or a deduction from unrealized gain or
loss on available-for-sale financial assets.We also experienced a delay in recognition of investment income in Double Win Enterprise
Co., Ltd., or Double Win, in 2004, and recognized their financial results in the subsequent
year. Our investment income (loss) from Double Win for the aforementioned years was not
material. Under US GAAP, there is no provision that allows us to delay recognition of financial
results of ChipMOS or any other investee accounted for under the equity method.  5




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(2)
    
    We did not have minority interest in 2004, 2005, 2006, 2007 and 2008. Therefore, no such
information is presented separately in this table.(3)
    
    Retroactively adjusted for all subsequent stock dividends and employee share bonuses.(4)
    
    Adjusted to reflect 187,655,305 shares, 267,794,338 shares, 93,876,060 shares and 77,892,337
shares distributed as stock dividends and employee stock bonuses in 2005, 2006, 2007 and 2008,
respectively, with respect to the earnings of 2004, 2005, 2006 and 2007.(5)
    
    Retroactively adjusted for all subsequent stock dividends only.(6)
    
    Amounts translated for convenience at the Federal Reserve Bank of New York noon buying
exchange rate of NT$32.76 to US$1.00 on December 31, 2008.  Currency Translations and Exchange Rates
  Year Ended December 31,
    
    Average(1)
    
    
    High
    
    
    Low
    
    
    At Period End2004
    
    
    33.27
    
    
    
    34.16
    
    
    
    31.74
    
    
    
    31.742005
    
    
    32.16
    
    
    
    33.77
    
    
    
    30.65
    
    
    
    32.802006
    
    
    32.51
    
    
    
    33.31
    
    
    
    31.28
    
    
    
    32.592007
    
    
    32.85
    
    
    
    33.41
    
    
    
    32.26
    
    
    
    32.432008
    
    
    31.51
    
    
    
    33.55
    
    
    
    29.99
    
    
    
    32.76October
    
    
    32.70
    
    
    
    33.50
    
    
    
    32.14
    
    
    
    32.97November
    
    
    33.10
    
    
    
    33.42
    
    
    
    32.77
    
    
    
    33.29December
    
    
    33.11
    
    
    
    33.55
    
    
    
    32.45
    
    
    
    32.762009 (through May 8, 2009)
    
    
    33.83
    
    
    
    35.21
    
    
    
    32.82
    
    
    
    33.01January
    
    
    33.37
    
    
    
    33.70
    
    
    
    32.82
    
    
    
    33.70February
    
    
    34.24
    
    
    
    35.00
    
    
    
    33.61
    
    
    
    35.00March
    
    
    34.30
    
    
    
    35.21
    
    
    
    33.75
    
    
    
    33.87April
    
    
    33.64
    
    
    
    33.88
    
    
    
    33.05
    
    
    
    33.06May (through May 8, 2009)
    
    
    33.07
    
    
    
    33.14
    
    
    
    32.99
    
    
    
    33.01
 
 Source: Federal Reserve Statistical Release, Board of Governors of the Federal Reserve System.(1)
    
    Annual averages are calculated using the average of the exchange rates on the last day of
each month during the period. Monthly averages are calculated using the average of the daily
rates during the relevant period. B. Capitalization and Indebtedness
  C. Reasons for the Offer and Use of Proceeds
   6




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D. Risk Factors
  Risks Relating to Our Financial Condition and Business
 The current global recession and credit crisis may cause significant disruptions to our major
customers businesses as well as to their ability to access sources of liquidity. Demand for our
products has been, and will continue to be, adversely affected by overall macroeconomic conditions
   The cyclical nature of the semiconductor industry makes us particularly vulnerable to economic
downturns and changes in the semiconductor industry
   7




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Our operating results fluctuate significantly, which may affect the value of your investments
  
    
    our ability to develop and implement new technologies. If we are unable to
successfully implement new technologies in a timely manner, our operating results could
suffer because we would allow our competitors to seize the opportunities in developing
new markets.
 
    
    changes in our mix of manufacturing services or our customers preferences. When we
discontinue or add manufacturing service or when our customers demand change, our
operating results usually fluctuate.
 
    
    changes in capacity utilization. When capacity utilization is low, such as in times
of market downturns, we may need to adjust our mix of manufacturing services to respond
to changes in demand and to adjust our prices sufficiently enough to maintain the level
of our capacity utilization.
  We do not have any significant backlog because our customers do not place purchase orders far in
advance, which makes us vulnerable to sudden changes in customer demand
  If we are unable to maintain a steady return to our former capacity utilization rates, our
profitability would be adversely affected
    
    
    ensure that our packaging and testing technologies meet our customers needs;
 
    
    install advanced equipment in anticipation of new business; and
 
    
    prevent disruption of operations due to fire, accidents, mechanical and technical
failures, expansion, introduction of new packages or relocation of equipment.
   8




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We depend on a small number of customers for a substantial portion of our revenues and a loss of
any one of these customers would result in the loss of a significant portion of our revenues
  If capital resources required for our future expansion plans are not available, we may be unable to
successfully implement our services strategy
  If we cannot compete successfully in our industry, our current and potential customers would likely
decide not to use our manufacturing services, which would seriously harm our business
  If the outsourcing trend for packaging and testing services does not continue, we could lose a
significant number of our current customers and we may be unable to implement our manufacturing
services strategy plan in the future
   9




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If demand for the services of Taiwans wafer foundries from fabless semiconductor companies and
integrated device manufacturers decreases, a significant source of our sales would decrease, which
would seriously harm our business
  The trend of adopting protectionist measures in certain countries, including the United States,
could have a material adverse impact on our results of operations and financial condition
  Our production schedule may be delayed and our business may be adversely affected if we are unable
to obtain raw materials from our suppliers at acceptable prices, qualities and quantities
   If we are unable to obtain equipment from our suppliers, we may be forced to delay any future
expansion plans
   10




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If we are unable to manage our growth effectively, our expansion plans could be jeopardized
  We depend on key management and the loss of any key management personnel may disrupt our
manufacturing services
  We depend on our technical personnel and the inability to attract and retain them would jeopardize
our operations and future expansion plans
  Our failure to comply with environmental regulations or to defend against environmental claims
could expose us to serious liabilities
  We and many Taiwan customers and suppliers are vulnerable to natural disasters and other events
beyond our control, the occurrence of which may seriously harm our manufacturing services
   11




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Disruptions in the international trading environment may seriously decrease our international sales
   The differences between Taiwan and U.S. accounting standards resulted in different amounts of our
net income under those standards, which makes evaluating our financial performance difficult
  Risks Relating to Our Technologies
 If we cannot respond to rapid technology changes in the semiconductor packaging and testing
industry, our profitability will suffer
    12




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##### Table of Contents



If we are unable to successfully perform manufacturing services within the acceptable range of
precision, we will not be able to achieve satisfactory production yields and our results of
operations will suffer
  
    
    the level of contaminants in the manufacturing environment;
 
    
    human error;
 
    
    equipment malfunction;
 
    
    incorrect process condition setting;
 
    
    use of defective raw materials; and
 
    
    inadequate sample testing.
  We rely on technology provided by third parties
  Disputes over intellectual property rights could be costly and could deprive us of technologies to
stay competitive
  
    
    discontinue using disputed process technologies which would prevent us from offering
some of our packaging and testing services;
 
    
    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
commercially reasonable terms, if at all.
  13




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##### Table of Contents



Political and Economic Risks
 We face substantial political risks associated with doing business in Taiwan, particularly due to
the tense relationship between the ROC and the PRC
   14




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##### Table of Contents



The trading price of our American Depositary Shares may be adversely affected by the general
activities of the Taiwan Stock Exchange and U.S. stock exchanges, the trading price of our shares,
fluctuations in interest rates and the economic performance of Taiwan and global markets
   Currency fluctuations could increase our costs relative to our revenues, which could adversely
affect our profitability
  Any future outbreak of contagious diseases may materially and adversely affect our manufacturing
services and operations, as well as our financial condition and results of operations
   15




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##### Table of Contents



Our future tax obligations may adversely affect our profitability
  Risks Relating to the PRC
 Our operations in the PRC may expose us to political, regulatory, economic and foreign investment
risks in the PRC
   The discontinuation of any preferential tax treatment currently available to us and the increase in
the enterprise income tax in the PRC could adversely affect our results of operations
   16




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##### Table of Contents



Changes in PRC foreign exchange regulations may adversely affect our results of operations and
financial condition
  Risks Related to Ownership of Our Shares or ADSs
 Restrictions on the ability to deposit shares into our ADS program may adversely affect the
liquidity and price of the ADSs
  
    
    distribution of share dividends or free distribution of our shares;
 
    
    exercise of the preemptive rights of ADS holders applicable to the shares evidenced
by ADSs in the event of capital increases for cash; or
 
    
    if permitted under the deposit agreement and the custody agreement, purchases of our
 shares in the domestic market in Taiwan by the investor directly or through the
depositary or the surrender of shares under the possession of investors and then
delivery of such shares to the custodian for deposit into our ADS program, subject to
the following conditions: (i) the depositary may accept deposit of those shares and
issue the corresponding number of ADSs with regard to such deposit only if the total
number of ADSs outstanding after the deposit does not exceed the number of ADSs
previously approved by R.O.C. SFB, plus any ADSs issued pursuant to the events
described in the above two bullet points; and (ii) this deposit may only be made to the
extent previously issued ADSs have been cancelled.
   17




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##### Table of Contents



Holders of our ADSs will not have the same proposal or voting rights as the holders of our shares,
which may affect the value of your investment
    The rights of holders of our ADSs to participate in our rights offerings may be limited, which may
cause dilution to their holdings
  Our public shareholders may have more difficulty protecting their interests than they would as
shareholders of a U.S. corporation
   18




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##### Table of Contents



Holders of our ADSs will be required to appoint several local agents in Taiwan if they withdraw
shares from our ADS program and become our shareholders, which may make ownership burdensome
  You may not be able to enforce a judgment of a foreign court in the ROC
  
    
    the court rendering the judgment does not have jurisdiction over the subject matter
according to R.O.C. law;
 
    
    the judgment or the court procedures resulting in the judgment is contrary to the
public order or good morals of the R.O.C.;
 
    
    the judgment was rendered by default, except where the summons or order necessary
for the commencement of the action was duly served on us within the jurisdiction of the
court rendering the judgment within a reasonable period of time and in accordance with
the laws and regulations of such jurisdiction, or with judicial assistance of the
R.O.C.; or
 
    
    the judgments of R.O.C. courts are not recognized and enforceable in the
jurisdiction of the court rendering the judgment on a reciprocal basis.
 We may become a passive foreign investment company, or PFIC, which could result in adverse U.S. tax
consequences to U.S. investors
   19




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##### Table of Contents



Item 4. Information on the Company
 A. History and Development of the Company
 www.spil.com.tw
   B. Business Overview
 Our Business
    Years Ended December 31,2006
    
    
    2007
    
    
    2008NT$
    
    
    %
    
    
    NT$
    
    
    %
    
    
    NT$
    
    
    %(audited) (consolidated)(in millions, except percentages)Substrate base packages
    
    
    29,458
    
    
    
    51.6
    
    
    
    32,180
    
    
    
    48.6
    
    
    
    31,243
    
    
    
    50.1Lead-frame base packages
    
    
    16,055
    
    
    
    28.1
    
    
    
    19,601
    
    
    
    29.6
    
    
    
    18,473
    
    
    
    29.6Other packages
    
    
    3,800
    
    
    
    6.7
    
    
    
    5,795
    
    
    
    8.8
    
    
    
    4,064
    
    
    
    6.5Total packaging revenues
    
    
    49,313
    
    
    
    86.4
    
    
    
    57,576
    
    
    
    87.0
    
    
    
    53,780
    
    
    
    86.2Testing and other revenues
    
    
    7,813
    
    
    
    13.6
    
    
    
    8,601
    
    
    
    13.0
    
    
    
    8,623
    
    
    
    13.8Total net operating revenues
    
    
    57,126
    
    
    
    100.0
    
    
    
    66,177
    
    
    
    100.0
    
    
    
    62,403
    
    
    
    100.0
  20




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##### Table of Contents




    
    providing a full range of packaging and testing services, including turnkey
capabilities to simplify our customers supply chain management;
 
    
    offering leading packaging and testing technology to attract and retain customers;
 
    
    focusing on customer service and working with our customers on developing and
fulfilling their current and future semiconductor packaging and testing needs;
 
    
    leveraging our existing foundry relationships and Taiwan location to enable our
customers to easily integrate all of their outsourced semiconductor manufacturing
needs; and
 
    
    diversifying and expanding our customer base geographically, by customer type and by
end-market application, to capitalize on growing markets including communications and
increased outsourcing from vertically integrated semiconductor device manufacturers and
systems original equipment manufacturers.
  Our Packaging Services
   21




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##### Table of Contents




    
    the size of the package;
 
    
    the number of electrical connections the package can support; and
 
    
    the thermal and electrical requirements of the package.
     Substrate Packages
   
    
    smaller size;
 
    
    greater pin count;
 
    
    greater reliability;
 
    
    better electrical signal integrity; and
 
    
    easier attachment to a printed circuit board.
  22




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##### Table of Contents



Lead-Frame Packages
   Testing and Other Services
   Wafer Probing
 Final Testing
  23




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##### Table of Contents



Other Testing Services
 Customers
    Years Ended December 31,2006
    
    
    2007
    
    
    2008NT$
    
    
    %
    
    
    NT$
    
    
    %
    
    
    NT$
    
    
    %(audited) (consolidated)(in millions, except percentages)U.S. and Canada
    
    
    34,045
    
    
    
    59.6
    
    
    
    37,842
    
    
    
    57.2
    
    
    
    32,300
    
    
    
    51.8Taiwan
    
    
    20,500
    
    
    
    35.9
    
    
    
    23,462
    
    
    
    35.4
    
    
    
    21,021
    
    
    
    33.7Others(1)
    
    
    2,581
    
    
    
    4.5
    
    
    
    4,873
    
    
    
    7.4
    
    
    
    9,082
    
    
    
    14.5Total
    
    
    57,126
    
    
    
    100.0
    
    
    
    66,177
    
    
    
    100.0
    
    
    
    62,403
    
    
    
    100.0
 
 (1)
    
    Includes primarily Singapore, Japan, Germany and Korea.    24




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##### Table of Contents



Sales and Marketing
    Quality Control
   25




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##### Table of Contents



Research and Development
  
    
    reduction of the size and thickness of semiconductor device packages;
 
    
    increasing input/output density of semiconductor device packages;
 
    
    enhancement of the electrical, thermal and reliability performance of semiconductor
device packages;
 
    
    reduction of spacing between leads;
 
    
    shortening the length and minimizing the diameter of gold wire used in the wire
bonding process;
 
    
    increasing packaging yields;
 
    
    shortening cycle times; and
 
    
    investigating the use of new or replacement raw materials.
    26




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##### Table of Contents



Supplies
 Raw Materials
   Equipment
     27




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##### Table of Contents



Competition
   
    
    the breadth of package and test offerings;
 
    
    technical competence;
 
    
    manufacturing yields;
 
    
    manufacturing cycle times;
 
    
    customer service; and
 
    
    price.
  
    
    we offer a broader and more complex range of services as compared to the IDMs, which
tend to focus their resources on improving their front-end operations;
 
    
    we generally have lower unit costs because of our higher utilization rates; and
 
    
    we offer a wider range of services in terms of complexity and technology.
 Strategic Investments
  
    
    Phoenix Precision Technology Corporation. As of December 31, 2008, we held, directly
and indirectly, a 16.8% equity interest in Phoenix Precision, a supplier of
semiconductor raw materials, including substrates. Mr. Bough Lin, our Chairman, Mr.
Fu-Mei Tang, and Ms. Teresa Wang, our supervisors, are directors of Phoenix Precision.
Ms. Teresa Wang is also the Chief Financial Officer of Phoenix Precision. Jerome Tsai,
one of our directors, is supervisor of Phoenix Precision. Mr. Byron Chiang, one of our
officers, is supervisor of Phoenix Precision.
 
    
    ChipMOS Technologies (Bermuda) Ltd., or ChipMOS Bermuda. As of December 31, 2008, we
held a 14.5% equity interest in ChipMOS Bermuda, a semiconductor packaging and testing
and LCD driver and IC manufacturing company. Mr. Jerome Tsai, one of our directors, is
a director of ChipMOS Bermuda.
  28




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##### Table of Contents



Intellectual Property
   
    
    Wafer Bumping and Redistribution technology, which enables us to form and/or
redistribute bumps on the chip to make a silicon die, is able to be directly attached
to the substrate using the aforementioned bumps rather than wire bonding. This license
does not have an expiration date.
 
    
    Wafer Level CSP technology, which enables us to produce a chip scale package at the
stage of wafer level. This license does not have an expiration date.
 
    
    Packaging technology pertaining to flip-chips, which offer us a cost-effective
solution for high performance ASIC and system-on-chip, or SoC, designs. We acquired
this license in August 2001. This license will expire in January 2010.
    
    
    discontinue the use of disputed process technologies;
 
    
    pay substantial damages;
 
    
    develop non-infringing technologies; or
 
    
    acquire licenses to the technologies that we had allegedly infringed.
 Environmental Matters
    29




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##### Table of Contents



Insurance
  Employees
  Capital Expenditures and Divestitures
   Years Ended December 31,2006
    
    
    2007
    
    
    2008NT$
    
    
    NT$
    
    
    NT$
    
    
    US$Equipment purchases
    
    
    9,094
    
    
    
    10,420
    
    
    
    8,587
    
    
    
    262.1Land and building construction and purchases
    
    
    1,945
    
    
    
    1,731
    
    
    
    1,461
    
    
    
    44.6
  30




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##### Table of Contents



Litigation
     C. Organizational Structure
  Total Paid-inCapital of Such
    
    
    Direct/IndirectCompany
    
    Main Activities
    
    
    Location
    
    
    Entity
    
    
    Equity Interest(in millions)SPIL (B.V.I.) Holding Limited
    
    Investment activities
    
    British Virgin Islands
    
    US$
    88.4
    (1)
    
    
    100.0
    %Siliconware Investment
Company Ltd.
    
    Investment activities
    
    Hsinchu, Taiwan
    
    NT$
    1,770.0
    (2)
    
    
    100.0
    %Siliconware U.S.A. Inc.
    
    Communicating and maintaining relationships with companies headquartered in North America
    
    San Jose, CA, USA
    
    US$
    1.3
    (1)
    
    
    100.0
    %SPIL (Cayman) Holding Limited
    
    Investment activities
    
    Cayman Islands
    
    US$
    90.2
    (1)
    
    
    100.0
    %Siliconware Technology (Suzhou) Limited
    
    Assembly and testing services
    
    Suzhou, Jiangsu, China
    
    US$
    90.0
    (2)
    
    
    100.0
    %
 
 (1)
    
    Aggregate par value of all issued shares.(2)
    
    Contributed capital.  31




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##### Table of Contents



Total Paid-inCapital of Such
    
    
    Direct/IndirectCompany
    
    Main Activities
    
    
    Location
    
    
    Entity
    
    
    Equity Interest(in millions)ChipMOS Technologies (Bermuda)
Inc.
    
    Investment activities
    
    Hsinchu, Taiwan
    
    US$
    0.9
    (1)
    
    
    14.5
    %Double Win Enterprise Co., Ltd.
    
    SMT process and hand insert
    
    Taoyuan, Taiwan
    
    NT$
    280
    (1)
    
    
    24.1
    %Phoenix Precision Technology Corp.
    
    Researching, developing, manufacturing and selling ball grid array substrate
    
    Hsinchu, Taiwan
    
    NT$
    7,260
    (1)
    
    
    16.8
    %Hsieh Yong Capital Co., Ltd.
    
    Investment activities
    
    Taipei, Taiwan
    
    NT$
    7,630
    (1)
    
    
    7.6
    %Mega Mission Limited Partnership
    
    Investment activities
    
    Cayman Islands
    
    US$
    150
    (2)
    
    
    4.0
    %
 
 (1)
    
    Aggregate par value of all issued shares.(2)
    
    Contributed capital. D. Property, Plants and Equipment
  Wire Bonding orFacility
    
    Location of Facility
    
    
    Size of Facility
    
    
    Size of Land(1)
    
    
    Testing Capacity(square meters)
    
    
    (square meters)DF Facility I
    
    Taichung, Taiwan
    
    
    81,000
    
    
    
    26,000
    
    
    1,863 wire bondersCS Facility II
    
    Taichung, Taiwan
    
    
    141,000
    
    
    
    47,000
    
    
    1,904 wire bonders and 169 testersHS Facility III
    
    Hsinchu, Taiwan
    
    
    33,000
    
    
    
    14,000
    
    
    180 testersCH Facility IV
    
    Changhua, Taiwan
    
    
    58,000
    
    
    
    42,000
    
    
    889 wire bondersSZ Facility V
    
    Suzhou, China
    
    
    74,000
    
    
    
    148,500
    
    
    520 wire bonders
and 32 testers
 
 (1)
    
    We own all of our properties except otherwise noted.  Item 4A. Unresolved Staff Comments
  
 Item 5. Operating and Financial Review and Prospects
   32




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##### Table of Contents



A. Operating Results
 Overview
     
    
    negotiate better pricing terms with our suppliers, including quantity discounts;
 
    
    find alternative, less expensive sources of raw materials;
 
    
    maximize production efficiency of our employees; and
 
    
    engage in utility conservation programs.
  General Factors Affecting Our Results of Operations
    33




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##### Table of Contents



Consolidation
   Disposal of ChipMOS Technologies Inc. with Subscription of ChipMOS
Technologies (Bermuda) Ltd.
  Change in Mix of Services
   Years Ended December 31,2006
    
    
    2007
    
    
    2008NT$
    
    
    %
    
    
    NT$
    
    
    %
    
    
    NT$
    
    
    %(audited) (consolidated)(in millions, except percentages)Substrate base packages
    
    
    29,458
    
    
    
    51.6
    
    
    
    32,180
    
    
    
    48.6
    
    
    
    31,243
    
    
    
    50.1Lead-frame base packages
    
    
    16,055
    
    
    
    28.1
    
    
    
    19,601
    
    
    
    29.6
    
    
    
    18,473
    
    
    
    29.6Other packages
    
    
    3,800
    
    
    
    6.7
    
    
    
    5,795
    
    
    
    8.8
    
    
    
    4,064
    
    
    
    6.5Total packaging revenues
    
    
    49,313
    
    
    
    86.4
    
    
    
    57,576
    
    
    
    87.0
    
    
    
    53,780
    
    
    
    86.2Testing and other revenues
    
    
    7,813
    
    
    
    13.6
    
    
    
    8,601
    
    
    
    13.0
    
    
    
    8,623
    
    
    
    13.8Total net operating revenues
    
    
    57,126
    
    
    
    100.0
    
    
    
    66,177
    
    
    
    100.0
    
    
    
    62,403
    
    
    
    100.0
  34




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##### Table of Contents



Expansion and Utilization Rate
   Applications of Critical Accounting Policies
   Revenue Recognition
  Accounts Receivable and Allowances for Doubtful Accounts
   35




---



##### Table of Contents



Inventory Reserves
   Impairment of Long-Lived Assets
    Impairment of Equity Investments
  Provision for Income Taxes and Deferred Tax Asset Valuation Allowances
   36




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##### Table of Contents



Employee Bonuses
   Goodwill
  Embedded Derivatives
      37




---



##### Table of Contents



Description of Revenue and Cost Items
 Net Operating Revenues
     Cost of Goods Sold
  
    
    cost of raw materials purchased for semiconductor packaging services;
 
    
    direct labor costs; and
 
    
    overhead including depreciation and maintenance of production equipment, indirect
labor costs, indirect material costs, utilities and royalties.
  Operating Expenses
  
    
    Selling, General and Administrative Expenses. Selling, general and administrative
expenses consist primarily of salaries and related personnel expenses, other marketing
expenses, fees for professional services, and the cost of computers to support our
operations.
 
    
    Research and Development Expenses. Research and development expenses consist
primarily of salaries, bonuses and related costs for technology development, technology
license fees allocated to research and development, and depreciation on and maintenance
of equipment and various materials used in our research and development processes. We
expect our research and development expenses to grow as we hire additional staff and
purchase additional equipment for research and development purposes.
  38




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##### Table of Contents



Results of Operations
  Years Ended December 31,2006
    
    
    2007
    
    
    2008%
    
    
    %
    
    
    %(audited) (consolidated)Net operating revenues
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Cost of goods sold
    
    
    73.3
    
    
    
    70.7
    
    
    
    79.3Gross profit
    
    
    26.7
    
    
    
    29.3
    
    
    
    20.7Operating expenses:Selling expenses
    
    
    1.3
    
    
    
    0.7
    
    
    
    1.5General and administrative expenses
    
    
    1.8
    
    
    
    2.2
    
    
    
    2.7Research and development expenses
    
    
    2.1
    
    
    
    1.9
    
    
    
    2.2Operating expenses
    
    
    5.2
    
    
    
    4.8
    
    
    
    6.4Operating income
    
    
    21.5
    
    
    
    24.5
    
    
    
    14.3Investment income
    
    
    2.0
    
    
    
    0.4
    
    
    
    Net non-operating income (loss)
    
    
    1.5
    
    
    
    4.8
    
    
    
    (3.9
    )Income before income tax and minority interest
    
    
    25.0
    
    
    
    29.7
    
    
    
    10.4Income tax expense
    
    
    (1.7
    )
    
    
    (3.3
    )
    
    
    (0.3
    )Income from continuing operations
    
    
    23.3
    
    
    
    26.4
    
    
    
    10.1Cumulative effects of changes in accounting principle
    
    
    
    
    
    
    
    
    
    
    Net income
    
    
    23.3
    
    
    
    26.4
    
    
    
    10.1
 The Year ended December 31, 2008 Compared to the Year Ended December 31, 2007
 Net operating revenues
    39




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##### Table of Contents



Gross profit and gross margin
 
    
    Operating expenses. Operating expenses increased by 24.2% from NT$3,224 million in
2007 to NT$4,003 million (US$122.2 million) in 2008. Operating expenses as a percentage
of net operating revenues was 4.8% and 6.4% in 2007 and 2008, respectively.
 
    
    Selling expenses.Selling expenses increased by NT$448 million between these two
years mainly due to the increase in bad debt of NT$262 million and an increase in
employees bonuses.
 
    
    General and administrative expenses. General and administrative expenses increased
by NT$236 million between these two years mainly due to the increase in employees
bonuses and the increase in directors and supervisors remuneration of NT$57 million.
 
    
    Research and development expenses.Research and development expenses increased by
NT$95 million between these two years mainly due to increases in salary expenses and
employees bonuses.
 Operating income and operating margin
 Net non-operating (loss) income
 Income tax expense
 Net income
 The Year Ended December 31, 2007 Compared to the Year Ended December 31, 2006
 Net operating revenues
    40




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##### Table of Contents



Gross profit and gross margin.
 Operating expenses.
 
    
    Selling expenses.Selling expenses decreased by NT$222 million between these two
years due to decreases in related fixed expenditure.
 
    
    General and Administrative Expenses. General and administrative expenses increased
by NT$363 million between these two years mainly due to increases in salary expenses
and legal fees.
 
    
    Research and development expenses.Research and development expenses increased by
NT$94 million between these two years mainly due to increases in costs for developing
new technologies and depreciation expenses.
 Operating income and operating margin
 Net non-operating income
 Income tax (expense) benefit
 Net income.
 B. Liquidity and Capital Resources
   41




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Liquidity
   Years Ended December 31,2006
    
    
    2007
    
    
    2008NT$
    
    
    NT$
    
    
    NT$
    
    
    US$(in millions)Net cash provided by operating activities
    
    
    20,250
    
    
    
    24,423
    
    
    
    21,605
    
    
    
    659.5Net cash used in investing activities
    
    
    (11,827
    )
    
    
    (5,395
    )
    
    
    (10,555
    )
    
    
    (322.2
    )Net cash used in financing activities
    
    
    (6,040
    )
    
    
    (11,157
    )
    
    
    (14,927
    )
    
    
    (455.7
    )Effect of exchange rate changes on cash
    
    
    8
    
    
    
    22
    
    
    
    94
    
    
    
    2.9Net increase (decrease) in cash and cash
equivalents
    
    
    2,391
    
    
    
    7,893
    
    
    
    (3,783
    )
    
    
    (115.5
    )
 Net Cash Provided by Operating Activities
   Net Cash Used in Investing Activities
   42




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##### Table of Contents



Net Cash Used in Financing Activities
   Capital Resources
    43




---



##### Table of Contents



Transactions with Related Parties
   Inflation/Deflation
  Taxation
   US GAAP Reconciliation
   44




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##### Table of Contents



Reconciliation of Consolidated Net Income
 For the Years Ended December 31,2006
    
    
    2007
    
    
    2008NT$
    
    
    NT$
    
    
    NT$
    
    
    US$(in millions)Net income as reported under ROC GAAP
    
    
    13,329
    
    
    
    17,489
    
    
    
    6,314
    
    
    
    192.7US GAAP adjustments:Compensated absences
    
    
    (13
    )
    
    
    (13
    )
    
    
    (2
    )
    
    
    (0.1
    )Compensation
    
    
    (1,909
    )
    
    
    (3,635
    )
    
    
    (1,582
    )
    
    
    (48.3
    )Employee stock option
    
    
    (27
    )
    
    
    (2
    )
    
    
    
    
    
    
    Impairment on long-term investments
    
    
    29
    
    
    
    
    
    
    
    (280
    )
    
    
    (8.5
    )Embedded derivative
    
    
    (2,987
    )
    
    
    (1,181
    )
    
    
    
    
    
    
    Defined benefit pension plan-net periodic
pension cost
    
    
    
    
    
    
    7
    
    
    
    1
    
    
    
    Equity investments:Net income variance between US GAAP and
ROC GAAP
    
    
    9
    
    
    
    7
    
    
    
    
    
    
    
    Gain on disposal of long-term investments
    
    
    
    
    
    
    403
    
    
    
    
    
    
    
    Total US GAAP adjustments
    
    
    (4,898
    )
    
    
    (4,414
    )
    
    
    (1,863
    )
    
    
    (56.9
    )Taxation effect
    
    
    (18
    )
    
    
    24
    
    
    
    (56
    )
    
    
    (1.7
    )Net income under US GAAP
    
    
    8,413
    
    
    
    13,099
    
    
    
    4,393
    
    
    
    134.1
 Reconciliation of Consolidated Shareholders Equity
  For the Years Ended December 31,2006
    
    
    2007
    
    
    2008NT$
    
    
    NT$
    
    
    NT$
    
    
    US$(in millions)Total shareholders equity as
reported under ROC GAAP
    
    
    62,936
    
    
    
    68,908
    
    
    
    59,314
    
    
    
    1,810.5US GAAP adjustments:Compensated absences
    
    
    (43
    )
    
    
    (56
    )
    
    
    (58
    )
    
    
    (1.8
    )Compensation
    
    
    (1,294
    )
    
    
    (1,729
    )
    
    
    
    
    
    
    Impairment on long-term investments
    
    
    (171
    )
    
    
    
    
    
    
    
    
    
    
    Embedded derivative
    
    
    (1,186
    )
    
    
    
    
    
    
    
    
    
    
    Defined benefit pension plan
    
    
    (210
    )
    
    
    (317
    )
    
    
    (172
    )
    
    
    (5.3
    )Equity investments:Net income variance between US
GAAP and ROC GAAP
    
    
    186
    
    
    
    
    
    
    
    
    
    
    
    Technology and know-how
contributed to a joint venture
investee
    
    
    (210
    )
    
    
    
    
    
    
    
    
    
    
    Adjustment for variances between
net income and shareholders
equity
    
    
    (15
    )
    
    
    
    
    
    
    
    
    
    
    Acquisition of Siliconware Corporation
    
    
    4,874
    
    
    
    4,874
    
    
    
    4,874
    
    
    
    148.8Taxation effect
    
    
    (8
    )
    
    
    16
    
    
    
    (40
    )
    
    
    (1.2
    )Shareholders equity under US GAAP
    
    
    64,859
    
    
    
    71,696
    
    
    
    63,917
    
    
    
    1,951.1
 The following are the most significant differences between R.O.C. GAAP and US GAAP as they relate
to our net income and shareholders equity. For other GAAP differences, please refer to note 33 to
our consolidated financial statements included elsewhere in this annual report.
  45




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Employee Bonuses
   Employee Stock Option
    46




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##### Table of Contents



Equity Investments
    Defined Benefit Pension Plan
   10% Tax on Undistributed Earnings and Tax Effect of US GAAP Adjustments
  Goodwill Acquired through Acquisition
    47




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##### Table of Contents



Impairment of Long-lived Assets
   Impairment of Investments
   Embedded Derivatives
    48




---



##### Table of Contents



Stock Dividends
  Marketable Securities
   Calculation of EPS
     49




---



##### Table of Contents



Merger between Equity-Method Investees
  Disposal of investment under equity method for exchange of noncontrolling ownership interest and
monetary consideration
  Recent Accounting Pronouncements
 US GAAP
     50




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##### Table of Contents



R.O.C. GAAP
   51




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##### Table of Contents



C. Research and Development, Patents and Licenses, etc.
  D. Trend Information
  E. Off-Balance Sheet Arrangements
  F. Tabular Disclosure of Contractual Obligations
  Payments Due by PeriodLess Than 1
    
    
    
    
    
    
    
    
    
    
    More Than 5Contractual Obligations (1)
    
    Total
    
    
    Year
    
    
    1-3 Years
    
    
    4-5 Years
    
    
    Years(in NT$ millions) (consolidated)Long-term debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Secured long-term loans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unsecured long-term loans
    
    
    3,000
    
    
    
    750
    
    
    
    2,250
    
    
    
    
    
    
    
    Short-term loans
    
    
    655
    
    
    
    655
    
    
    
    
    
    
    
    
    
    
    
    Secured bonds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unsecured bonds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating
leases (2)
    
    
    88
    
    
    
    10
    
    
    
    21
    
    
    
    20
    
    
    
    37Purchase obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total contractual cash obligations
    
    
    3,743
    
    
    
    1,415
    
    
    
    2,271
    
    
    
    20
    
    
    
    37
 
 (1)
    
    Excludes interest payments.(2)
    
    Represents our obligations to make lease payments to use the land on
which our facilities are located, primarily in Hsinchu, Taiwan.  52




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##### Table of Contents



Item 6. Directors, Senior Management and Employees
 A. Directors and Senior Management
  Years
    
    Principal Business Activities PerformedName
    
    Age
    
    Position
    
    with Us
    
    Outside Our CompanyBough Lin
    
    
    57
    
    
    Chairman; Executive Vice President
    
    
    25
    
    
    Director of Phoenix Precision Technology; 
Director of SPILs subsidiaries.Chi-Wen Tsai
    
    
    61
    
    
    Vice Chairman; President
    
    
    25
    
    
    Director of SPILs subsidiaries.Wen-Lung Lin
    
    
    57
    
    
    Director;
    
    
    4
    
    
    Chairman of Ku-Ming Investment Co.Yen-Chun Chang
    
    
    54
    
    
    Director; Senior Vice President
    
    
    25
    
    
    Director of SPILs subsidiary.Wen-Jung Lin
    
    
    62
    
    
    Director
    
    
    18
    
    
    NoneJerome Tsai(1)
    
    
    55
    
    
    Director
    
    
    4
    
    
    Director of ChipMOS (Bermuda); 
Supervisor of Phoenix Precision Technology.Hsiu-Li Liu
    
    
    54
    
    
    Independent Director(2)
    
    
    18
    
    
    Chairman of So Dar Investment; Director of Chi Cheng Enterprise, Li Fu Investment, More Power Electronics Corp.Ing Dar Liu
    
    
    61
    
    
    Independent Director(2)
    
    
    4
    
    
    Director of InnoLux Display Corp., AME Inc. 

Chairman of Jing-Hong Investment.Jing-Shan Aur
    
    
    60
    
    
    Independent Director(2)
    
    
    4
    
    
    NoneWen-Lung Cheng
    
    
    61
    
    
    Supervisor
    
    
    7
    
    
    Chairman of Joinwin Investment; Director of SPILs subsidiary;
Supervisor of Gamania Digital Entertainment Co. Ltd.Fu-Mei Tang
    
    
    57
    
    
    Supervisor
    
    
    4
    
    

Director of Phoenix Precision Technology.Teresa Wang(3)
    
    
    53
    
    
    Supervisor
    
    
    7
    
    
    Director of Phoenix Precision Technology; CFO of Phoenix Precision Technology.Johnson Tien
    
    
    55
    
    
    Senior Vice President
    
    
    15
    
    
    NoneKuo-Jui Tai
    
    
    46
    
    
    Vice President
    
    
    6
    
    
    NoneChien-An Chen
    
    
    59
    
    
    Vice President
    
    
    17
    
    
    NoneChien-Hua Chen
    
    
    54
    
    
    Vice President
    
    
    10
    
    
    NoneMichael Chang
    
    
    47
    
    
    Vice President
    
    
    10
    
    
    NoneC.S Hsiao
    
    
    50
    
    
    Vice President
    
    
    22
    
    
    NoneYu Hu Liu
    
    
    51
    
    
    Vice President
    
    
    24
    
    
    NoneJas Hsieh
    
    
    58
    
    
    Vice President
    
    
    5
    
    
    NoneEva Chen
    
    
    51
    
    
    Chief Financial Officer
    
    
    4
    
    
    None
 
 (1)
    
    Representing Pei-Sheng Cultural Educational Foundation.(2)
    
    Our independent directors independency complies with SECs and Nasdaqs independency
requirements.(3)
    
    Representing Siliconware Investment Company Ltd. Bough Lin
 Chi-Wen Tsai
 Wen-Lung Lin
 Yen-Chun Chang
  53




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##### Table of Contents



Wen-Jung Lin
 Jerome Tsai
 Hsiu-Li Liu
 Ing-Dar Liu
 Jing-Shan Aur
 Wen-Lung Cheng
 Fu-Mei Tang
 Teresa Wang
 Johnson Tien
 Kuo-Jui Tai
 Chien-An Chen
 Chien-Hua Chen
 Michael Chang
 C.S Hsiao
 Yu Hu Liu
 Jas Hsieh
 Eva Chen
  54




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##### Table of Contents



B. Compensation of Directors, Supervisors and Executive Officers
  C. Board Practices
  Audit Committee
  Differences between NASDAQ Corporate Governance Requirements and Home Country Practices
  D. Employees
      55




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##### Table of Contents



E. Share Ownership
  Number of Shares
    
    
    Percentage ofName
    
    Owned
    
    
    Shares OwnedBough Lin
    
    
    66,494,075
    
    
    
    2.11
    %Chi-Wen Tsai
    
    
    40,175,555
    
    
    
    1.27
    %Wen-Lung Lin
    
    
    19,754,751
    
    
    
    2.11
    %Yen-Chun Chang
    
    
    10,476,417
    
    
    
    *Wen-Jung Lin
    
    
    5,711,914
    
    
    
    *Jerome Tsai (1)
    
    
    10,051,831
    
    
    
    *Hsiu-Li Liu
    
    
    12,251,189
    
    
    
    *Ing-Dar Liu
    
    
    
    
    
    
    Jing-Shan Aur
    
    
    146,292
    
    
    
    *Wen-Lung Cheng
    
    
    10,133,937
    
    
    
    *Fu-Mei Tang
    
    
    9,025,917
    
    
    
    *Teresa Wang (2)
    
    
    36,228,732
    
    
    
    1.15
    %Johnson Tien
    
    
    418,089
    
    
    
    *Kuo-Jui Tai
    
    
    356,304
    
    
    
    *Chien-An Chen
    
    
    473,833
    
    
    
    *Chien-Hua Chen
    
    
    61,496
    
    
    
    *Michael Chang
    
    
    306,560
    
    
    
    *C.S Hsiao
    
    
    135,408
    
    
    
    *Yu Hu Liu
    
    
    7,438,972
    
    
    
    *Jas Hsich
    
    
    191,845
    
    
    
    *Eva Chen
    
    
    213,164
    
    
    
    *
 
 *
    
    Less than 1%.(1)
    
    Representing Pei-Sheng Cultural Educational Foundation.(2)
    
    Representing Siliconware Investment Company.  
 Item 7. Major Shareholders and Related Party Transactions
 A. Major Shareholders
  December 31, 2007
    
    
    December 31, 2008
    
    
    April 12, 2009(1)Number of
    
    
    Percentage of
    
    
    Number of
    
    
    Percentage of
    
    
    Number of
    
    
    Percentage ofName of beneficial owner
    
    Shares Owned
    
    
    Shares Owned
    
    
    Shares Owned
    
    
    Shares Owned
    
    
    Shares Owned
    
    
    Shares OwnedCitibank(2)
    
    
    618,309,437
    
    
    
    20.15
    %
    
    
    517,969,290
    
    
    
    16.43
    %
    
    
    624,143,605
    
    
    
    19.80
    %JPMorgan in Custody for Capital World
Growth and Income Fund Inc.
    
    
    
    
    
    
    
    
    
    
    151,319,210
    
    
    
    4.80
    %
    
    
    130,795,000
    
    
    
    4.15
    %National Financial Stability Fund Commission
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    82,255,000
    
    
    
    2.61
    %JPMorgan in Custody for Capital Income Builder Inc.
    
    
    
    
    
    
    
    
    
    
    93,455,300
    
    
    
    2.96
    %
    
    
    80,140,300
    
    
    
    2.54
    %Bough Lin
    
    
    44,746,609
    
    
    
    1.46
    %
    
    
    66,494,075
    
    
    
    2.11
    %
    
    
    66,494,075
    
    
    
    2.11
    %Citibank in Custody for Government of
Singarpore Investment Corp. PFE Ltd.
    
    
    42,913,044
    
    
    
    1.40
    %
    
    
    48,150,784
    
    
    
    1.53
    %
    
    
    62,594,784
    
    
    
    1.99
    %Ku-Ming Investment Company Ltd(3)
    
    
    55,547,404
    
    
    
    1.81
    %
    
    
    56,102,878
    
    
    
    1.78
    %
    
    
    56,102,878
    
    
    
    1.78
    %Nan Shan Life Insurance Company Ltd.
    
    
    
    
    
    
    
    
    
    
    64,847,374
    
    
    
    2.06
    %
    
    
    55,334,354
    
    
    
    1.76
    %Old Labor Pension Fund
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54,777,907
    
    
    
    1.74
    %Chunghwa Post Co., Ltd.
    
    
    
    
    
    
    
    
    
    
    44,524,157
    
    
    
    1.41
    %
    
    
    45,662,067
    
    
    
    1.45
    %Directors and Supervisors as a group
    
    
    208,164,603
    
    
    
    6.79
    %
    
    
    231,704,074
    
    
    
    7.35
    %
    
    
    220,450,610
    
    
    
    6.99
    %
 
 (1)
    
    Our most recent record date.(2)
    
    As record owner of our ADSs.(3)
    
    Wen-Lung Lin is the chairman of Ku-Ming Investment Company Ltd.  56




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##### Table of Contents



B. Related Party Transactions
 Related Party Transactions Policies
  Sigurd Microelectronics Corp.
  ChipMOS Technologies Inc.
  Phoenix Precision Technology Corporation
     57




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##### Table of Contents



C. Interests of Experts and Counsel
  
 Item 8. Financial Information
 A. Consolidated Statements and Other Financial Information
  Litigation
  Dividend Policy and Distributions
  Total Number ofCash Dividend per
    
    
    Stock Dividend per
    
    
    Shares Issued as
    
    
    Outstanding Sharesshare
    
    
    share(1)
    
    
    Stock Dividend(2)
    
    at Year End(NT$)
    
    
    (NT$)1995
    
    
    0
    
    
    
    4.00
    
    
    
    70,048,800
    
    
    
    280,668,0001996
    
    
    0
    
    
    
    6.00
    
    
    
    168,400,800
    
    
    
    457,800,0001997
    
    
    0
    
    
    
    4.00
    
    
    
    183,120,000
    
    
    
    654,200,0001998
    
    
    0
    
    
    
    3.60
    
    
    
    235,512,000
    
    
    
    904,162,0001999
    
    
    0
    
    
    
    2.30
    
    
    
    207,957,260
    
    
    
    1,127,092,4022000
    
    
    0
    
    
    
    1.40
    
    
    
    157,793,537
    
    
    
    1,449,882,8702001
    
    
    0
    
    
    
    1.45
    
    
    
    235,421,212
    
    
    
    1,852,761,6832002
(3)
    
    
    0
    
    
    
    0
    
    
    
    
    
    
    
    1,853,668,6832003
(4)
    
    
    0
    
    
    
    0
    
    
    
    
    
    
    
    1,876,625,6832004
    
    
    0.35
    
    
    
    1.00
    
    
    
    189,447,578
    
    
    
    2,105,073,0602005
    
    
    0.75
    
    
    
    0.80
    
    
    
    168,889,805
    
    
    
    2,328,919,3372006
    
    
    1.73
    
    
    
    1.00
    
    
    
    241,014,905
    
    
    
    2,887,757,4262007
    
    
    3.40
    
    
    
    0.20
    
    
    
    58,672,538
    
    
    
    3,073,424,5342008
    
    
    4.50
    
    
    
    0.10
    
    
    
    30,746,975
    
    
    
    3,152,589,871
 
 (1)
    
    Our stock dividend is declared in NT dollar amount per Share. The number of Shares received
by a shareholder equals to the NT dollar amount per share of dividend declared multiplied by
the number of Shares owned by the shareholder and divided by the par value of NT$10 per Share.(2)
    
    Total number of Shares issued as stock dividends include Shares issued from retained earnings
and from capital reserve.(3)
    
    We did not declare a dividend in 2002 because we incurred a net loss in 2001.(4)
    
    We did not declare a dividend in 2003 because our shareholders did not elect to declare such
dividend, even though we generated net income in 2002.  58




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##### Table of Contents



B. Significant Changes
  
 Item 9. The Offer and Listing
 A. Offer and Listing Details
 Market Price Information for Our Shares
  Closing Price for Each Share(1)
    
    
    Average Daily
    
    
    Taiwan Stock Exchange IndexPeriod
    
    High
    
    
    Low
    
    
    Trading Volume
    
    
    High
    
    
    LowNT$
    
    
    NT$
    
    
    (in thousandsof shares)2004
    
    
    42.20
    
    
    
    19.80
    
    
    
    20,556
    
    
    
    7,135.00
    
    
    
    5,255.062005
    
    
    46.90
    
    
    
    21.90
    
    
    
    20,048
    
    
    
    6,267.32
    
    
    
    5,565.412006
    
    
    52.50
    
    
    
    33.70
    
    
    
    18,554
    
    
    
    7,823.72
    
    
    
    6,257.802007
    
    
    71.70
    
    
    
    47.90
    
    
    
    12,423
    
    
    
    9,809.88
    
    
    
    7,344.56First Quarter
    
    
    64.50
    
    
    
    47.90
    
    
    
    13,308
    
    
    
    7,935.54
    
    
    
    7,344.56Second Quarter
    
    
    74.10
    
    
    
    61.20
    
    
    
    10,867
    
    
    
    8,939.19
    
    
    
    7,875.42Third Quarter
    
    
    75.80
    
    
    
    56.10
    
    
    
    13,112
    
    
    
    9,744.06
    
    
    
    8,090.29Fourth Quarter
    
    
    74.20
    
    
    
    51.90
    
    
    
    16,861
    
    
    
    9,809.88
    
    
    
    7,807.392008
    
    
    58.10
    
    
    
    22.95
    
    
    
    17,490
    
    
    
    9,295.20
    
    
    
    4,089.93First Quarter
    
    
    56.30
    
    
    
    41.15
    
    
    
    24,097
    
    
    
    8,865.35
    
    
    
    7,408.40Second Quarter
    
    
    58.10
    
    
    
    44.00
    
    
    
    16,060
    
    
    
    9,295.20
    
    
    
    7,523.54Third Quarter
    
    
    48.80
    
    
    
    33.30
    
    
    
    15,686
    
    
    
    7,407.98
    
    
    
    5,641.95Fourth Quarter
    
    
    36.80
    
    
    
    22.95
    
    
    
    14,859
    
    
    
    5,764.01
    
    
    
    4,089.93November
    
    
    33.90
    
    
    
    23.85
    
    
    
    14,717
    
    
    
    4,995.06
    
    
    
    4,089.93December
    
    
    30.60
    
    
    
    22.95
    
    
    
    16,847
    
    
    
    4,694.81
    
    
    
    4,225.072009 (through May
8, 2009)
    
    
    46.00
    
    
    
    25.90
    
    
    
    19,750
    
    
    
    6,583.87
    
    
    
    4,259.98First Quarter
    
    
    37.45
    
    
    
    25.90
    
    
    
    18,230
    
    
    
    5,390.70
    
    
    
    4,259.98January
    
    
    31.30
    
    
    
    25.90
    
    
    
    15,317
    
    
    
    4,242.61
    
    
    
    4,789.84February
    
    
    31.00
    
    
    
    26.05
    
    
    
    17,674
    
    
    
    4,592.50
    
    
    
    4,259.98March
    
    
    37.45
    
    
    
    29.00
    
    
    
    20,721
    
    
    
    5,390.70
    
    
    
    4,425.83April
    
    
    41.50
    
    
    
    36.40
    
    
    
    23,228
    
    
    
    5,997.17
    
    
    
    5,314.45May (through
May 8, 2009)
    
    
    46.00
    
    
    
    43.00
    
    
    
    21,774
    
    
    
    6,583.87
    
    
    
    6,330.40
 
 Sources: Taiwan Stock Exchange Statistical Data 1999-2009, Taiwan Stock Exchange and Bloomberg.
 (1)
    
    As reported.   59




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##### Table of Contents



Market Price Information for Our American Depositary Shares
  Closing Price for Each ADS(1)
    
    
    Average DailyPeriod
    
    High
    
    
    Low
    
    
    Trading VolumeNT$
    
    
    NT$
    
    
    (in thousandsof shares)2004
    
    
    6.00
    
    
    
    2.83
    
    
    
    1,047,1412005
    
    
    6.95
    
    
    
    3.08
    
    
    
    719,1772006
    
    
    7.94
    
    
    
    4.74
    
    
    
    1,786,7002007
    
    
    12.54
    
    
    
    7.45
    
    
    
    1,877,492First Quarter
    
    
    10.11
    
    
    
    7.45
    
    
    
    1,698,074Second Quarter
    
    
    11.52
    
    
    
    9.56
    
    
    
    1,776,946Third Quarter
    
    
    12.41
    
    
    
    9.08
    
    
    
    1,858,061Fourth Quarter
    
    
    12.54
    
    
    
    7.85
    
    
    
    2,176,8882008
    
    
    9.55
    
    
    
    3.24
    
    
    
    2,506,994First Quarter
    
    
    8.80
    
    
    
    6.50
    
    
    
    2,928,278Second Quarter
    
    
    9.55
    
    
    
    7.17
    
    
    
    1,844,209Third Quarter
    
    
    8.05
    
    
    
    5.38
    
    
    
    2,378,050Fourth Quarter
    
    
    5.66
    
    
    
    3.24
    
    
    
    2,883,350November
    
    
    5.22
    
    
    
    3.31
    
    
    
    2,996,400December
    
    
    4.82
    
    
    
    3.24
    
    
    
    2,886,2552009 (through
May 8, 2009)
    
    
    8.11
    
    
    
    3.85
    
    
    
    2,306,541First Quarter
    
    
    6.40
    
    
    
    3.85
    
    
    
    2,147,803January
    
    
    4.91
    
    
    
    3.85
    
    
    
    2,073,945February
    
    
    4.93
    
    
    
    4.08
    
    
    
    1,885,495March
    
    
    6.40
    
    
    
    4.18
    
    
    
    2,441,486April
    
    
    7.47
    
    
    
    5.99
    
    
    
    2,583,195May (through
May 8, 2009)
    
    
    8.11
    
    
    
    7.28
    
    
    
    2,952,083
 
 Source: NASDAQ Stock Exchange.
 (1)
    
    As reported.  60




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##### Table of Contents



B. Plan of Distribution
  C. Markets
  D. Selling Shareholders
  E. Dilution
  F. Expenses of the Issue
  
 Item 10. Additional Information
 A. Share Capital
  B. Memorandum and Articles of Association
 The following statements summarize the material elements of our capital structure and the more
important rights and privileges of our shareholders conferred by Taiwan law and our articles of
incorporation.
 Objects and Purpose
    Directors
   61




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##### Table of Contents



Shares
  New Shares and Preemptive Rights
  Shareholders
   62




---



##### Table of Contents



Transfer of Shares
  Shareholders Meetings
  Voting Rights
      63




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##### Table of Contents



Dividends and Distributions
    
    
    allocation of 10% of our net income as legal reserve; and
 
    
    payment of no more than 1% of the balance after deducting the 10% legal reserve as
remuneration to our directors and supervisors. The remaining amount may be distributed
or reserved in a ratio of 10% and 90%, respectively, to our employees as their bonuses
and to our shareholders as their dividends.
    Acquisition of Our Shares by Us
   
    
    to transfer shares to our employees;
 
    
    to transfer upon conversion of bonds with warrants, preferred shares with warrants,
convertible bonds, convertible preferred shares or certificates of warrants issued by
us; and
 
    
    if necessary, to maintain our credit and our shareholders interests; provided that
the shares so purchased shall be cancelled thereafter.
  64




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##### Table of Contents



Liquidation Rights
  Other Rights of Shareholders
    Voting of Deposited Securities
     65




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##### Table of Contents




    
    the notice of the meeting sent by us; and
 
    
    a statement that the owners will be entitled to instruct the depositary or its
nominee as to the exercise of the voting rights.
     C. Material Contracts
 Immunity Agreement with Freescale Semiconductor, Inc.
   License Agreement with Flip Chip International, L.L.C.
    66




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##### Table of Contents



D. Exchange Controls
    E. Taxation
 ROC Tax Considerations
 The following summarizes the principal Taiwan tax consequences of owning and disposing of ADSs
and shares for non-residents of Taiwan. Investors in our ADSs are advised to consult their own tax
advisers as to United States, Taiwan or other tax consequences of the purchase, ownership and
disposition of ADSs.
  
    
    an individual who is not an R.O.C. citizen, who owns ADSs and who is not physically
present in the R.O.C. for 183 days or more during any calendar year; or
 
    
    a corporation or a non-corporate body that is organized under the laws of a
jurisdiction other than the R.O.C. for profit-making purposes and has no fixed place of
business or other permanent establishment in the R.O.C..
  Dividends
   67




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##### Table of Contents



Capital Gains
  Securities Transaction Tax
  Estate and Gift Tax
  Tax Treaty
  U.S. Federal Income Tax Considerations For U.S. Persons
  
    
    an individual citizen or resident of the United States;
 
    
    a corporation (or other entity treated as a corporation) created or organized in or
under the laws of the United States, any state thereof or the District of Columbia;
 
    
    an estate the income of which is subject to U.S. federal income taxation regardless
of its source;
 
    
    a trust that is subject to the primary supervision of a court within the United
States and one or more U.S. persons have the authority to control all substantial
decisions of the trust; or
 
    
    a trust that has a valid election in effect under applicable U.S. Treasury
regulations to be treated as a U.S. person.
  68




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##### Table of Contents




    
    a dealer in securities or currencies;
 
    
    a trader in securities if you elect to use a mark-to-market method of accounting for
your securities holdings;
 
    
    a financial institution or an insurance company;
 
    
    a tax-exempt organization;
 
    
    a regulated investment company;
 
    
    a real estate investment trust;
 
    
    a person liable for alternative minimum tax;
 
    
    a person holding shares or ADSs as part of a hedging, integrated or conversion
transaction, constructive sale or straddle;
 
    
    a partnership or other pass-through entity for U.S. federal income tax purposes;
 
    
    a person owning, actually or constructively, 10% or more of our voting stock; or
 
    
    a U.S. holder whose functional currency is not the United States dollar.
      69




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Taxation of Dividends
       70




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##### Table of Contents



Taxation of Capital Gains
   Passive Foreign Investment Company
   
    
    at least 75% of its gross income is passive income, which generally includes income
derived from certain dividends, interest, royalties and rents (other than royalties and
rents derived in the active conduct of a trade or business or not derived from a
related person), annuities or property transactions; or
 
    
    at least 50% of the value of its assets is attributable to assets that produce or
are held for the production of passive income.
   71




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##### Table of Contents




    
    the excess distribution or gain will be allocated ratably over your holding period
for our shares or ADSs;
 
    
    the amount allocated to the current taxable year, and any taxable year prior to the
first taxable year in which we were a PFIC, will be treated as ordinary income; and
 
    
    the amount allocated to each other year will be subject to tax at the highest tax
rate in effect for that year and the interest charge generally applicable to
underpayments of tax will be imposed on the resulting tax attributable to each such
year.
      72




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##### Table of Contents



Information Reporting and Backup Withholding
   Inheritance and Gift Tax
  F. Dividends and Paying Agents
  G. Statement by Experts
  H. Documents on Display
     73




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##### Table of Contents



I. Subsidiary Information
  
 Item 11. Quantitative and Qualitative Disclosures About Market Risk
  Foreign Exchange Risk
  Expected Maturity DateExpressed in NT$ amount (in millions)
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    Thereafter
    
    
    Total
    
    
    Fair valueOn-balance sheet financial instrumentsAssetsMarketable Securities Time Deposit (US$)
    
    
    2,010.82
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,010.82
    
    
    
    2,010.82LiabilitiesLong-term Debt:Fixed Rate (US$)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Variable Rate (US$)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Average interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 Interest Rate Risk
   2013 andDebt Obligations
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    thereafter(in millions, except percentages)US$-denominated debt:Fix rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    NT$-denominated debt:Variable rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Average interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fix rate
    
    
    750
    
    
    
    1,500
    
    
    
    750
    
    
    
    
    
    
    
    Interest rate
    
    
    2.093
    %
    
    
    2.093
    %
    
    
    2.093
    %
    
    
    
    
    
    
    RMB-denominated debt:Variable rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Average interest rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fair value
    
    
    757
    
    
    
    1,527
    
    
    
    769
    
    
    
    
    
    
    
    
  74




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##### Table of Contents



Item 12. Description of Securities Other Than Equity Securities
  
 PART II
 
 Item 13. Defaults, Dividend Arrearages and Delinquencies
  
 Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
  
 Item 15. Controls and Procedures
 Disclosure Controls and Procedures
   Managements Annual Report on Internal Control over Financial Reporting
   75




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##### Table of Contents



Changes in Internal Control over Financial Reporting
  
 Item 16A. Audit Committee Financial Expert
  
 Item 16B. Code of Ethics
 www.spil.com.tw
 
 Item 16C. Principal Accountant Fees and Services
   2007
    
    
    2008
    
    
    2008NT$
    
    
    NT$
    
    
    US$(in thousands)
    
    
    (in thousands)
    
    
    (in thousands)Audit Fees(1)
    
    
    22,220
    
    
    
    21,980
    
    
    
    670.9Audit-related Fees(2)
    
    
    570
    
    
    
    380
    
    
    
    11.6Tax Fees(3)
    
    
    3,590
    
    
    
    3,470
    
    
    
    105.9Total
    
    
    26,380
    
    
    
    25,830
    
    
    
    788.4
 
 (1)
    
    Audit fees consist of fees billed for the audit or review of our annual financial statements,
internal control over financial reporting, quarterly financial statements, and related
statutory and regulatory filings.(2)
    
    Audit-related fees consist of fees billed for assurance and related services that are
reasonably related to the performance of the audit or review of our financial statements and
are not reported above as Audit Fees, including consultations of financial accounting and
reporting standards.(3)
    
    Tax fees include fees billed for tax compliance services and tax advice services.  76




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##### Table of Contents



Pre-approval Policies and Procedures
  
 Item 16D. Exemptions from the Listing Standards for Audit Committees
  
 Item 16E. Purchase of Equity Securities by the Issuer and Affiliated Purchasers
  
 Item 16F. Change in Registrants Certifying Accountant
  
 Item 16G. Corporate Governance
     77




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##### Table of Contents



78




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##### Table of Contents



PART III
 
 Item 17. Financial Statements
  
 Item 18. Financial Statements
  PageSILICONWARE PRECISION INDUSTRIES CO., LTD.Report of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets as of December 31, 2007 and 2008
    
    
    F-4Consolidated Statements of Income for the Years Ended December 31, 2006, 2007 and 2008
    
    
    F-6Consolidated Statements of Changes in Stockholders Equity for the Years Ended December
31, 2006, 2007 and 2008
    
    
    F-7Consolidated Statements of Cash Flows for the Years Ended December 31, 2006, 2007 and 2008
    
    
    F-10Notes to Consolidated Financial Statements
    
    
    F-12CHIPMOS TECHNOLOGIES INC.Report
of Independent Registered Public Accounting Firm
    
    
    F-76Consolidated Balance Sheets as of December 31, 2005 and 2006
    
    
    F-77Consolidated Income Statements for the Years Ended December 31, 2004, 2005 and 2006
    
    
    F-79Consolidated Statements of Changes in Shareholders Equity for the Years Ended December
31, 2004, 2005 and 2006
    
    
    F-81Consolidated Statements of Cash Flows for the Years Ended December 31, 2004, 2005 and 2006
    
    
    F-82Notes to Consolidated Financial Statements
    
    
    F-84
  79




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##### Table of Contents



Item 19. Exhibit Index
 ExhibitNumber
    
    Description of Exhibits*1.1
    
    
    Articles of
Incorporation of Siliconware Precision Industries Co., Ltd., as
amended on June 13, 2007 (English translation)2.1
    
    
    Form of the Second Amended and Restated Deposit Agreement among Siliconware Precision Industries Co.,
Ltd., Citibank, N.A. and Holders and Beneficial owners of American Depositary Shares issued thereunder,
including the form of American Depositary
Receipts(1)4.1
    
    
    Immunity Agreement with Motorola, Inc. (effective from November 5, 1996
to December 31,
2010)(2)4.2
    
    
    License Agreement with Flip Chip Technologies, L.L.C. (effective from November 28, 1999 to November 27,
2009)(3)4.3
    
    
    Joint Venture Agreement with Mosel Vitelic, Inc. (English
translation)(4)*8.1
    
    
    List of Significant Subsidiaries of Siliconware Precision Industries Co., Ltd.11.1
    
    
    Code of
Ethics(5)*12.1
    
    
    Certification of our Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*12.2
    
    
    Certification of our Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*13.1
    
    
    Certification by our Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002*13.2
    
    
    Certification by our Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
 
 *
    
    filed herewith.(1)
    
    Incorporated by reference to Exhibit 4.1 to our Registration Statement on Form F-1 (File No.
333-11812) filed with the SEC on April 29, 2000.(2)
    
    Incorporated by reference to Exhibit 10.2 to our Registration Statement on Form F-1 (File No.
333-11812) filed with the SEC on April 29, 2000.(3)
    
    Incorporated by reference to Exhibit 10.5 to our Registration Statement on Form F-1 (File No.
333-11812) filed with the SEC on April 29, 2000.(4)
    
    Incorporated by reference to Exhibit 10.6 to our Registration Statement on Form F-1 (File No.
333-11812) filed with the SEC on April 29, 2000.(5)
    
    Incorporated by reference to Exhibit 11.1 to our Year 2003 Form 20-F filed with the SEC on
June 28, 2004.  80




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##### Table of Contents



SIGNATURES
  SILICONWARE PRECISION INDUSTRIES CO., LTD.By:
    /s/ Eva ChenName:
    Eva ChenTitle:
    Chief Financial Officer   81




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##### Table of Contents



PageSILICONWARE PRECISION INDUSTRIES CO., LTD.Report of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets as of December 31, 2007 and 2008
    
    
    F-4Consolidated Statements of Income for the Years Ended December 31, 2006, 2007 and 2008
    
    
    F-6Consolidated Statements of Changes in Stockholders Equity for the Years Ended December
31, 2006, 2007 and 2008
    
    
    F-7Consolidated Statements of Cash Flows for the Years Ended December 31, 2006, 2007 and 2008
    
    
    F-10Notes to Consolidated Financial Statements
    
    
    F-12CHIPMOS TECHNOLOGIES INC.Report of Independent Registered Public Accounting Firm
    
    
    F-76Consolidated Balance Sheets as of December 31, 2005 and 2006
    
    
    F-77Consolidated Income Statements for the Years Ended December 31, 2004, 2005 and 2006
    
    
    F-79Consolidated Statements of Changes in Shareholders Equity for the Years Ended December
31, 2004, 2005 and 2006
    
    
    F-81Consolidated Statements of Cash Flows for the Years Ended December 31, 2004, 2005 and 2006
    
    
    F-82Notes to Consolidated Financial Statements
    
    
    F-84
  F-1




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
 Internal Control  Integrated Framework
  F-2




---



##### Table of Contents



Accounting for Financial Instruments" Disclosure and Presentation of Financial Instruments" Accounting for Employees Bonuses and Directors and
Supervisors Remuneration
   
 
  F-3




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
  December 31,2007
    
    
    2008NT$
    
    
    NT$
    
    
    US$(Note 2)ASSETSCurrent AssetsCash (Note 4)
    
    
    22,624,658
    
    
    
    18,840,965
    
    
    
    575,121Notes receivable, net
    
    
    116,622
    
    
    
    46,173
    
    
    
    1,409Accounts receivable, net (Notes 5 and 25)
    
    
    11,257,006
    
    
    
    7,290,315
    
    
    
    222,537Other financial assets, current (Notes 25 and 26)
    
    
    688,105
    
    
    
    464,557
    
    
    
    14,181Inventories (Note 6)
    
    
    3,460,983
    
    
    
    2,383,067
    
    
    
    72,743Deferred income tax assets, current (Note 22)
    
    
    1,268,774
    
    
    
    425,761
    
    
    
    12,996Other current assets  other
    
    
    626,599
    
    
    
    696,466
    
    
    
    21,26040,042,747
    
    
    
    30,147,304
    
    
    
    920,247Long-term InvestmentsAvailable-for-sale financial assets, noncurrent (Notes 7 and 30)
    
    
    4,873,284
    
    
    
    1,075,480
    
    
    
    32,829Financial assets carried at cost (Notes 8 and 30)
    
    
    719,055
    
    
    
    322,036
    
    
    
    9,8305,592,339
    
    
    
    1,397,516
    
    
    
    42,659Property, Plant and Equipment (Notes 10 and 25)Cost:Land
    
    
    2,892,083
    
    
    
    2,902,823
    
    
    
    88,609Buildings
    
    
    9,594,035
    
    
    
    11,435,051
    
    
    
    349,055Machinery and equipment
    
    
    51,980,903
    
    
    
    53,528,647
    
    
    
    1,633,964Utility equipment
    
    
    1,023,203
    
    
    
    1,225,810
    
    
    
    37,418Furniture and fixtures
    
    
    819,737
    
    
    
    829,769
    
    
    
    25,329Other equipment
    
    
    2,087,567
    
    
    
    2,356,471
    
    
    
    71,93168,397,528
    
    
    
    72,278,571
    
    
    
    2,206,306Less: Accumulated depreciation
    
    
    (31,986,343
    )
    
    
    (34,090,559
    )
    
    
    (1,040,615
    )Construction in progress and prepayments for equipment
    
    
    2,211,180
    
    
    
    651,621
    
    
    
    19,89138,622,365
    
    
    
    38,839,633
    
    
    
    1,185,582Other AssetsRefundable deposits
    
    
    10,457
    
    
    
    10,034
    
    
    
    306Deferred charges
    
    
    766,713
    
    
    
    727,025
    
    
    
    22,192Deferred income tax asset, noncurrent (Note 22)
    
    
    527,213
    
    
    
    2,061,567
    
    
    
    62,929Other assets  other (Note 11)
    
    
    211,252
    
    
    
    197,122
    
    
    
    6,0181,515,635
    
    
    
    2,995,748
    
    
    
    91,445TOTAL ASSETS
    
    
    85,773,086
    
    
    
    73,380,201
    
    
    
    2,239,933
    F-4




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  CONSOLIDATED BALANCE SHEETS (CONTINUED)
 December 31,2007
    
    
    2008NT$
    
    
    NT$
    
    
    US$(Note 2)LIABILITIES AND STOCKHOLDERS EQUITYCurrent LiabilitiesShort-term loans (Notes 12 and 30)
    
    
    529,323
    
    
    
    654,933
    
    
    
    19,992Notes payable
    
    
    769
    
    
    
    655
    
    
    
    20Accounts payable (Note 25)
    
    
    6,430,221
    
    
    
    4,836,163
    
    
    
    147,624Income tax payable (Note 22)
    
    
    1,501,656
    
    
    
    821,878
    
    
    
    25,088Accrued expenses
    
    
    2,442,444
    
    
    
    3,184,879
    
    
    
    97,219Other payables (Notes 13 and 25)
    
    
    2,633,392
    
    
    
    1,253,730
    
    
    
    38,270Current portion of long-term loans (Note 15)
    
    
    
    
    
    
    749,354
    
    
    
    22,874Other current liabilities
    
    
    141,516
    
    
    
    164,589
    
    
    
    5,02413,679,321
    
    
    
    11,666,181
    
    
    
    356,111Long-term LiabilitiesLong-term loans (Notes 15 and 30)
    
    
    2,995,871
    
    
    
    2,248,065
    
    
    
    68,6222,995,871
    
    
    
    2,248,065
    
    
    
    68,622Other Liabilities (Note 16)
    
    
    189,740
    
    
    
    151,834
    
    
    
    4,635Total Liabilities
    
    
    16,864,932
    
    
    
    14,066,080
    
    
    
    429,368Stockholders EquityCapital stock (Notes 1 and 17)
    
    
    30,734,245
    
    
    
    31,525,899
    
    
    
    962,329Capital reserve (Note 18)Additional paid in capital
    
    
    14,456,352
    
    
    
    14,456,352
    
    
    
    441,280Premium arising from merger
    
    
    1,951,563
    
    
    
    1,951,563
    
    
    
    59,572Other
    
    
    250,709
    
    
    
    412,296
    
    
    
    12,585Retained earnings (Note 19)Legal reserve
    
    
    3,340,131
    
    
    
    5,089,066
    
    
    
    155,344Unappropriated earnings
    
    
    17,761,366
    
    
    
    6,453,435
    
    
    
    196,991Unrealized gain on available-for-sale financial assets (Note 7)
    
    
    1,160,659
    
    
    
    
    
    
    
    Cumulative translation adjustments
    
    
    84,926
    
    
    
    296,866
    
    
    
    9,062Net loss not recognized as pension cost (Note 16)
    
    
    (37,613
    )
    
    
    (77,172
    )
    
    
    (2,356
    )Treasury stock (Note 20)
    
    
    (794,184
    )
    
    
    (794,184
    )
    
    
    (24,242
    )Total Stockholders Equity
    
    
    68,908,154
    
    
    
    59,314,121
    
    
    
    1,810,565Commitments and Contingencies (Note 27)TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    
    85,773,086
    
    
    
    73,380,201
    
    
    
    2,239,933
   F-5




---



##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF INCOME
  For the years ended December 31,2006
    
    
    2007
    
    
    2008NT$
    
    
    NT$
    
    
    NT$
    
    
    US$(Note 2)Net Operating Revenues (Note 25)
    
    
    57,125,920
    
    
    
    66,177,329
    
    
    
    62,402,934
    
    
    
    1,904,851Cost of Goods Sold (Note 25)
    
    
    (41,893,872
    )
    
    
    (46,758,974
    )
    
    
    (49,456,148
    )
    
    
    (1,509,650
    )Gross Profit
    
    
    15,232,048
    
    
    
    19,418,355
    
    
    
    12,946,786
    
    
    
    395,201Operating Expenses (Note 25)Selling expenses
    
    
    (717,065
    )
    
    
    (494,598
    )
    
    
    (942,653
    )
    
    
    (28,775
    )General and administrative expenses
    
    
    (1,078,217
    )
    
    
    (1,441,499
    )
    
    
    (1,677,753
    )
    
    
    (51,213
    )Research and development expenses
    
    
    (1,194,178
    )
    
    
    (1,287,951
    )
    
    
    (1,382,560
    )
    
    
    (42,203
    )(2,989,460
    )
    
    
    (3,224,048
    )
    
    
    (4,002,966
    )
    
    
    (122,191
    )Operating Income
    
    
    12,242,588
    
    
    
    16,194,307
    
    
    
    8,943,820
    
    
    
    273,010Non-operating Income and GainInterest income (Note 30)
    
    
    396,461
    
    
    
    368,610
    
    
    
    366,086
    
    
    
    11,175Investment income recognized under
the equity method (Note 9)
    
    
    1,153,630
    
    
    
    246,410
    
    
    
    
    
    
    
    Gain on disposal of investments (Notes 9 and 25)
    
    
    
    
    
    
    2,323,279
    
    
    
    
    
    
    
    Others (Note 25)
    
    
    703,427
    
    
    
    689,309
    
    
    
    410,581
    
    
    
    12,5332,253,518
    
    
    
    3,627,608
    
    
    
    776,667
    
    
    
    23,708Non-operating Expenses and LossesInterest expenses (Note 30)
    
    
    (130,443
    )
    
    
    (90,294
    )
    
    
    (89,017
    )
    
    
    (2,717
    )Impairment loss (Notes 7 and 8)
    
    
    (27,013
    )
    
    
    
    
    
    
    (3,030,605
    )
    
    
    (92,509
    )Others (Note 25)
    
    
    (61,007
    )
    
    
    (103,129
    )
    
    
    (76,812
    )
    
    
    (2,345
    )(218,463
    )
    
    
    (193,423
    )
    
    
    (3,196,434
    )
    
    
    (97,571
    )Income from Continuing Operations Before Income Tax
    
    
    14,277,643
    
    
    
    19,628,492
    
    
    
    6,524,053
    
    
    
    199,147Income Tax Expense (Note 22)
    
    
    (948,574
    )
    
    
    (2,139,141
    )
    
    
    (210,523
    )
    
    
    (6,426
    )Net Income
    
    
    13,329,069
    
    
    
    17,489,351
    
    
    
    6,313,530
    
    
    
    192,721
 For the years ended December 31,2006
    
    
    2007
    
    
    2008NT$
    
    
    NT$
    
    
    NT$
    
    
    US$Basic Earnings Per Share (in dollars) (Note 23)Net Income (Before Tax)
    
    
    4.97
    
    
    
    6.35
    
    
    
    2.09
    
    
    
    0.06Net Income (After Tax)
    
    
    4.63
    
    
    
    5.66
    
    
    
    2.03
    
    
    
    0.06Diluted Earnings Per Share (in dollars) (Note 23)Net Income (Before Tax)
    
    
    4.66
    
    
    
    6.32
    
    
    
    2.08
    
    
    
    0.06Net Income (After Tax)
    
    
    4.36
    
    
    
    5.63
    
    
    
    2.01
    
    
    
    0.06
   F-6




---



##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
  Unrealized(Loss) Gain onCapital Stock Issued
    
    
    
    
    
    
    Retained Earnings
    
    
    Available-for-
    
    
    Cumulative
    
    
    Net Loss NotShares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Special
    
    
    Unappropriated
    
    
    Sale Financial
    
    
    Translation
    
    
    Recognized as
    
    
    Treasury2006
    
    (Thousand)
    
    
    Capital Stock
    
    
    Capital Reserve
    
    
    Legal Reserve
    
    
    Reserve
    
    
    Earnings
    
    
    Assets
    
    
    Adjustments
    
    
    Pension Cost
    
    
    Stock
    
    
    TotalNT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$Balance at January 1, 2006
    
    
    2,328,919
    
    
    
    23,289,193
    
    
    
    8,853,379
    
    
    
    1,179,104
    
    
    
    141,053
    
    
    
    8,241,034
    
    
    
    (737
    )
    
    
    (47,463
    )
    
    
    (1,828
    )
    
    
    (828,728
    )
    
    
    40,825,007Appropriation for legal reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    824,390
    
    
    
    
    
    
    
    (824,390
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Reversal of special reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (91,024
    )
    
    
    91,024
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Remuneration to directors and supervisors
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (149,324
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (149,324
    )Employees cash bonuses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (463,284
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (463,284
    )Employees stock bonuses
    
    
    26,779
    
    
    
    267,794
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (267,794
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,169,558
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,169,558
    )Stock dividends
    
    
    241,015
    
    
    
    2,410,149
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,410,149
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unrealized gain on available-for-sale financial assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,765,885
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,765,885Conversion of Euro convertible bonds
    
    
    277,870
    
    
    
    2,778,697
    
    
    
    5,692,509
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,471,206Employee stock option exercised
    
    
    13,174
    
    
    
    131,741
    
    
    
    15,729
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    147,470Long-term investment adjustment for investee
companys additional paid-in capital
    
    
    
    
    
    
    
    
    
    
    30,645
    
    
    
    
    
    
    
    
    
    
    
    37,300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    67,945Long-term investment adjustment for investee
companys cumulative translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25,187
    
    
    
    
    
    
    
    
    
    
    
    25,187Reversal of long-term investment adjustment for
investee companys unrecognized pension cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41
    
    
    
    
    
    
    
    41Long-term investment adjustment for
investee companys treasury stock variances
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,178
    
    
    
    33,178Cash dividends from treasury stock held
by subsidiary
    
    
    
    
    
    
    
    
    
    
    53,391
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53,391Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,329,069
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,329,069Balance at December 31, 2006
    
    
    2,887,757
    
    
    
    28,877,574
    
    
    
    14,645,653
    
    
    
    2,003,494
    
    
    
    50,029
    
    
    
    13,413,928
    
    
    
    4,765,148
    
    
    
    (22,276
    )
    
    
    (1,787
    )
    
    
    (795,550
    )
    
    
    62,936,213
 
  F-7




---



##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (CONTINUED)
 UnrealizedGain (Loss) onCapital Stock Issued
    
    
    
    
    
    
    Retained Earnings
    
    
    Available-for-
    
    
    Cumulative
    
    
    Net Loss NotShares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Special
    
    
    Unappropriated
    
    
    Sale Financial
    
    
    Translation
    
    
    Recognized as
    
    
    Treasury2007
    
    (Thousand)
    
    
    Capital Stock
    
    
    Capital Reserve
    
    
    Legal Reserve
    
    
    Reserve
    
    
    Earnings
    
    
    Assets
    
    
    Adjustments
    
    
    Pension Cost
    
    
    Stock
    
    
    TotalNT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$Balance at January 1, 2007
    
    
    2,887,757
    
    
    
    28,877,574
    
    
    
    14,645,653
    
    
    
    2,003,494
    
    
    
    50,029
    
    
    
    13,413,928
    
    
    
    4,765,148
    
    
    
    (22,276
    )
    
    
    (1,787
    )
    
    
    (795,550
    )
    
    
    62,936,213Appropriation for legal reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,336,637
    
    
    
    
    
    
    
    (1,336,637
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Reversal of special reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (50,029
    )
    
    
    50,029
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Remuneration to directors and supervisors
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (120,797
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (120,797
    )Employees cash bonuses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (821,415
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (821,415
    )Employees stock bonuses
    
    
    35,204
    
    
    
    352,035
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (352,035
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,974,332
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,974,332
    )Stock dividends
    
    
    58,673
    
    
    
    586,726
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (586,726
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Conversion of Euro convertible bonds
    
    
    80,711
    
    
    
    807,112
    
    
    
    1,929,508
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,736,620Employee stock option exercised
    
    
    11,080
    
    
    
    110,798
    
    
    
    (16,313
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    94,485Long-term investment adjustment for
investee companys additional paid-in capital
    
    
    
    
    
    
    
    
    
    
    (18,200
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,200
    )Long-term investment adjustment for investee
companys cumulative translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    107,202
    
    
    
    
    
    
    
    
    
    
    
    107,202Unrealized loss on available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,604,489
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,604,489
    )Long-term investment adjustment for
investee companys treasury stock variances
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,366
    
    
    
    1,366Reversal of long-term investment adjustment for
investee companys unrecognized pension cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,787
    
    
    
    
    
    
    
    1,787Net loss not recognized as pension cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37,613
    )
    
    
    
    
    
    
    (37,613
    )Cash dividends from treasury stock held
by subsidiary
    
    
    
    
    
    
    
    
    
    
    117,976
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    117,976Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,489,351
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,489,351Balance at December 31, 2007
    
    
    3,073,425
    
    
    
    30,734,245
    
    
    
    16,658,624
    
    
    
    3,340,131
    
    
    
    
    
    
    
    17,761,366
    
    
    
    1,160,659
    
    
    
    84,926
    
    
    
    (37,613
    )
    
    
    (794,184
    )
    
    
    68,908,154
 
  F-8




---



##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY (CONTINUED)
 UnrealizedGain (Loss) onCapital Stock Issued
    
    
    
    
    
    
    Retained Earnings
    
    
    Available-for-
    
    
    Cumulative
    
    
    Net Loss NotShares
    
    
    
    
    
    
    
    
    
    
    
    
    
    Special
    
    
    Unappropriated
    
    
    Sale Financial
    
    
    Translation
    
    
    Recognized as
    
    
    Treasury2008
    
    (Thousand)
    
    
    Capital Stock
    
    
    Capital Reserve
    
    
    Legal Reserve
    
    
    Reserve
    
    
    Earnings
    
    
    Assets
    
    
    Adjustments
    
    
    Pension Cost
    
    
    Stock
    
    
    TotalNT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$Balance at January 1, 2008
    
    
    3,073,425
    
    
    
    30,734,245
    
    
    
    16,658,624
    
    
    
    3,340,131
    
    
    
    
    
    
    
    17,761,366
    
    
    
    1,160,659
    
    
    
    84,926
    
    
    
    (37,613
    )
    
    
    (794,184
    )
    
    
    68,908,154Appropriation for legal reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,748,935
    
    
    
    
    
    
    
    (1,748,935
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Remuneration to directors and supervisors
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (157,405
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (157,405
    )Employees cash bonuses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,100,058
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,100,058
    )Employees stock bonuses
    
    
    47,145
    
    
    
    471,454
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (471,454
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,836,139
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,836,139
    )Stock dividends
    
    
    30,747
    
    
    
    307,470
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (307,470
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Employee stock option exercised
    
    
    1,273
    
    
    
    12,730
    
    
    
    (5,335
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,395Long-term investment adjustment for
investee companys additional paid-in capital
    
    
    
    
    
    
    
    
    
    
    5,507
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,507Long-term investment adjustment for
investee companys cumulative translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    211,940
    
    
    
    
    
    
    
    
    
    
    
    211,940Unrealized loss on available-for-sale financial assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,160,659
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,160,659
    )Net loss not recognized as pension cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (39,559
    )
    
    
    
    
    
    
    (39,559
    )Cash dividends for treasury stock held by subsidiary
    
    
    
    
    
    
    
    
    
    
    161,415
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    161,415Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,313,530
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,313,530Balance at December 31, 2008
    
    
    3,152,590
    
    
    
    31,525,899
    
    
    
    16,820,211
    
    
    
    5,089,066
    
    
    
    
    
    
    
    6,453,435
    
    
    
    
    
    
    
    296,866
    
    
    
    (77,172
    )
    
    
    (794,184
    )
    
    
    59,314,121
   F-9




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
  For the years ended December 31,2006
    
    
    2007
    
    
    2008NT$
    
    
    NT$
    
    
    NT$
    
    
    US$(Note 2)Cash flows from operating activitiesNet income
    
    
    13,329,069
    
    
    
    17,489,351
    
    
    
    6,313,530
    
    
    
    192,721Adjustments to reconcile net income to net cash
provided
by operating activities:Depreciation
    
    
    6,752,711
    
    
    
    7,603,913
    
    
    
    8,845,225
    
    
    
    270,001Amortization
    
    
    541,718
    
    
    
    564,893
    
    
    
    586,439
    
    
    
    17,901Bad debts expense
    
    
    11,982
    
    
    
    8,800
    
    
    
    271,091
    
    
    
    8,275Provision for (reversal of) sales allowance
    
    
    (11,705
    )
    
    
    (19,532
    )
    
    
    120,153
    
    
    
    3,668Gain on disposal of investments
    
    
    (82,908
    )
    
    
    (2,323,279
    )
    
    
    
    
    
    
    Provision for (recovery of) loss on obsolescence
and decline
in market value of inventories
    
    
    (2,329
    )
    
    
    18,471
    
    
    
    9,065
    
    
    
    277Long-term investment income under the equity
method
    
    
    (1,153,630
    )
    
    
    (246,410
    )
    
    
    
    
    
    
    Cash dividends received from long-term
investment under
the equity method
    
    
    175,742
    
    
    
    
    
    
    
    
    
    
    
    Impairment loss
    
    
    27,013
    
    
    
    
    
    
    
    3,030,605
    
    
    
    92,509Investment loss
    
    
    
    
    
    
    3,891
    
    
    
    
    
    
    
    Gain on disposal of property, plant and equipment
    
    
    (45,268
    )
    
    
    (8,670
    )
    
    
    (30,473
    )
    
    
    (930
    )Provision for loss on idle assets
    
    
    27,672
    
    
    
    48,528
    
    
    
    43,093
    
    
    
    1,315Amortization of discount on long-term notes
    
    
    6,537
    
    
    
    62,790
    
    
    
    1,548
    
    
    
    47Compensation interest on bonds payable
    
    
    30,810
    
    
    
    36
    
    
    
    
    
    
    
    Foreign currency exchange (gain) loss on bonds
payable
    
    
    (113,157
    )
    
    
    34,880
    
    
    
    
    
    
    
    (Increase) decrease in assets:Notes receivable
    
    
    115,788
    
    
    
    (75,511
    )
    
    
    70,449
    
    
    
    2,150Accounts receivable
    
    
    336,037
    
    
    
    (2,042,049
    )
    
    
    3,611,376
    
    
    
    110,237Other financial assets, current
    
    
    131,029
    
    
    
    53,214
    
    
    
    248,323
    
    
    
    7,580Inventories
    
    
    (30,214
    )
    
    
    (635,695
    )
    
    
    1,085,907
    
    
    
    33,147Deferred income tax assets
    
    
    97,824
    
    
    
    575,077
    
    
    
    (691,318
    )
    
    
    (21,102
    )Other current assets
    
    
    41,987
    
    
    
    (132,388
    )
    
    
    (66,688
    )
    
    
    (2,036
    )Increase (decrease) in liabilities:Notes payable
    
    
    (5,493
    )
    
    
    769
    
    
    
    (114
    )
    
    
    (3
    )Accounts payable
    
    
    (1,009,711
    )
    
    
    2,303,799
    
    
    
    (1,618,261
    )
    
    
    (49,397
    )Income tax payable
    
    
    794,366
    
    
    
    554,274
    
    
    
    (679,778
    )
    
    
    (20,750
    )Accrued expenses
    
    
    561,278
    
    
    
    221,131
    
    
    
    737,548
    
    
    
    22,514Other payables
    
    
    (368,631
    )
    
    
    413,761
    
    
    
    (312,998
    )
    
    
    (9,554
    )Other current liabilities
    
    
    94,763
    
    
    
    (64,436
    )
    
    
    20,847
    
    
    
    636Other liabilities
    
    
    
    
    
    
    9,175
    
    
    
    928
    
    
    
    28Accrued pension liabilities
    
    
    (3,268
    )
    
    
    3,798
    
    
    
    8,195
    
    
    
    250Net cash provided by operating activities
    
    
    20,250,012
    
    
    
    24,422,581
    
    
    
    21,604,692
    
    
    
    659,484
 
  F-10




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
 For the years ended December 31,2006
    
    
    2007
    
    
    2008NT$
    
    
    NT$
    
    
    NT$
    
    
    US$(Note 2)Cash flows from investing activitiesRefund of (payment for) security deposits
    
    
    9,200
    
    
    
    (52,395
    )
    
    
    (19,500
    )
    
    
    (595
    )(Increase) decrease of financial assets carried at cost
    
    
    (687,840
    )
    
    
    9,163
    
    
    
    3,559
    
    
    
    109Purchase of available-for-sale financial assets
    
    
    
    
    
    
    (2,523,529
    )
    
    
    
    
    
    
    Proceeds from disposal of long-term investments
    
    
    91,386
    
    
    
    9,563,882
    
    
    
    
    
    
    
    Acquisition of property, plant and equipment
    
    
    (11,038,964
    )
    
    
    (12,151,393
    )
    
    
    (10,048,005
    )
    
    
    (306,716
    )Proceeds from disposal of assets
    
    
    268,735
    
    
    
    397,046
    
    
    
    48,911
    
    
    
    1,493Payment for deferred charges
    
    
    (468,465
    )
    
    
    (638,421
    )
    
    
    (540,914
    )
    
    
    (16,512
    )(Payment for) receipt of refundable deposits
    
    
    (1,191
    )
    
    
    683
    
    
    
    479
    
    
    
    15Net cash used in investing activities
    
    
    (11,827,139
    )
    
    
    (5,394,964
    )
    
    
    (10,555,470
    )
    
    
    (322,206
    )Cash flows from financing activitiesProceeds from short-term loans
    
    
    331,107
    
    
    
    73,745
    
    
    
    687,298
    
    
    
    20,980Repayment of short-term loans
    
    
    
    
    
    
    
    
    
    
    (603,309
    )
    
    
    (18,416
    )Repayment of long-term loans
    
    
    (2,046,184
    )
    
    
    (166,443
    )
    
    
    
    
    
    
    Redemption of bonds payable
    
    
    
    
    
    
    (18,945
    )
    
    
    
    
    
    
    Receipt (repayment) of deposit-in
    
    
    256,453
    
    
    
    (340,983
    )
    
    
    (86,331
    )
    
    
    (2,636
    )Proceeds from the exercise of employee stock option
    
    
    147,470
    
    
    
    94,485
    
    
    
    7,395
    
    
    
    226Remuneration to directors and supervisors
    
    
    (149,324
    )
    
    
    (120,798
    )
    
    
    (157,405
    )
    
    
    (4,805
    )Payment for cash dividends and employees bonuses
    
    
    (4,579,452
    )
    
    
    (10,677,739
    )
    
    
    (14,774,769
    )
    
    
    (451,000
    )Net cash used in financing activities
    
    
    (6,039,930
    )
    
    
    (11,156,678
    )
    
    
    (14,927,121
    )
    
    
    (455,651
    )Effect on foreign currency exchange
    
    
    7,712
    
    
    
    22,231
    
    
    
    94,206
    
    
    
    2,876Net increase (decrease) in cash
    
    
    2,390,655
    
    
    
    7,893,170
    
    
    
    (3,783,693
    )
    
    
    (115,497
    )Cash at the beginning of the year
    
    
    12,340,833
    
    
    
    14,731,488
    
    
    
    22,624,658
    
    
    
    690,618Cash at the end of the year
    
    
    14,731,488
    
    
    
    22,624,658
    
    
    
    18,840,965
    
    
    
    575,121Supplemental disclosures of cash flow information:Cash paid for interest (excluding capitalized interest)
    
    
    134,525
    
    
    
    91,459
    
    
    
    91,999
    
    
    
    2,808Cash paid for income tax
    
    
    51,222
    
    
    
    994,542
    
    
    
    1,575,888
    
    
    
    48,104Supplemental disclosures of partial cash paid for
investing activities:Acquisition of property, plant and equipment
    
    
    10,703,697
    
    
    
    12,540,792
    
    
    
    8,974,422
    
    
    
    273,945Add: Payable at the beginning of the year
    
    
    1,662,379
    
    
    
    1,327,112
    
    
    
    1,716,511
    
    
    
    52,397Less: Payable at the end of the year
    
    
    (1,327,112
    )
    
    
    (1,716,511
    )
    
    
    (642,928
    )
    
    
    (19,626
    )Cash paid
    
    
    11,038,964
    
    
    
    12,151,393
    
    
    
    10,048,005
    
    
    
    306,716Non-cash investing and financing activities:Convertible bonds converted to capital stock and premiumConvertible bonds converted to capital stock
    
    
    2,778,697
    
    
    
    807,112
    
    
    
    
    
    
    
    Convertible bonds converted to paid-in capital
    
    
    5,692,509
    
    
    
    1,929,508
    
    
    
    
    
    
    
    Converted amount of convertible bonds
    
    
    8,471,206
    
    
    
    2,736,620
    
    
    
    
    
    
    
    Current portion of long-term loans
    
    
    
    
    
    
    
    
    
    
    749,354
    
    
    
    22,874
   F-11




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  1.
    
    History and Organization
 (1)
    
    Siliconware Precision Industries Co., Ltd. (the Company) was incorporated as a
company limited by shares under the Company Law of the Republic of China (R.O.C) in May
1984 and was listed on the Taiwan Stock Exchange in April 1993. As of December 31, 2008,
issued common stock was NT$31,525,899. The Company is mainly engaged in the assembly,
testing and turnkey services of integrated circuits. As of December 31, 2008, the Company
and its subsidiaries had 15,762 employees.(2)
    
    Consolidated subsidiaries:
 % of ownership held by thenamed investors as of December 31,Name of investor
    
    Name of subsidiaries
    
    Main operating activities
    
    2007
    
    
    2008The Company
    
    Siliconware Investment Company Ltd.
    
    Investment activities
    
    
    100
    %
    
    
    100
    %The Company
    
    SPIL (B.V.I.) Holding Limited
    
    Investment activities
    
    
    100
    %
    
    
    100
    %SPIL (B.V.I.) Holding Limited
    
    Siliconware USA, Inc.
    
    Communications and relationship maintenance with companies headquartered in North America
    
    
    100
    %
    
    
    100
    %SPIL (B.V.I.) Holding Limited
    
    SPIL (Cayman) Holding Limited
    
    Investment activities
    
    
    100
    %
    
    
    100
    %SPIL (Cayman) Holding Limited
    
    Siliconware Technology (Suzhou) Limited
    
    Assembly and testing service providing
    
    
    100
    %
    
    
    100
    %
 (3)
    
    Non-consolidated subsidiaries:None.(4)
    
    Adjustments for subsidiaries with different accounting periods:None.(5)
    
    Extraordinary risks from foreign subsidiaries:None.(6)
    
    Material limitations for capital transfer from subsidiaries to the parent
company:None.(7)
    
    The parent companys stocks held by subsidiaries:Please refer to Note 20.(8)
    
    Convertible bonds and stocks issued by subsidiaries:Please refer to Note 31.
  F-12




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 2.
    
    Summary of Significant Accounting Policies
   Basic of Consolidation
  Use of Estimates
  Translation of Foreign Currency Transactions on Subsidiaries Financial Statements
  Foreign Currency Transactions
  Convenience Translation into US Dollars
   F-13




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Classification of Current and Noncurrent Assets/Liabilities
 A.
    
    Assets that meet one of the following criteria are classified as current assets;
otherwise they are classified as noncurrent assets:
 (1)
    
    Assets arising from operating activities that are expected to be realized or
consumed, or are intended to be sold within the normal operation cycle;(2)
    
    Assets held mainly for trading purposes;(3)
    
    Assets that are expected to be realized within twelve months from the balance sheet
date;(4)
    
    Cash or cash equivalents, excluding restricted cash and cash equivalents and those
that are to be exchanged
or used to pay off liabilities more than twelve months after the balance sheet date.
 B.
    
    Liabilities that meet one of the following criteria are classified as current
liabilities; otherwise they are classified as noncurrent liabilities:
 (1)
    
    Liabilities arising from operating activities that are expected to be paid off
within the normal operating
cycle;(2)
    
    Liabilities arising mainly from trading activities;(3)
    
    Liabilities that are to be paid off within twelve months from the balance sheet
date;(4)
    
    Liabilities for which the repayment date cannot be extended unconditionally to more
than twelve months after the balance sheet date.
 Accounts Receivable
  Allowance for Doubtful Accounts
  Allowance for Sales Discounts
  Inventories
   F-14




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Available-for-sale Securities
  Financial Assets Carried at Cost
  Long-term Investments Accounted for under Equity Method
 A.
    
    Long-term equity investments in which the Company owns at least 20% of the voting
stocks of the investee companies are accounted for under the equity method, unless the
Company cannot exercise significant influence over the investee company. The excess of the
acquisition cost over the investees fair value of the identifiable net assets acquired is
capitalized as goodwill and tested for impairment annually. No prior period adjustment is
required for the amortization in previous years. Long-term equity investments in which the
Company holds more than 50% of the voting stocks or has controlling interests over the
investee companies are included in the quarterly consolidated financial statements.
 B.
    
    Unrealized gains and losses from transactions between the Company and investee
companies accounted for under the equity method are deferred. Profit (loss) from sales of
depreciable assets between the investee and the Company is amortized to income over the
assets economic service lives. Profit (loss) from sales of non-depreciable assets between
the investee and the Company is recognized until such profit (loss) is realized. Gains or
losses on sales from the Company to equity method investees are deferred in proportion to
the Companys ownership percentages in the investees as deferred credits classified as
current or noncurrent liabilities. Gains or losses on sales from equity method investees to
the Company are deferred in proportion to the Companys ownership percentages in the
investees until they are realized through transactions with third parties.
 C.
    
    When the Companys proportional interest in an equity investee changes after the equity
investee issues new shares, the effect of change in the Companys holding ratio on
long-term investment is adjusted to capital reserve. If capital reserve account is
insufficient, the effect is then charged to retained earnings.
 D.
    
    The Companys proportionate share of the foreign investees cumulative translation
adjustments related to the translation of the foreign investees financial statements into
New Taiwan dollars is recognized as Cumulative Translation Adjustments in the
stockholders equity.
  F-15




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Property, Plant and Equipment
 A.
    
    Property, plant and equipment are stated at historical cost. Interest incurred
relating to the construction of property, plant and equipment is capitalized and
depreciated accordingly.
 B.
    
    Depreciation is provided on the straight-line method over the assets estimated
economic service lives, plus an additional year as the salvage value. Salvage values of
fixed assets which are still in use after reaching their estimated economic service lives
are depreciated over their new estimated remaining service lives. The service lives of
fixed assets are 3 to 15 years, except for buildings, which are 20 to 55 years.
 C.
    
    Maintenance and repairs are expensed as incurred. Significant renewals and
improvements are capitalized and depreciated accordingly. When fixed assets are disposed,
their original cost and accumulated depreciation are removed from the corresponding
accounts, with gain or loss recorded as non-operating income or loss.
 D.
    
    Idled assets are stated at the lower of book value or net realizable value and are
reclassified to other assets. Differences between book value and net realizable value are
reported as losses in current earnings.
 Deferred Charges
  Land Use Right
  Bonds Payable
  A.
    
    The excess of the stated redemption price over the par value is recognized as
interest expense and compensation interest payable using the effective interest method
during the period from the issuance date to the last day of the redemption period.
 B.
    
    When a bondholder exercises his/her conversion rights, the book value of bonds is
credited to common stock at an amount equal to the par value of the stock and the excess
to capital reserve; no gain or loss is recognized on bond conversion.
 C.
    
    The related issuance costs of convertible bonds are recorded as deferred charges and
amortized over the period of the bonds.
 D.
    
    For convertible bonds with redemption options, the right of redemption becomes
invalid if the bondholder fails to exercise his/her redemption right upon expiration. The
balance of the compensation interest payable is amortized over the period from the date
following the expiration date to the maturity date using the effective interest method.
However, if the fair value of common stocks, which would have been converted on the
expiration date of the redemption right, is higher than the redemption price, compensation
interest should be reclassified from the liability to additional paid-in capital.
 E.
    
    The convertible bonds with redemption options are classified as current or noncurrent
liabilities based on the date of redemption.
  F-16




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Pension Cost
  Income Tax
 A.
    
    The Company computes its income tax based on the income before tax. In accordance with
R.O.C. SFAS No. 22, Accounting for Income Taxes, the income tax effect resulting from
temporary differences and investment tax credits is recorded as deferred income tax assets
or liabilities using the asset and liability method. Deferred tax assets or liabilities
are further classified into current or noncurrent and carried at net balance. Valuation
allowance on deferred tax assets is provided to the extent that it is more likely than not
that the tax benefit will not be realized.
 B.
    
    The Company adopted R.O.C. SFAS No. 12, Accounting for Investment Tax Credits, in
determining the investment tax credits. The investment tax credits relating to the
acquisition cost of qualifying equipment or technology, qualifying research and development
expenditure, qualifying personnel training expenditure and qualifying investments in
significant technology companies are recognized as income tax adjustments in the period the
tax credits arise.
 C.
    
    Over or under provisions of prior years income tax liabilities are included in the
current periods income tax expense.
 D.
    
    The Taiwan imputation tax system requires that any undistributed earnings in domestic
consolidated entities be subject to an additional 10% corporate income tax, which is
recognized as tax expense at the time when the stockholders resolve the distribution of
retained earnings.
 E.
    
    Pursuant to the ROC Alternative Minimum Tax Act, the domestic consolidated entities are
required to calculate Alternative Minimum Tax (AMT), a supplemental 10% tax on taxable
income including most income that is exempted from regular income tax under various
legislations, in addition to the regular tax. If the amount of alternative minimum tax is
greater than that of the regular tax, the excess amount shall be reported as current tax
expense.
 Revenue Recognition
  Research and Development
   F-17




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Employee Stock Option Plan
  Employees Bonuses and Directors and Supervisors Remunerations
  Treasury Stock
 A.
    
    The Company records treasury stock purchases under the cost method whereby the entire
cost of the acquired stock is recorded as treasury stock and as a reduction of
shareholders equity.
 B.
    
    Upon subsequent disposal of the treasury stock, the excess of the proceeds from
disposal over the book value, determined by the weighted-average method, is credited to
capital reserve. However, if the book value of the treasury stock exceeds the proceeds from
disposal, the excess is first charged against capital reserve arising from treasury stock
and the remainder, if any, is charged against retained earnings.
 C.
    
    Stock of the Company held by the subsidiaries is treated as treasury stock.
Subsidiaries gain on disposal of the Companys stock and the cash dividend income received
from the Company are recorded as additional paid-in capital  treasury stock.
 Earnings Per Share
 A.
    
    Basic earnings per share is calculated by dividing net income by the weighted average
number of shares outstanding during the period. Diluted earnings per share is calculated
by taking into consideration additional common shares that would have been outstanding if
the equivalent diluted shares had been issued at the beginning of the year and the related
gain or loss incurred from the aforementioned conversion.
 B.
    
    The Companys dilutive potential common shares are employee stock options and
convertible bonds. In computing the dilutive effects of the employee stock options and
convertible bonds, the Company applies the treasury stock method and if-converted method,
respectively.
 C.
    
    Effective January 1, 2008, as employees bonuses could be distributed in the form of
stock, the diluted EPS computation shall include those estimated shares that would be
increased from employees stock bonus issuance in the weighted-average number of common
 shares outstanding during the reporting year, which taking into account the dilutive
effects of stock bonus on potential common shares; whereas, basic EPS shall be calculated
based on the weighted-average number of common shares outstanding during the reporting year
that include the shares of employees stock bonuses for the appropriation of prior year
earnings, which have already been resolved at the stockholders meeting held in the
reporting year. Since capitalization of employees bonus is no longer considered a
distribution of stock dividends (or retained earnings and capital reserve capitalized), the
calculation of basic EPS and diluted EPS for all periods presented shall not be adjusted
retroactively. However, the accounting treatment for the appropriation of employees bonus
for 2007 earnings resolved at the stockholders meeting held in 2008 is still in accordance
with the regulations on capitalization of employees bonus under paragraphs 19 and 39 of
R.O.C. SFAS No. 24, Earnings per Share.
  F-18




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Impairment Loss of Non-financial Assets
 A.
    
    The Company recognizes impairment loss whenever an event occurs or evidence indicates
the carrying amount of an asset exceeds its recoverable amount. Recoverable amount is
measured as the higher of net selling price or value in use. Net selling price is the
amount obtainable from the sale of an asset in an arms-length transaction after deducting
any direct incremental disposal costs. The value in use is the present value of estimated
future cash flows expected to arise in its remained useful life.
 B.
    
    An impairment loss recognized in prior years is reversed if the impairment loss
caused by a specific external event of an exceptional nature is not expected to recur.
However, the restored amount is limited to the amount of impairment loss previously
recognized. Impairment loss for goodwill cannot be reversed.
 3.
    
    Effects of Changes in Accounting Principle
 A.
    
    Effective January 1, 2006, the Company adopted the amended R.O.C. SFAS No. 1,
Conceptual Framework for Financial Accounting and Preparation of Financial Statements,
R.O.C. SFAS No. 5, Accounting for Long-term Equity Investment, R.O.C. SFAS No. 7,
Consolidated Financial Statements, R.O.C. SFAS No. 25, Business Combinations -
Accounting Treatment under Purchase Method and R.O.C. SFAS No. 35, Accounting for Assets
Impairment, which discontinued amortization of goodwill. This change of accounting
principle had no effect on the financial statements.
 B.
    
    Effective January 1, 2006, the Company adopted the newly released R.O.C. SFAS No. 34,
Accounting for Financial Instruments and R.O.C. SFAS No. 36, Disclosure and Presentation
of Financial Instruments. As a result, the Companys total assets and total shareholders
equity increased by NT$9,277,206 as of January 1, 2006 with no impact on net income and
earnings per share for the year ended December 31, 2006.
 C.
    
    Effective January 1, 2008, the Company adopted R.O.C. EITF 96-052 Accounting for
Employees Bonuses and Directors and Supervisors Remuneration as prescribed by the
Accounting Research and Development Foundation, R.O.C., dated March 16, 2007. As a result
of the adoption of R.O.C. EITF 96-052, total expenses increased by NT$687,340, net income
after tax decreased by NT$515,505, and basic earnings per share decreased by approximately
NT$0.17 (in dollars) for the year ended December 31, 2008.
 4.
    
    Cash
 December 31,2007
    
    
    2008NT$
    
    
    NT$Cash on hand and petty cash
    
    
    2,029
    
    
    
    2,068Savings accounts and checking accounts
    
    
    1,659,703
    
    
    
    1,293,207Time deposits
    
    
    20,962,926
    
    
    
    17,545,69022,624,658
    
    
    
    18,840,965
   F-19




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 5.
    
    Accounts Receivable, Net
 December 31,2007
    
    
    2008NT$
    
    
    NT$Accounts receivable
    
    
    11,326,063
    
    
    
    7,750,698Less: Allowance for sales discounts
    
    
    (35,943
    )
    
    
    (156,096
    )Allowance for doubtful accounts
    
    
    (33,114
    )
    
    
    (304,287
    )11,257,006
    
    
    
    7,290,315
 6.
    
    Inventories
 December 31,2007
    
    
    2008NT$
    
    
    NT$Raw materials and supplies
    
    
    2,876,326
    
    
    
    2,040,999Work in process
    
    
    414,088
    
    
    
    245,016Finished goods
    
    
    236,954
    
    
    
    172,6333,527,368
    
    
    
    2,458,648Less: Allowance for loss on obsolescence and
decline in market value of
inventories
    
    
    (66,385
    )
    
    
    (75,581
    )3,460,983
    
    
    
    2,383,067
 7.
    
    Available-for-sale Financial Assets  Noncurrent
 December 31,2007
    
    
    2008NT$
    
    
    NT$Cost of listed securities
    
    
    3,992,468
    
    
    
    3,712,625Valuation adjustment
    
    
    880,816
    
    
    
    Accumulated impairment loss
    
    
    
    
    
    
    (2,637,145
    )4,873,284
    
    
    
    1,075,480
   F-20




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 8.
    
    Financial Assets Carried at Cost, Noncurrent
 December 31,2007
    
    
    2008NT$
    
    
    NT$Unlisted securities
    
    
    719,055
    
    
    
    322,036
 A.
    
    There are no reliable quoted prices for unlisted securities, and therefore these
investments are carried at cost.
 B.
    
    Global financial crisis caused a significant decrease in the net value of the financial
assets carried at cost, Mega Mission Limited Partnership and Hsieh-Yong Capital Co., Ltd,
held by the Company. The Company recognized impairment loss of NT$393,460 based on the
proportional interests on these financial assets for the year ended December 31, 2008.
 9.
    
    Long-term Investments Accounted for Under The Equity Method
 A.
    
    Details of long-term investments in stocks are summarized as follows:
 December 31,2007
    
    
    2008Percentage of
    
    
    
    
    
    
    Percentage ofInvestee company
    
    Amount
    
    
    ownership
    
    
    Amount
    
    
    ownershipNT$
    
    
    
    
    
    
    NT$Equity method:Double Win Enterprise Co., Ltd.
    
    
    84,450
    
    
    
    24.14
    %
    
    
    84,450
    
    
    
    24.14
    %Less : Accumulated impairment loss
    
    
    (84,450
    )
    
    
    
    
    
    
    (84,450
    )
    
    
    
    
    
    
    
    
 B.
    
    For the years ended December 31, 2006 and 2007, the Company recognized investment
income of NT$1,153,630 and NT$246,410, respectively, for all other investees accounted for
underthe equity method based on investees audited financial statements for the same
period.
 C.
    
    On March 27, 2007, the Company disposed its common stock ownership in ChipMOS
Technologies Inc. (ChipMOS) for US$191,147. The Company recognized investment income of
NT$246,410 through the date of transaction and recognized gain on disposal of investment
of NT$793,492. Also, the Company acquired 14.70% of common stock ownership in ChipMOS
Technologies (Bermuda) Ltd., the parent company of ChipMOS, through private stock offering
for US$76,459 and reported the investment as available-for-sale financial assets,
noncurrent.
 D.
    
    Due to the merger of Sigard, one of the Companys investees originally accounted for
under the equity method, with the other company in 2006, the Companys percentage of
ownership has been reduced to below 20% and the Company is unable to exercise significant
influence on Sigard. The Company reclassified the investment in Sigard as
available-for-sale financial assets, noncurrent. As of December 31, 2007, the Company has
disposed all of its holding common shares of Sigard and recognized disposal gain of
NT$208,184.
  F-21




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 10.
    
    Property, Plant and Equipment
 December 31, 2007AccumulatedCost
    
    
    depreciation
    
    
    Book valueNT$
    
    
    NT$
    
    
    NT$Land
    
    
    2,892,083
    
    
    
    
    
    
    
    2,892,083Buildings
    
    
    9,594,035
    
    
    
    (2,577,486
    )
    
    
    7,016,549Machinery and equipment
    
    
    51,980,903
    
    
    
    (27,322,744
    )
    
    
    24,658,159Utility equipment
    
    
    1,023,203
    
    
    
    (488,759
    )
    
    
    534,444Furniture and fixtures
    
    
    819,737
    
    
    
    (453,303
    )
    
    
    366,434Other equipment
    
    
    2,087,567
    
    
    
    (1,144,051
    )
    
    
    943,516Construction in progress and
prepayments for equipment
    
    
    2,211,180
    
    
    
    
    
    
    
    2,211,18070,608,708
    
    
    
    (31,986,343
    )
    
    
    38,622,365
 December 31, 2008AccumulatedCost
    
    
    depreciation
    
    
    Book valueNT$
    
    
    NT$
    
    
    NT$Land
    
    
    2,902,823
    
    
    
    
    
    
    
    2,902,823Buildings
    
    
    11,435,051
    
    
    
    (3,224,764
    )
    
    
    8,210,287Machinery and equipment
    
    
    53,528,647
    
    
    
    (28,564,096
    )
    
    
    24,964,551Utility equipment
    
    
    1,225,810
    
    
    
    (560,254
    )
    
    
    665,556Furniture and fixtures
    
    
    829,769
    
    
    
    (479,881
    )
    
    
    349,888Other equipment
    
    
    2,356,471
    
    
    
    (1,261,564
    )
    
    
    1,094,907Construction in progress and
prepayments for equipment
    
    
    651,621
    
    
    
    
    
    
    
    651,62172,930,192
    
    
    
    (34,090,559
    )
    
    
    38,839,633
  11.
    
    Other Assets  Other
   F-22




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 12.
    
    Short-term Loans
 December 31,Nature of loans
    
    2007
    
    
    2008NT$
    
    
    NT$Credit loans
    
    
    529,323
    
    
    
    654,933Interest rates
    
    
    5.99%~7.00
    %
    
    
    3.61
    %
 13.
    
    Other Payables
 December 31,2007
    
    
    2008NT$
    
    
    NT$Payables for equipment
    
    
    1,716,511
    
    
    
    642,928Other payables
    
    
    916,881
    
    
    
    610,8022,633,392
    
    
    
    1,253,730
 14.
    
    Bonds Payable
 A.
    
    On January 28, 2002, the Company issued five-year (from January 28, 2002 to January
28, 2007) zero coupon Euro convertible bonds amounting to US$200,000 listed on the
Luxembourg Stock Exchange. All of the convertible bonds issued in 2002 have been converted
into common stocks, redeemed, or retired after being repurchased from the market as of
March 31, 2007.
 B.
    
    On February 5, 2004, the Company issued five-year (from February 5, 2004 to February
5, 2009) zero coupon Euro convertible bonds amounting to US$200,000 listed on the
Luxembourg Stock Exchange. All of the convertible bonds issued in 2004 have been converted
into common stocks or redeemed as of September 30, 2007.
 15.
    
    Long-term Loans
 December 31,Nature of loans
    
    Repayment period
    
    
    2007
    
    
    2008NT$
    
    
    NT$Commercial papers
    
    Repayable in 4 semi-annual installments from November 2009
    
    
    3,000,000
    
    
    
    3,000,000Less: Discount on
commercial paper
    
    
    
    
    
    
    (4,129
    )
    
    
    (2,581
    )2,995,871
    
    
    
    2,997,419Less: Current portion
of long-term loans
    
    
    
    
    
    
    
    
    
    
    (749,354
    )2,995,871
    
    
    
    2,248,065Interest rates
    
    
    
    
    
    
    2.093
    %
    
    
    2.093
    %
   F-23




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 16.
    
    Pension Plan and Net Periodic Pension Cost
 A.
    
    In accordance with the Labor Standards Act, the Company has a funded defined benefit
pension plan covering all eligible employees prior to the enforcement of the Labor Pension
Act (the Act), effective on July 1, 2005 and employees choosing to continue to be subject
to the pension mechanism under the Labor Standards Law after the enforcement of the Act.
Under the funding policy of the plan, the Company contributes monthly an amount equal to 2%
(5% before July 2005) of the employees monthly salaries and wages to the pension fund
deposited with the Bank of Taiwan, the custodian, which acquired the Central Trust of China
on July 1, 2007. Pension benefits are generally based on service years and six-month
average wages and salaries before retirement of the employee. Two units are earned per year
for the first 15 years of service and one unit is earned for each additional year of service
with a maximum of 45 units.
 B.
    
    In accordance with the Labor Pension Act, effective July 1, 2005, the Company has a
defined contribution pension plan covering employees (excluding foreign employees) who
chose to be subject to the pension mechanism under this Act. The Company makes monthly
contributions to the employees individual pension accounts on a basis no less than 6% of
each employees monthly salary or wage. The principal and accrued dividends from an
employees personal pension account are claimed monthly or in full at one time. Under this
pension plan, net pension periodic costs amounting to NT$245,742, NT$275,976 and NT$312,441
were recognized for the years ended December 31, 2006, 2007 and 2008, respectively.
 C.
    
    The following tables set forth the actuarial assumptions, funded status and amounts
recognized for the Companys defined benefit pension plan pursuant to R.O.C. SFAS No. 18:
 (1)
    
    Assumptions used in actuarial calculations for the years ended December 31,
2006, 2007 and 2008:
 For the years ended December 31,2006
    
    
    2007
    
    
    2008Discount rate
    
    
    3.25
    %
    
    
    2.75
    %
    
    
    2.20
    %Long-term rate of compensation increase
    
    
    2.00
    %
    
    
    2.00
    %
    
    
    1.00
    %Expected rate of return on plan assets
    
    
    3.25
    %
    
    
    3.00
    %
    
    
    2.50
    %
 December 31,2007
    
    
    2008NT$
    
    
    NT$Vested benefit
    
    
    (39,213
    )
    
    
    (47,463
    )Vested benefit obligation
    
    
    (34,739
    )
    
    
    (44,852
    )Accumulated benefit obligation
    
    
    (1,130,091
    )
    
    
    (1,249,343
    )
  F-24




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (2)
    
    Changes in benefit obligation for the years ended December 31, 2007 and 2008:
 For the years ended December 31,2007
    
    
    2008NT$
    
    
    NT$Projected benefit obligation at the beginning of the year
    
    
    (1,346,909
    )
    
    
    (1,620,782
    )Service cost
    
    
    (36,639
    )
    
    
    (36,001
    )Interest cost
    
    
    (43,775
    )
    
    
    (45,252
    )Plan amendments
    
    
    
    
    
    
    59,238(Loss) gain on projected benefit obligation
    
    
    (198,886
    )
    
    
    77,386Benefit paid
    
    
    5,427
    
    
    
    20,680Projected benefit obligation at the end of the year
    
    
    (1,620,782
    )
    
    
    (1,544,731
    )
 (3)
    
    Changes in plan assets during the years ended December 31, 2007 and 2008:
 For the years ended December 31,2007
    
    
    2008NT$
    
    
    NT$Fair value of plan assets at the beginning of the year
    
    
    981,249
    
    
    
    1,059,039Actual return on plan assets
    
    
    28,022
    
    
    
    38,553Employer contributions
    
    
    55,195
    
    
    
    53,625Benefits paid
    
    
    (5,427
    )
    
    
    (20,680
    )Fair value of plan assets at the end of the year
    
    
    1,059,039
    
    
    
    1,130,537
 (4)
    
    Funded status at December 31, 2007 and 2008:
 December 31,2007
    
    
    2008NT$
    
    
    NT$Fair value of plan assets
    
    
    1,059,039
    
    
    
    1,130,537Projected benefit obligation
    
    
    (1,620,782
    )
    
    
    (1,544,731
    )Funded status
    
    
    (561,743
    )
    
    
    (414,194
    )Unrecognized transition assets
    
    
    (2,738
    )
    
    
    (1,825
    )Prior service cost
    
    
    
    
    
    
    (57,814
    )Unrecognized net actuarial loss
    
    
    531,042
    
    
    
    432,199Additional pension liability
    
    
    (37,613
    )
    
    
    (77,172
    )Accured pension cost
    
    
    (71,052
    )
    
    
    (118,806
    )
  F-25




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (5)
    
    Components of net periodic cost for the years ended December 31, 2006, 2007
and 2008:
 For the years ended December 31,2006
    
    
    2007
    
    
    2008NT$
    
    
    NT$
    
    
    NT$Service cost
    
    
    37,095
    
    
    
    36,639
    
    
    
    36,001Interest cost
    
    
    38,802
    
    
    
    43,775
    
    
    
    45,252Expected return on plan assets
    
    
    (29,430
    )
    
    
    (31,891
    )
    
    
    (32,470
    )Amortization of unrecognized net
transition assets
    
    
    (913
    )
    
    
    (913
    )
    
    
    (913
    )Amortization of prior service cost
    
    
    
    
    
    
    
    
    
    
    (1,424
    )Amortization of unrecognized loss
    
    
    7,408
    
    
    
    11,388
    
    
    
    15,374Net periodic cost
    
    
    52,962
    
    
    
    58,998
    
    
    
    61,820
 D.
    
    Siliconware USA, Inc. has established a 401(K) pension plan (the Plan) covering
substantially all employees. The Plan provides voluntary salary reduction contributions by
eligible participants in accordance with Section 401(K) of the Internal Revenue Code, as
well as discretionary matching contributions determined annually by its Board of Directors
from Siliconware USA, Inc. to its employees individual pension accounts. The contribution
in accordance with the Plan amounted NT$7,312, NT$8,188 and NT$8,812, respectively, for the
years ended December 31, 2006, 2007 and 2008.
 E.
    
    Siliconware Technology (Suzhou) Limited contributes monthly an amount equal to certain
percentage of employees monthly salaries and wages according to the specific legal
requirements in Suzhou to the Bureau of Social Insurance without bearing other obligations.
The contributions are recorded as pension expense.
 17.
    
    Capital Stock
 A.
    
    As of December 31, 2008, the authorized capital of the Company was NT$36,000,000,
represented by 3,600,000,000 common shares with par value of NT$10 (in dollars) per share.
As of December 31, 2008, issued common stock was NT$31,525,899.
 B.
    
    On June 13, 2008, the stockholders of the Company resolved to capitalize the
unappropriated earnings of NT$307,470 and the employee bonus of NT$471,454 by issuing
77,892 thousand new shares. Registration for the capitalization has been completed.
 C.
    
    The Company issued NT$1,500,000 American Depositary Shares (ADSs), represented by
30,000,000 units of ADSs, in June 2000. Each ADS represents five shares of common stock of
the Company with an offering price of US$8.49 (in dollars) per ADS. As of December 31,
2008, the outstanding ADSs amounted to 124,618,327 units. Major terms and conditions of
the ADSs are summarized as follows:
 (1)
    
    Voting RightsADS holders will have no rights to vote directly in shareholders meetings with respect
to the Deposited Shares. The Depositary shall provide voting instruction to the Chairman
of the Company and vote on behalf of the Deposited shares evidenced by ADSs. If the
Depositary receives voting instructions from holders of at least 51% of the outstanding
ADSs to vote in the same direction on a resolution, the Depositary will vote in the
manner as instructed.
  F-26




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (2)
    
    Distribution of DividendsADS holders are deemed to have the same rights as holders of common shares with
respect to the distribution of dividends.
 D.
    
    The exercise price of the employee stock option was decided according to the closing
price at the measurement date and is subject to adjustment for distribution of cash
dividend or changes in capital stock in accordance
with certain formula. The granted employee stock options will expire in five years and will
be graded vested after two years of service in accordance with the employee stock option
plan.For the years ended December 31, 2006, 2007 and 2008, details of the employee stock option
granted, exercised and canceled and exercise price of the employee stock option are as
follows: (Numbers of options are presented in thousands)
 WeightedaverageNumber
    
    
    exercise priceof options
    
    
    (in dollars)NT$Outstanding options at January 1, 2006
    
    
    26,348
    
    
    
    11.95Exercised
    
    
    (13,174
    )
    
    
    11.23Forfeited/cancelled
    
    
    (543
    )
    
    
    11.07Outstanding options at December 31, 2006
    
    
    12,631
    
    
    
    9.25Exercised
    
    
    (11,080
    )
    
    
    5.74Forfeited/cancelled
    
    
    (37
    )
    
    
    5.78Outstanding options at December 31, 2007
    
    
    1,514
    
    
    
    5.83Exercised
    
    
    (1,273
    )
    
    
    5.81Forfeited/cancelled
    
    
    (241
    )
    
    
    5.97Outstanding options at December 31, 2008
    
    
    
 18.
    
    Capital Reserve
 A.
    
    According to the Company Law of the R.O.C., the capital reserve arising from paid-in
capital in excess of par on the issuance of stocks, from merger, from the conversion of
convertible bonds and from donation shall be exclusively used to cover accumulated
deficits or transferred to capital. Other capital reserve shall be exclusively used to
cover accumulated deficits. The amount of capital reserve used to increase capital is
limited to 10% of the common stock each year when the Company has no accumulated deficits.
The capital reserve can only be used to cover accumulated deficits when the legal reserve
is insufficient to cover the deficits.
 B.
    
    According to the Company Law of the R.O.C., the capital reserve is allowed to be
transferred to capital one year after the registration of capitalization is approved.
 19.
    
    Retained Earnings
 A.
    
    According to the Companys Articles of Incorporation, current years earnings before
tax, if any, shall be distributed in the following order:
 (1)
    
    Pay all taxes and duties;
 (2)
    
    Offset prior years operating losses, if any;
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (3)
    
    Set aside 10% of the remaining amount after deducting (1) and (2) as legal
reserve;
 (4)
    
    Set aside no more than 1% of the remaining amount after deducting items
(1), (2), and (3) as directors and supervisors remunerations.
 (5)
    
    After items (1), (2), (3), and (4) were deducted, 10% of the remaining
amount may be allocated as employee bonus and 90% as stockholders dividend. The
distributed amount is subject to the resolution adopted by the Board of Directors and
approved at the stockholders meeting.
 B.
    
    Among the total dividend distributed, at least 50% is distributed as cash dividend
and the rest as stock dividend. The appropriation of the profit is subject to the
resolution adopted by the Board and approval by the shareholders.
 C.
    
    Legal reserve can only be used to offset deficits or increase capital. The legal
reserve can be used to increase capital when and only when the reserve balance exceeds 50%
of the capital stock, and the amount capitalized should be limited to 50% of the legal
reserve.
 D.
    
    In accordance with the R.O.C. Securities and Future Bureau (SFB) regulation, in
addition to legal reserve and prior to distribution of earnings, the Company should set
aside a special reserve in an amount equal to the net change in the reduction of prior
years stockholders equity, resulting from adjustments, such as cumulative foreign
currency translation adjustment and unrealized loss on available-for-sale financial
assets. Such special reserve is not available for dividend distribution. In the
subsequent year(s), if the year-end balances of the cumulative foreign currency
translation adjustment and unrealized losses on available-for-sale financial assets no
longer result in a net reduction in the stockholders equity, the special reserve
previously set aside will then be available for distribution.
 E.
    
    The Taiwan imputation tax system requires that any undistributed current earnings of
a company derived on or after January 1, 1998 be subject to an additional 10% corporate
income tax if the earnings are not distributed in the following year. As of December 31,
2008, the undistributed earnings derived on or after January 1, 1998 was NT$6,453,435.
 F.
    
    As of December 31, 2008, the balance of stockholders imputation tax credit account
of the Company was NT$58,619. The rate of stockholders imputation tax credit to
undistributed earnings for the earnings distributed in 2008 is 9.07%. The rate of
stockholders imputation tax credit to undistributed earnings for the earnings distributed
in the following year is approximately 13.56%. However, the rate is subject to changes
based on the balance of stockholders imputation tax credit account, the undistributed
earnings, and other tax credit amount in accordance with the R.O.C. tax law at the
dividend allocation date.
 G.
    
    The distributions of 2005, 2006 and 2007 dividends had been resolved at the
stockholders meetings on June 12, 2006, June 13, 2007 and June 13, 2008, respectively.
Details are summarized below:
 2005
    
    
    2006
    
    
    2007Dividends
    
    
    
    
    
    
    Dividends
    
    
    
    
    
    
    DividendsAmount
    
    
    per share
    
    
    Amount
    
    
    per share
    
    
    Amount
    
    
    per shareNT$
    
    
    (in NT dollars)
    
    
    NT$
    
    
    (in NT dollars)
    
    
    NT$
    
    
    (in NT dollars)Stock dividends
    
    
    2,410,149
    
    
    
    0.96
    
    
    
    586,726
    
    
    
    0.20
    
    
    
    307,470
    
    
    
    0.10Cash dividends
    
    
    4,169,558
    
    
    
    1.66
    
    
    
    9,974,332
    
    
    
    3.35
    
    
    
    13,836,139
    
    
    
    4.506,579,707
    
    
    
    2.62
    
    
    
    10,561,058
    
    
    
    3.55
    
    
    
    14,143,609
    
    
    
    4.60
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  H.
    
    According to the Articles of Incorporation of the Company, the Company accrued
NT$630,518 as employees bonuses and NT$56,822 as directors and supervisors
remunerations, respectively, which were accrued based on 10% and 1% of net income after
considering the required capital reserve. If the Company distributes stocks as employees
bonus, shares of the distributed stocks will be calculated based on the closing price one
day before the stockholders meeting considering the effect of ex-right and ex-dividend
and the Company will recognize it in operating cost / expense. If the actual amount of
distributed stocks is different from the estimation, the Company should adjust the
difference to the income/loss in the next year.
 I.
    
    The Companys earnings distributions of 2007 for employee bonuses and directors and
supervisors remunerations were as follow:
 The amount of the actualearnings distributionsapproved by shareholders in 2008NT$(a) The amount of the retained earnings distributed1. Employees cash bonuses
    
    
    1,100,0582. Employees stock bonuses(i) Shares (in thousands of shares)
    
    
    47,145(ii) Amount
    
    
    471,454(iii) As a percentage of outstanding common shares
    
    
    1.53
    %3. Directors and supervisors remunerations
    
    
    157,405(b) Informations regarding earnings per common share (in dollors)1. Original earnings per common share (Note 1)
    
    
    5.802. Adjusted earnings per common share (Note 2)
    
    
    5.22
 Note 1:
    
    Not retroactively adjusted by the common shares issued on capitalization of earnings in 2008.Note 2:
    
    Adjusted earnings per share = (Net income  Employees bonuses  Remunerations to directors and supervisors) / Weighted average oustanding common shares. 20.
    
    Treasury StockAs of December 31, 2007 and 2008, Siliconware Investment Company Ltd., the subsidiary of the
Company, holds 35,870 and 36,229 thousand shares of the Companys stock, with book value of
NT$22.14 (in dollars) and NT$21.92 (in dollars) per share, respectively. The closing prices of
the Companys stock were NT$58.3 (in dollars) per share and NT$28.0 (in dollars) per share as
of December 31, 2007 and 2008, respectively.
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 21.
    
    Impairment of Assets
 Impairment loss on long-term investmentFor the years ended December 31,2006
    
    
    2007
    
    
    2008NT$
    
    
    NT$
    
    
    NT$Recognized in income statement
    
    
    27,013
    
    
    
    
    
    
    
    3,030,605
 A.
    
    For the year ended December 31, 2006, Siliconware Investment Company Ltd. and SPIL
(B.V.I) Holding Limited, subsidiaries of the Company, recognized a total amount of
impairment loss of NT$27,013 after evaluation of impairment toward its investments of
equity securities.
 B.
    
    Under the impact of global financial crisis, the Company performed evaluation of
impairment toward its investments of equity securities and recognized other-than-temporary
impairment loss of NT$2,637,145 for the year ended December 31, 2008. In addition,
Siliconware Investment Company Ltd., subsidiary of the Company, recognized a total amount
of impairment loss of NT$393,460 based on the proportional interests on these financial
assets for the year ended December 31, 2008.
 22.
    
    Income TaxThe Company and its subsidiaries file separate income tax returns. Reconciliation between the
income tax calculated on pre-tax financial statement income based on the statutory tax rate and
the income tax expense is as follows:
 As of and for the years ended December 31,2006
    
    
    2007
    
    
    2008NT$
    
    
    NT$
    
    
    NT$Income tax expense calculated at the statutory tax rate (25%)
    
    
    3,613,846
    
    
    
    5,007,546
    
    
    
    1,578,720Tax exempt income and other permanent differences
    
    
    (1,518,940
    )
    
    
    (2,007,161
    )
    
    
    (566,347
    )Investment tax credits
    
    
    (1,147,432
    )
    
    
    (931,664
    )
    
    
    (863,441
    )Changes in valuation allowance for deferred income tax assets
    
    
    (28,798
    )
    
    
    25,673
    
    
    
    63,330Under (over) provision from prior years
    
    
    29,898
    
    
    
    11,191
    
    
    
    (1,739
    )Additonal 10% tax on undistributed earnings
    
    
    
    
    
    
    33,556
    
    
    
    Income tax expense
    
    
    948,574
    
    
    
    2,139,141
    
    
    
    210,523Adjustments:Net change of deferred income tax assets
    
    
    (102,987
    )
    
    
    (575,108
    )
    
    
    690,683Decrease (increase)in income tax payable
    
    
    127,778
    
    
    
    (9,725
    )
    
    
    (33,987
    )Prepaid and withholding tax
    
    
    (49,487
    )
    
    
    (52,652
    )
    
    
    (52,796
    )Subsidiarys tax refund receivable
    
    
    6,899
    
    
    
    
    
    
    
    7,455Income tax payable
    
    
    930,777
    
    
    
    1,501,656
    
    
    
    821,878Income tax payable (refund receivable) carried over from
prior year
    
    
    16,605
    
    
    
    (17,728
    )
    
    
    
 A.
    
    For the years ended December 31, 2006, 2007 and 2008, significant portion of the
permanent differences are derived from the income tax exemption of capital gain
resulted from the security transactions, long-term investment income (loss) accounted for
under the equity method, and the revenue from assembly of certain integrated circuit
products exempted from income tax.
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 B.
    
    As of December 31, 2007 and 2008, deferred income tax assets and liabilities were as
follows:
 December 31,2007
    
    
    2008NT$
    
    
    NT$Deferred income tax assets, current
    
    
    1,273,935
    
    
    
    425,761Valuation allowance for deferred income tax assets
    
    
    (5,161
    )
    
    
    1,268,774
    
    
    
    425,761Deferred income tax assets, noncurrent
    
    
    864,466
    
    
    
    2,460,298Deferred income tax liabilities, noncurrent
    
    
    (147,425
    )
    
    
    (142,017
    )717,041
    
    
    
    2,318,281Valuation allowance for deferred income tax assets
    
    
    (189,828
    )
    
    
    (256,714
    )527,213
    
    
    
    2,061,567
 C.
    
    The details of deferred income tax assets and liabilities as of December 31, 2007 and 2008
were as follows:
 December 31,2007
    
    
    2008Amount
    
    
    Tax effect
    
    
    Amount
    
    
    Tax effectNT$
    
    
    NT$
    
    
    NT$
    
    
    NT$CurrentTemporary differencesUnrealized loss on obsolescence and
decline in market value of inventories
    
    
    80,413
    
    
    
    20,103
    
    
    
    111,894
    
    
    
    27,974Unrealized sales allowance
    
    
    35,943
    
    
    
    8,986
    
    
    
    156,097
    
    
    
    39,024Unrealized foreign exchange loss
    
    
    4,137
    
    
    
    1,034
    
    
    
    155,016
    
    
    
    38,754Allowance for doubtful accounts
    
    
    
    
    
    
    
    
    
    
    233,422
    
    
    
    58,355Others
    
    
    6,606
    
    
    
    1,651
    
    
    
    6,614
    
    
    
    1,654Loss carryforwards
    
    
    20,643
    
    
    
    5,161
    
    
    
    
    
    
    
    Investment tax credits
    
    
    
    
    
    
    1,237,000
    
    
    
    
    
    
    
    260,0001,273,935
    
    
    
    
    
    
    
    425,761Allowance for deferred income tax assets
    
    
    
    
    
    
    (5,161
    )
    
    
    
    
    
    
    1,268,774
    
    
    
    
    
    
    
    425,761NoncurrentTemporary differenceUnrealized loss on long-term investments
    
    
    66,044
    
    
    
    16,511
    
    
    
    2,277,036
    
    
    
    569,259Depreciation expense
    
    
    (589,700
    )
    
    
    (147,425
    )
    
    
    (568,069
    )
    
    
    (142,017
    )Unrealized asset  intercompany profit
    
    
    
    
    
    
    
    
    
    
    21,933
    
    
    
    5,483Unrealized loss on idle assets
    
    
    296,798
    
    
    
    74,199
    
    
    
    336,348
    
    
    
    84,087Others
    
    
    2,618
    
    
    
    655
    
    
    
    4,321
    
    
    
    1,080Loss carryforwards
    
    
    95,338
    
    
    
    23,834
    
    
    
    219,118
    
    
    
    27,390Investment tax credits
    
    
    
    
    
    
    749,267
    
    
    
    
    
    
    
    1,772,999717,041
    
    
    
    
    
    
    
    2,318,281Allowance for deferred income tax assets
    
    
    
    
    
    
    (189,828
    )
    
    
    
    
    
    
    (256,714
    )527,213
    
    
    
    
    
    
    
    2,061,567
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SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Valuation allowance for deferred income tax assets relates primarily to allowance for
investment tax credits from qualifying research and development expenditure and
unrealized loss of holding long-term investments.
 D.
    
    The income tax returns of the Company and its subsidiary, Siliconware Investment
Company Ltd., have been assessed and approved by the Tax Authority through 2006.
 E.
    
    According to the Income Tax Law of the Peoples Republic of China for Enterprises with
Foreign Investment and Foreign Enterprises , Siliconware Technology (Suzhou) Limited is
entitled to two years exemption from income taxes followed by three years of a 50% tax
reduction, i.e., the tax rate of 7.5%, commencing from the first cumulative profit-making
year net of loss carryforwards. In addition, any foreign investor of an enterprise with
foreign investment which reinvests its share of profit obtained from the enterprise
directly into that enterprise by increasing its registered capital, or uses the profit as
capital investment to establish other enterprises with foreign investment to operate for a
period of not less than five years shall, upon approval by the tax authorities of an
application filed by the investor, be refunded 40% of the income tax already paid in
relation to the reinvested amount. Effective January 1, 2008, the Income Tax Law of the
Peoples Republic of China has adopted the corporate income tax rate of 25% and required
the commencement of two years exemption from income taxes followed by three years of a
50% tax reduction in 2008. In addition, the favorable tax treatment of 40% tax refund
aforementioned was canceled effective 2008.
 F.
    
    As of December 31, 2008, the Companys unused portion of investment tax credits, under the
Statue for Upgrading Industries, were as follows:
 Nature of investment tax credit
    
    Deductible amount
    
    
    Unused amount
    
    
    Expiration yearsNT$
    
    
    NT$Acquisition cost of qualifying machinery
and equipment
    
    
    1,902,777
    
    
    
    1,052,708
    
    
    
    2009 to 2012Qualifying research and development
expenditure
    
    
    980,291
    
    
    
    980,291
    
    
    
    2009 to 20122,883,068
    
    
    
    2,032,999
 G.
    
    As of December 31, 2008, the unused loss carryforwards of Siliconware Technology (Suzhou) Ltd. were as follows:
 Deductible
    
    
    ExpirationYears of loss incurred
    
    amount
    
    
    years
    
    
    StatusNT$2005
    
    
    12,414
    
    
    
    2010
    
    
    Assessd amount2006
    
    
    14,976
    
    
    
    2011
    
    
    Assessd amount27,390
 H.
    
    The Company has met the requirement of Incentives for Emerging Important Strategic Industries in Manufacturing and Technology
Services for its capitalization plans in 1999, 2000, 2004, 2005 and 2006, which is exempted from income tax for revenues
arising from the assembly and testing of certain integrated circuit products for five-year periods from 2004, 2006, and 2008,
respectively. The five-year income tax exemptions will expire in December 2008, 2010, 2012, and May 2013, respectively. Also,
the Industrial Development Bureau of Ministry of Economic Affairs has issued permission for the five-year income tax exemption
of the Companys 2007 registered capitalization plan in 2008.
  F-32




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 23.
    
    Earnings Per Share
 For the year ended December 31, 2006WeightedaverageIncome
    
    
    outstanding
    
    
    Earnings per shareBefore tax
    
    
    After tax
    
    
    common stock
    
    
    Before tax
    
    
    After taxNT$
    
    
    NT$
    
    
    (in thousand)
    
    
    (in NT dollars)Basic earnings per shareNet income
    
    
    14,277,643
    
    
    
    13,329,069
    
    
    
    2,873,489
    
    
    
    4.97
    
    
    
    4.63Dilutive effect of
employee stock option
    
    
    
    
    
    
    
    
    
    
    13,381Dilutive effect of
3rd Euro convertible bonds
    
    
    22,562
    
    
    
    33,421
    
    
    
    178,497Diluted earnings per share
    
    
    14,300,205
    
    
    
    13,362,490
    
    
    
    3,065,367
    
    
    
    4.66
    
    
    
    4.36
 For the year ended December 31, 2007WeightedaverageIncome
    
    
    outstanding
    
    
    Earnings per shareBefore tax
    
    
    After tax
    
    
    common stock
    
    
    Before tax
    
    
    After taxNT$
    
    
    NT$
    
    
    (in thousand)
    
    
    (in NT dollars)Basic earnings per shareNet income
    
    
    19,628,492
    
    
    
    17,489,351
    
    
    
    3,092,309
    
    
    
    6.35
    
    
    
    5.66Dilutive effect of
employee stock option
    
    
    
    
    
    
    
    
    
    
    3,624Dilutive effect of
3rd Euro convertible bonds
    
    
    51,606
    
    
    
    51,365
    
    
    
    19,416Diluted earnings per share
    
    
    19,680,098
    
    
    
    17,540,716
    
    
    
    3,115,349
    
    
    
    6.32
    
    
    
    5.63
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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For the year ended December 31, 2008WeightedaverageIncome
    
    
    outstanding
    
    
    Earnings per shareBefore tax
    
    
    After tax
    
    
    common stock
    
    
    Before tax
    
    
    After taxNT$
    
    
    NT$
    
    
    (in thousand)
    
    
    (in NT dollars)Basic earnings per shareNet income
    
    
    6,524,053
    
    
    
    6,313,530
    
    
    
    3,115,321
    
    
    
    2.09
    
    
    
    2.03Dilutive effect of
employee bonuses
    
    
    
    
    
    
    
    
    
    
    24,125Dilutive effect of
employee stock option
    
    
    
    
    
    
    
    
    
    
    13Diluted earnings per share
    
    
    6,524,053
    
    
    
    6,313,530
    
    
    
    3,139,459
    
    
    
    2.08
    
    
    
    2.01
 A.
    
    The weighted average treasury stock held by the subsidiary has been deducted in the
calculation of weighted average outstanding common stock for the years ended December 31,
2006, 2007 and 2008. The basic and diluted earnings per share for the years ended December
31, 2006 and 2007 were retroactively adjusted for all subsequent stock dividends and
employees stock bonus.B.
    
    Effective January 1, 2008, as employees bonus could be distributed in the form of
stock, the diluted EPS computation shall include those estimated shares that would be
increased from employees stock bonus issuance in the weighted-average number of common
 shares outstanding during the reporting year, which taking into account the dilutive
effects of stock bonus on potential common shares; whereas, basic EPS shall be calculated
based on the weighted-average number of common shares outstanding during the reporting year
that include the shares of employees stock bonus for the appropriation of prior year
earnings, which have already been resolved at the stockholders meeting held in the
reporting year. Since capitalization of employees bonus is no longer considered a
distribution of stock dividends (or retained earnings and capital reserve capitalized), the
calculation of basic EPS and diluted EPS for all periods presented shall not be adjusted
retroactively. However, the accounting treatment for the appropriation of employees bonus
for 2007 earnings resolved at the stockholders meeting held in 2008 is still in accordance
with the regulations on capitalization of employees bonus under paragraphs 19 and 39 of
R.O.C. SFAS No. 24, Earnings per Share.
  F-34




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 24.
    
    Personnel Costs, Depreciation and Amortization
 For the year ended December 31, 2006Operating costs
    
    
    Operating expenses
    
    
    TotalNT$
    
    
    NT$
    
    
    NT$Personnel CostPayroll
    
    
    5,280,258
    
    
    
    1,337,313
    
    
    
    6,617,571Labor and health insurance
    
    
    414,906
    
    
    
    104,812
    
    
    
    519,718Pension expense
    
    
    245,299
    
    
    
    60,541
    
    
    
    305,840Other
    
    
    597,393
    
    
    
    102,805
    
    
    
    700,1986,537,856
    
    
    
    1,605,471
    
    
    
    8,143,327Depreciation
    
    
    6,579,537
    
    
    
    173,174
    
    
    
    6,752,711Amortization
    
    
    358,635
    
    
    
    167,361
    
    
    
    525,996
 For the year ended December 31, 2007Operating costs
    
    
    Operating expenses
    
    
    TotalNT$
    
    
    NT$
    
    
    NT$Personnel CostPayroll
    
    
    5,776,433
    
    
    
    1,361,554
    
    
    
    7,137,987Labor and health insurance
    
    
    442,716
    
    
    
    102,638
    
    
    
    545,354Pension expense
    
    
    274,920
    
    
    
    68,238
    
    
    
    343,158Other
    
    
    603,523
    
    
    
    133,000
    
    
    
    736,5237,097,592
    
    
    
    1,665,430
    
    
    
    8,763,022Depreciation
    
    
    7,371,429
    
    
    
    232,484
    
    
    
    7,603,913Amortization
    
    
    419,864
    
    
    
    135,209
    
    
    
    555,073
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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For the year ended December 31, 2008Operating costs
    
    
    Operating expenses
    
    
    TotalNT$
    
    
    NT$
    
    
    NT$Personnel CostPayroll
    
    
    6,586,012
    
    
    
    1,766,164
    
    
    
    8,352,176Labor and health insurance
    
    
    495,590
    
    
    
    109,989
    
    
    
    605,579Pension expense
    
    
    309,474
    
    
    
    73,599
    
    
    
    383,073Other
    
    
    547,882
    
    
    
    124,923
    
    
    
    672,8057,938,958
    
    
    
    2,074,675
    
    
    
    10,013,633Depreciation
    
    
    8,632,102
    
    
    
    213,123
    
    
    
    8,845,225Amortization
    
    
    478,892
    
    
    
    104,733
    
    
    
    583,625
 25.
    
    Related Party Transactions
 1.
    
    Name and Relationship with Related Parties:
 Name of related parties
    
    Relationship with the CompanyPhoenix Precision Technology Corporation
    
    The Company holds directorshipSigurd Microelectronics Corporation
    
    The Company holds directorship (Note 1)ChipMOS Technologies Inc.
    
    Investee company accounted for under the equity method (Note 2)Hai-Feng Fundation
    
    Same chairman of the board of the directorsPei-Sheng Fundation
    
    Same chairman of the board of the directors
 Note 1:
    
    The Company resigned its position as a director on November 9, 2007. The
named company ceased to be a related party of the Company.Note 2:
    
    The Company disposed all of its ownership on March 27, 2007. The named
company ceased to be a related party of the Company. 2.
    
    Significant Transactions with Related Parties:
 (1)
    
    Sales
 For the years ended December 31,2006
    
    
    2007
    
    
    2008% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofAmount
    
    
    net sale
    
    
    Amount
    
    
    net sale
    
    
    Amount
    
    
    net saleNT$
    
    
    
    
    
    NT$
    
    
    
    
    
    NT$Sigurd Microelectronics
Corporation
    
    
    5,217
    
    
    
    
    
    
    
    223,991
    
    
    
    
    
    
    
    
    
    
    
    
   F-36




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (2)
    
    Purchases
 For the years ended December 31,2006
    
    
    2007
    
    
    2008% of net
    
    
    
    
    
    
    % of net
    
    
    
    
    
    
    % of netAmount
    
    
    purchase
    
    
    Amount
    
    
    purchase
    
    
    Amount
    
    
    purchaseNT$
    
    
    
    
    
    NT$
    
    
    
    
    
    NT$Phoenix Precision
Technology
Corporation
    
    
    3,100,909
    
    
    
    13
    
    
    
    2,544,206
    
    
    
    9
    
    
    
    2,093,426
    
    
    
    8Others
    
    
    83
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,100,992
    
    
    
    13
    
    
    
    2,544,206
    
    
    
    9
    
    
    
    2,093,426
    
    
    
    8
  (3)
    
    Accounts payable
 December 31,2007
    
    
    2008% of
    
    
    
    
    
    
    % ofaccounts
    
    
    
    
    
    
    accountsAmount
    
    
    payable
    
    
    Amount
    
    
    payableNT$
    
    
    
    
    
    NT$Phoenix Precision Technology
Corporation
    
    
    662,731
    
    
    
    10
    
    
    
    435,777
    
    
    
    9
 (4)
    
    Other Expenses / Other Payables
 As of and for the years ended December 31,2006
    
    
    2007
    
    
    2008Other
    
    
    Other
    
    
    Other
    
    
    Other
    
    
    Other
    
    
    Otherexpenses
    
    
    payables
    
    
    expenses
    
    
    payables
    
    
    expenses
    
    
    payablesNT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$Others
    
    
    12,153
    
    
    
    4,807
    
    
    
    16,839
    
    
    
    3,489
    
    
    
    12,284
    
    
    
    1,733
   F-37




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (5)
    
    Other Incomes / Other Receivables
 As of and for the years ended December 31,2006
    
    
    2007
    
    
    2008Other
    
    
    Other
    
    
    Other
    
    
    Other
    
    
    Other
    
    
    Otherincomes
    
    
    receivables
    
    
    incomes
    
    
    receivables
    
    
    incomes
    
    
    receivablesNT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$Others
    
    
    12,614
    
    
    
    11,288
    
    
    
    136
    
    
    
    
    
    
    
    
    
    
    
    
  (6)
    
    Property Transaction
 For the year ended December 31, 2007Loss on disposal ofName of the
    
    Transaction
    
    
    
    
    
    
    property, plant andproperty
    
    amount
    
    
    Book value
    
    
    equipmentNT$
    
    
    NT$
    
    
    NT$Pei-Sheng Fundation
    
    Land
    
    
    132,391
    
    
    
    159,740
    
    
    
    (27,349
    )Buildings
    
    
    49,336
    
    
    
    54,610
    
    
    
    (5,274
    )181,727
    
    
    
    214,350
    
    
    
    (32,623
    )
  (7)
    
    Salaries / Remunerations Paid to Directors, Supervisors, and Managements
 For the years ended December 31,2006
    
    
    2007
    
    
    2008NT$
    
    
    NT$
    
    
    NT$Salary
    
    
    43,039
    
    
    
    53,669
    
    
    
    53,917Remuneration / Compensation
    
    
    13,084
    
    
    
    16,016
    
    
    
    14,178Operating expenses
    
    
    5,537
    
    
    
    588
    
    
    
    474Earnings distribution
    
    
    410,975
    
    
    
    462,362
    
    
    
    137,475472,635
    
    
    
    532,635
    
    
    
    206,044
 i.
    
    Salary includes base salary, job allowance, retirement pension, and etc.ii.
    
    Compensation includes various kinds of bonuses, other financial incentives, and etc.iii.
    
    Operating expenses include transportation fare, dormitory, and other kinds of practical subsidies.iv.
    
    Earnings distribution means directors and supervisors remunerations and employees bonuses recognized for the current period.v.
    
    Please refer to the Companys annual report to stockholders for other related information.
 (8)
    
    Other Transactions
   F-38




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 26.
    
    Assets Pledged as Collaterals
  December 31,2007
    
    
    2008
    
    
    Subject of collateralNT$
    
    
    NT$AssetsTime deposits (shown as other
financial assets, current)
    
    
    259,100
    
    
    
    278,600
    
    
    Guarantees for custom duties
 27.
    
    Commitments and Contingencies
 A.
    
    As of December 31, 2008, the Company and its subsidiaries issued but unused letters
of credit for imported machinery and equipment was approximate NT$158,952.
 B.
    
    The Company entered into several contracts with six foreign companies for the use of
certain technologies and patents. The Company agreed to pay royalty fees based on the
total number of certain products sold. Contracts are valid through January 2010, December
2010, January 2011, March 2012, November 2014, and May 2018, respectively. One of the
contracts is valid until all patents included in the contract expire and until both
parties agree to terminate the contract.
 C.
    
    On March 1, 2006, the Company was informed of a lawsuit brought by Tessera in the
United States District Court for the Northern District of California against it, its
subsidiary, Siliconware USA, Inc., and five other semiconductor companies and their
subsidiaries (California Litigation). Tessera alleged that some of our packaging services
have infringed patents owned by Tessera and that we breached a license agreement with
Tessera. In May 2007, the parties stipulated to a stay pending a final determination of an
investigation (605 case) directed against other parties (including certain co-defendants
in the California Litigation) conducted by the International Trade Commission (ITC).
Pursuant to the stipulation, the court stayed the litigation.
    28.
    
    Significant Disaster Loss
   F-39




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 29.
    
    Significant Subsequent Event
  30.
    
    Other
 A.
    
    Fair Values of Financial Instruments:
 December 31,2007
    
    
    2008Fair Value
    
    
    
    
    
    
    Fair ValueEstimated
    
    
    
    
    
    
    
    
    
    
    EstimatedQuotation in an
    
    
    using a
    
    
    
    
    
    
    Quotation in an
    
    
    using aBook Value
    
    
    active market
    
    
    valuation
    
    
    Book Value
    
    
    active market
    
    
    valuationNT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$Non-derivative financial instruments:Financial assetsFinancial assets with book value
equal to fair value
    
    
    34,696,848
    
    
    
    
    
    
    
    34,696,848
    
    
    
    26,652,044
    
    
    
    
    
    
    
    26,652,044Available-for-sale financial assets,
noncurrent
    
    
    4,873,284
    
    
    
    4,873,284
    
    
    
    
    
    
    
    1,075,480
    
    
    
    1,075,480
    
    
    
    Financial assets carried at cost, noncurrent
    
    
    719,055
    
    
    
    
    
    
    
    
    
    
    
    322,036
    
    
    
    
    
    
    
    40,289,187
    
    
    
    4,873,284
    
    
    
    34,696,848
    
    
    
    28,049,560
    
    
    
    1,075,480
    
    
    
    26,652,044Financial liabilitiesFinancial liabilities with book value
equal to fair value
    
    
    13,777,435
    
    
    
    
    
    
    
    13,777,435
    
    
    
    10,837,281
    
    
    
    
    
    
    
    10,837,281Long-term loans
    
    
    2,995,871
    
    
    
    
    
    
    
    2,993,416
    
    
    
    2,997,419
    
    
    
    
    
    
    
    3,053,71616,773,306
    
    
    
    
    
    
    
    16,770,851
    
    
    
    13,834,700
    
    
    
    
    
    
    
    13,890,997
  (1)
    
    Financial assets and liabilities with book value equal to fair value are cash,
notes receivable, accounts receivable, other financial assets  current, refundable
deposits, short-term loans, notes payable, accounts payable, income tax payable, accrued
expenses, other payables, other current liabilities and other liabilities  others
because of their short maturities.
 (2)
    
    Available-for-sale financial assets, noncurrent are recorded at quoted market
prices as their fair values due to the availability of the quoted price in an active
market.
 (3)
    
    Financial assets carried at cost, noncurrent are recorded at costs due to the lack
of quoted market prices derived from the active market and the reasonable measurement for
the fair value.
 (4)
    
    The fair value of long-term loans, including current portion of long-term loans, is
estimated by the discounted future cash flows. The discount rates of 2.307% and 1.011%
for 2007 and 2008, respectively, are based on the interest rate of the similar long-term
loan, which the Company would have acquired.
  F-40




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 B.
    
    Financial assets and liabilities with the risk of interest rate fluctuation:
  C.
    
    Financial assets and liabilities whose changes in fair value are not recognized in
earnings:
  D.
    
    Financial risk control:
  E.
    
    Financial risk information:
 1.
    
    Financial assets: investments in equity instruments
 December 31,2007
    
    
    2008NT$
    
    
    NT$Available-for-sale financial assets
    
    
    4,873,284
    
    
    
    1,075,480Financial assets carried at cost
    
    
    719,055
    
    
    
    322,0365,592,339
    
    
    
    1,397,516
 (1)
    
    Market risk:
  (2)
    
    Credit risk:
  (3)
    
    Liquidity risk:
   F-41




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (4)
    
    Cash flow risk of interest rate:
  2.
    
    Financial liabilities: debt instruments
 December 31,2007
    
    
    2008NT$
    
    
    NT$Short-term loans
    
    
    529,323
    
    
    
    654,933Long-term loans
    
    
    2,995,871
    
    
    
    2,997,4193,525,194
    
    
    
    3,652,352
 (1)
    
    Market risk:
 The Company and its subsidiaries loans are fixed interest rate for short-term
and long-term loans, so there is no market risk of interest rate fluctuating.
 (2)
    
    Credit risk:
  (3)
    
    Liquidity risk:
  (4)
    
    Cash flow risk of interest rate:
   F-42




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 31.
    
    Special Disclosure Items Required by ROC GAAP
 A.
    
    Significant Transaction Information
 (1)
    
    Loans to third parties attributed to financial activities:For the year ended December 31, 2008: None.(2)
    
    Endorsement and guarantee provided to third parties:For the year ended December 31, 2008: None.(3)
    
    The ending balance of securities are summarized as follows:As of December 31, 2008:
 The relationship
    
    
    
    Number
    
    
    
    
    
    
    Percentage
    
    
    Market valueType of
    
    
    
    of the issuers
    
    General ledger
    
    of shares
    
    
    
    
    
    
    of
    
    
    per shareInvestor
    
    securities
    
    Name of securities
    
    with the Company
    
    accounts
    
    (in thousands)
    
    
    Book value
    
    
    ownership
    
    
    (in dollars)NT$
    
    
    
    
    
    
    NT$Siliconware Precision Industries Co., Ltd.
    
    
    
    Siliconware Investment Company Ltd.
    
    Investee accounted for under the equity method
    
    Long-term investments accounted for under the equity method
    
    
    (Note 1
    )    
    
    817,284
    
    
    
    100.00
    %
    
    
    
    (Note 4)Siliconware Precision Industries Co., Ltd.
    
    Stock
    
    Double Win Enterprise Co., Ltd.
    
    Investee accounted for under the equity method
    
    Long-term investments accounted for under the equity method
    
    
    6,760
    
    
    
    
    
    
    
    24.14
    %
    
    
    Siliconware Precision Industries Co., Ltd.
    
    Stock
    
    SPIL (B.V.I.) Holding Limited
    
    Investee accounted for under the equity method
    
    Long-term investments accounted for under the equity method
    
    
    88,400
    
    
    
    3,167,712
    
    
    
    100.00
    %
    
    

    35.83
    (Notes 2 and 4)Siliconware Precision Industries Co., Ltd.
    
    Stock
    
    Phoenix Precision Technology Corporation
    
    The Company holds directorship
    
    Available-for-sale financial assets, noncurrent
    
    
    115,917
    
    
    
    928,498
    
    
    
    15.97
    %
    
    
    8.01Siliconware Precision Industries Co., Ltd.
    
    Stock
    
    ChipMOS Technologies (Bermuda) Ltd.
    
    
    
    Available-for-sale financial assets, noncurrent
    
    
    12,175
    
    
    
    99,713
    
    
    
    14.52
    %
    
    

    8.19
    (Note 3)
 Note 1: The contributed capital was NT$1,770,000.Note 2: The market value is not available. Therefore, the net equity per share
as of December 31, 2008 was used.Note 3: The closing price of US$0.25 (in dollars) per share on December 31, 2008
was used. (Exchange rate US$1: NT$32.76)Note 4: Eliminated under consolidation.
  F-43




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (4)
    
    Securities for which total buying or selling exceeds the lower of NT$100,000 or 20 percent
of the capital stock:For the year ended December 31, 2008:
 TheName
    
    
    relationshipof
    
    
    of the
    
    
    Beginning balance
    
    
    Addition
    
    
    Disposal
    
    
    Ending balanceGeneral
    
    the
    
    
    issuers
    
    
    Number
    
    
    
    
    
    
    Number
    
    
    
    
    
    
    Number
    
    
    
    
    
    
    
    
    
    
    Gain (loss)
    
    
    NumberName of
    
    ledger
    
    counter
    
    
    with the
    
    
    of shares/unit
    
    
    
    
    
    
    of shares/unit
    
    
    
    
    
    
    of shares/unit
    
    
    
    
    
    
    
    
    
    
    from
    
    
    of shares/unit
    
    
    AmountInvestor
    
    the security
    
    accounts
    
    party
    
    
    Company
    
    
    (in thousands)
    
    
    Amount
    
    
    (in thousands)
    
    
    Amount
    
    
    (in thousands)
    
    
    Sale price
    
    
    Book value
    
    
    disposal
    
    
    (in thousands)
    
    
    (Notes 1 and 2)NT$
    
    
    
    
    
    
    NT$
    
    
    
    
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    
    
    
    
    NT$Siliconware Precision Industries Co., Ltd.
    
    SPIL (B.V.I.) Holding Limited
    
    Long-term investment accounted for under equity method
    
    
    
    
    
    
    
    
    
    
    77,800
    
    
    
    2,587,094
    
    
    
    10,600
    
    
    
    323,332
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88,400
    
    
    
    3,167,712
 Note 1: The ending balance amount included the investment income or loss recognized in
current earnings and cumulative translation adjustments.Note 2: Eliminated under consolidation.
  F-44




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (5)
    
    Acquisition of real estate with an amount exceeding the lower of NT$100,000 or 20 percent
of the capital stock:For the year ended December 31, 2008:
 Related party as counter partyOriginal
    
    
    TheRelation-
    
    
    owner which
    
    
    relationship of
    
    
    
    
    
    
    
    
    
    
    The bases orship with
    
    
    sold the
    
    
    the original
    
    
    Date of the
    
    
    
    
    
    
    reference used
    
    Purpose andName of the
    
    Date of
    
    Transaction
    
    
    Status of
    
    
    
    
    the
    
    
    property to the
    
    
    owner with
    
    
    original
    
    
    
    
    
    
    in deciding the
    
    status of theProperties
    
    transaction
    
    amount
    
    
    payment
    
    
    Counter party
    
    Company
    
    
    counter party
    
    
    the Company
    
    
    transaction
    
    
    Amount
    
    
    price
    
    acquisition
    
    Other commitmentNT$
    
    
    NT$
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    NT$Building improvements
    
    March 2008
    
    
    102,000
    
    
    
    102,000
    
    
    Chung-Rui Construction Corporation Ltd.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    As specified in contract
    
    For operating use
    
    Payment made according to construction progressBuilding improvements
    
    March 2008
    
    
    149,800
    
    
    
    149,800
    
    
    Acter Construction Corporation Ltd.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    As specified in contract
    
    For operating use
    
    Payment made according to construction progressBuilding
    
    November 2008
    
    
    142,700
    
    
    
    
    
    
    Jun-Biau Construction Corporation Ltd.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    As specified in contract
    
    For operating use
    
    Payment made according to construction progress
 (6)
    
    Disposal of real estate with an amount exceeding the lower of NT$100,000 or 20 percent of
the capital stock:For the year ended December 31, 2008: None.
  F-45




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (7)
    
    Related party transactions with purchases and sales amounts exceeding the lower of
NT$100,000 or 20 percent of the capital stock:For the year ended December 31, 2008:
 Description of and reasons fordifference in transaction termscompared to non-related party
    
    
    Notes or accounts receivable /Description of the transaction
    
    transactions
    
    
    payablePercentage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Percentage ofRelationship
    
    
    
    
    
    
    
    of net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    notes or accountsPurchase / sales
    
    Name of
    
    with the
    
    Purchases
    
    
    
    
    
    purchases
    
    
    Credit
    
    Unit
    
    
    Credit
    
    
    
    
    receivable /company
    
    the counter party
    
    counter party
    
    / sales
    
    Amount
    
    
    / sales
    
    
    terms
    
    price
    
    
    terms
    
    
    Amount
    
    payableNT$
    
    
    
    
    
    
    
    
    NT$
    
    
    
    
    
    
    NT$Siliconware Precision Industries Co., Ltd.
    
    Phoenix Precision Technology Corporation
    
    The Company holds directorship
    
    Purchases
    
    
    2,093,426
    
    
    
    8
    %
    
    Three months
    
    
    
    
    
    
    
    
    
    Accounts payable 435,777
    
    
    9
    %
 (8)
    
    Receivables from related parties exceeding the lower of NT$100,000 or 20 percent of the
capital stock:As of December 31, 2008: None.(9)
    
    Transaction of derivative financial instruments:For the year ended December 31, 2008: None.
  F-46




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 B.
    
    Related Information on Investee Companies
 (1)
    
    Basic information on investee companies:For the year ended December 31, 2008:
 The Company / majorityOriginal investments
    
    
    owned subsidiary owns
    
    
    Current periodCurrent
    
    
    Priorperiod
    
    
    period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    
    Income (loss)ending
    
    
    ending
    
    
    Shares
    
    
    Ownership
    
    
    Book
    
    
    (loss) of
    
    
    recognized byInvestor
    
    Name of Investee
    
    Location
    
    Main activities
    
    balance
    
    
    balance
    
    
    (in thousands)
    
    
    Percentage
    
    
    value
    
    
    investee
    
    
    the Company
    
    
    NoteNT$
    
    
    NT$
    
    
    
    
    
    
    
    
    
    
    NT$
    
    
    NT$
    
    
    NT$Siliconware Precision Industries Co., Ltd.
    
    Siliconware Investment Company Ltd.
    
    Hsin-Chu
    
    Investment activities
    
    
    1,770,000
    
    
    
    1,770,000
    
    
    

    (Note 6
    )

    
    
    100.00
    %
    
    
    817,284
    
    
    
    (233,613
    )
    
    
    (395,028
    )
    
    (Notes 1, 2, 7 and 9)Siliconware Precision Industries Co., Ltd.
    
    Double Win Enterprise Co., Ltd.
    
    Ping-chen City, Taoyuan
    
    SMT process and hand insert
    
    
    152,100
    
    
    
    152,100
    
    
    
    6,760
    
    
    
    24.14
    %
    
    
    
    
    
    
    
    
    
    
    
    
    
    (Note 1)Siliconware Precision Industries Co., Ltd.
    
    SPIL (B.V.I.) Holding Limited
    
    British Virgin Islands
    
    Investment activities
    
    
    2,895,100
    
    
    
    2,547,950
    
    
    
    88,400
    
    
    
    100.00
    %
    
    
    3,167,712
    
    
    
    39,839
    
    
    
    39,839
    
    
    (Notes 1, 2, 8 and 9)SPIL (B.V.I.) Holding Limited
    
    Siliconware USA, Inc.
    
    San Jose, CA, USA
    
    Communications and relationship maintenance with companies headquartered in North America
    
    
    40,938
    
    
    
    40,938
    
    
    
    1,250
    
    
    
    100.00
    %
    
    
    142,595
    
    
    
    7,126
    
    
    
    7,126
    
    
    (Notes 3, 8 and 9)SPIL (B.V.I.) Holding Limited
    
    SPIL (Cayman) Holding Limited
    
    Cayman Islands, British West India
    
    Investment activities
    
    
    2,954,050
    
    
    
    2,295,775
    
    
    
    90,200
    
    
    
    100.00
    %
    
    
    3,014,527
    
    
    
    31,024
    
    
    
    31,024
    
    
    (Notes 3, 8 and 9)SPIL (Cayman) Holding Limited
    
    Siliconware Technology (Suzhou) Limited
    
    Suzhou Jiangsu, China
    
    Assembly and testing service providing
    
    
    2,947,500
    
    
    
    2,292,500
    
    
    

    (Note 5

    )
    

    
    100.00
    %
    
    
    3,011,796
    
    
    
    31,775
    
    
    
    31,775
    
    
    (Notes 4, 8 and 9)
 Note 1: The Companys investee accounted for under the equity method.Note 2: The Companys 100% owned subsidiary.Note 3: An investee accounted for under the equity method of SPIL (B.V.I.) Holding
Limited, a 100% owned subsidiary of the Company.Note 4: An investee accounted for under the equity method of SPIL (Cayman) Holding
Limited, a 100% owned subsidiary of SPIL (B.V.I) Holding Limited.Note 5: The contributed capital was US$90,000.Note 6: The contributed capital was NT$1,770,000.Note 7: The investment income (loss) recognized during the current period already
excludes the amount of cash dividends distributed from the parent company to its
subsidiaries and reclassified into paid-in-capital.Note 8: The foreign currency exchange rates prevailing at the balance sheet date were
used for the currency translation.Note 9: Eliminated under consolidation.
  F-47




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (2)
    
    The ending balance of securities held by investee companies:As of December 31, 2008:
 The relationship
    
    General
    
    Number of
    
    
    
    
    
    
    Percentage
    
    
    Market valueType of
    
    Name of
    
    of the issuers with
    
    ledger
    
    shares
    
    
    Book value
    
    
    of
    
    
    per shareInvestor
    
    securities
    
    securities
    
    the Company
    
    accounts
    
    (in thousands)
    
    
    (Note 2)
    
    
    ownership
    
    
    (in dollars)NT$
    
    
    
    
    
    
    NT$Siliconware Investment Company Ltd.
    
    Stock
    
    Siliconware Precision Industries Co., Ltd.
    
    The Company
    
    Available-for-sale financial assets, noncurrent
    
    
    36,229
    
    
    
    1,014,404
    
    
    
    1.15
    %
    
    
    28.00
    (Note 6)Siliconware Investment Company Ltd.
    
    Stock
    
    Hsieh Yong Capital Co., Ltd.
    
    
    
    Financial assets carried at cost, noncurrent
    
    
    57,810
    
    
    
    170,000
    
    
    
    7.58
    %
    
    
    2.94Siliconware Investment Company Ltd.
    
    Stock
    
    Phoenix Precision Technology Corporation
    
    The Company holds directorship
    
    Available-for-sale financial assets, noncurrent
    
    
    5,901
    
    
    
    47,269
    
    
    
    0.81
    %
    
    
    8.01Siliconware Investment Company Ltd.
    
    
    
    Mega Mission Limited Partnership
    
    
    
    Financial assets carried at cost, noncurrent
    
    
    (Note 3
    )
    
    
    132,063
    
    
    
    4.00
    %
    
    
    Siliconware Investment Company Ltd.
    
    
    
    Others (Note 1)
    
    
    
    Financial assets carried at cost, noncurrent
    
    
    
    
    
    
    19,973
    
    
    
    
    
    
    
    SPIL (B.V.I.) Holding Limited
    
    Stock
    
    Siliconware USA, Inc.
    
    Indirect subsidiary of the Company
    
    Long-term investments accounted for under the equity method
    
    
    1,250
    
    
    
    142,595 (Note 5
    )
    
    
    100.00
    %
    
    

    114.08

    (Notes 2 and 6)SPIL (B.V.I.) Holding Limited
    
    Stock
    
    SPIL (Cayman) Holding Limited
    
    Indirect subsidiary of the Company
    
    Long-term investments accounted for under the equity method
    
    
    90,200
    
    
    
    3,014,527 (Note 5
    )
    
    
    100.00
    %
    
    
    33.42
    (Notes 2 and 6)SPIL (Cayman) Holding Limited
    
    
    
    Siliconware Technology (Suzhou) Limited
    
    Indirect subsidiary of the Company
    
    Long-term investments accounted for under the equity method
    
    
    (Note 4
    )
    
    3,011,796 (Note 5
    )
    
    
    100.00
    %
    
    
    
    (Note 6)
 Note 1: Combined amount for individual security less than NT$100,000.Note 2: The market value is not available. Therefore, the net equity per share as of December
31, 2008 was used.Note 3: The contributed capital was US$6,000.Note 4: The contributed capital was US$90,000.Note 5: The foreign currency exchange rates prevailing at the balance sheet date were used for
the currency translation.Note 6: Eliminated under consolidation.
  F-48




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (3)
    
    Securities for which total buying or selling amount exceed the lower of
NT$100,000 or 20 percent of the capital stock:For the year ended December 31, 2008:
 TherelationshipName
    
    of the
    
    
    Beginning balance
    
    
    Addition
    
    
    Disposal
    
    
    Ending balanceGeneral
    
    of the
    
    issuers
    
    
    Number
    
    
    
    
    
    
    Number
    
    
    
    
    
    
    Number
    
    
    
    
    
    
    
    
    
    
    Gain (loss)
    
    
    Number
    
    
    AmountName of
    
    ledger
    
    counter
    
    with the
    
    
    of shares/unit
    
    
    Amount
    
    
    of shares/unit
    
    
    Amount
    
    
    of shares/unit
    
    
    
    
    
    
    
    
    
    
    from
    
    
    of shares/unit
    
    
    (Notes 4,Investor
    
    the security
    
    accounts
    
    party
    
    Company
    
    
    (in thousands)
    
    
    (Note 5)
    
    
    (in thousands)
    
    
    (Note 5)
    
    
    (in thousands)
    
    
    Sale price
    
    
    Book value
    
    
    disposal
    
    
    (in thousands)
    
    
    5 and 6)NT$
    
    
    
    
    
    
    NT$
    
    
    
    
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    
    
    
    
    NT$SPIL (B.V.I.) Holding Limited
    
    SPIL (Cayman) Holding Limited
    
    Long-term investments accounted for under the equity method
    
    Cash capitalization
    
    
    
    
    
    
    70,100
    
    
    
    2,295,775
    
    
    
    20,100
    
    
    
    658,275
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    90,200
    
    
    
    3,014,527SPIL (Cayman) Holding Limited
    
    Siliconware Technology (Suzhou) Limited
    
    Long-term investments accounted for under the equity method
    
    Cash capitalization
    
    
    
    
    
    (Note 1)
    
    
    2,292,500
    
    
    (Note 2)
    
    
    655,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (Note 3)
    
    
    3,011,796
 Note 1: The contributed capital was US$70,000.Note 2: The contributed capital was US$20,000.Note 3: The contributed capital was US$90,000.Note 4: The ending balance includes the investment income and cumulative translation
adjustments.Note 5: The foreign currency exchange rates prevailing at the balance sheet date were used for
the currency translation.Note 6: Eliminated under consolidation.
 (4)
    
    Acquisition of real estate with an amount exceeding the lower of NT$100,000 or 20 percent
of the capital stock:For the year ended December 31, 2008: None.
  F-49




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 C.
    
    Information of investment in mainland China:
 (1)
    
    Information of investment in mainland China: (The amount in USD is presented in
thousands.)
 OwnershipName of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    held byInvestee
    
    
    
    
    
    
    
    
    
    
    
    Accumulated
    
    
    Remitted or
    
    
    Accumulated
    
    
    the Companyin mainland
    
    Main activities
    
    
    
    
    
    Investment
    
    
    remittance as of
    
    
    (collected)
    
    
    remittance as of
    
    
    (Direct andChina
    
    of investee
    
    Capital
    
    
    method
    
    
    January 1, 2008
    
    
    this period
    
    
    December 31, 2008
    
    
    indirect)NT$
    
    
    
    
    
    
    NT$
    
    
    NT$
    
    
    NT$Siliconware Technology
    
    Assembly and testing
    
    
    2,947,500
    
    
    
    
    
    
    
    2,292,500
    
    
    
    655,000
    
    
    
    2,947,500(Suzhou) Limited
    
    service providing
    
    
    (US$90,000
    )
    
    
    (Note 1
    )
    
    
    (US$70,000
    )
    
    
    (US$20,000
    )
    
    
    (US$90,000
    )
    

    
    100
    %(Note 3
    )
    
    
    
    
    
    
    (Note 3
    )
    
    
    (Note 3
    )
    
    
    (Note 3
    )
 Investment
    
    
    
    
    
    
    
    
    
    
    
    
    
    The investment balanceincome (loss)
    
    
    
    
    
    The investment
    
    
    Accumulated
    
    
    approved by
    
    
    The ceiling of investmentrecognized by
    
    
    
    
    
    income (loss)
    
    
    remittance
    
    
    Investment Commissions,
    
    
    in mainland China according tothe Company
    
    Ending balance
    
    
    remitted back as of
    
    
    from Taiwan to
    
    
    Ministry of Economic
    
    
    Investment Commissions,during the period
    
    of investment
    
    
    December 31, 2008
    
    
    mainland China
    
    
    Affairs
    
    
    Ministry of Economic AffairsNT$
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$2,947,500
    
    
    
    4,257,50031,775
    
    
    3,011,796
    
    
    
    
    
    
    
    (US$90,000
    )
    
    
    (US$130,000
    )
    
    
    35,588,473(Notes 2,3 and 4
    )
    
    (Notes 3 and 4
    )
 Note 1: The Company set up a subsidiary in Cayman Island to invest in mainland China.Note 2: The investment income (loss) was recorded based on the financial statements audited by
the auditors.Note 3: The foreign currency exchange rates prevailing at the balance sheet date were used for
the currency translation.Note 4: Eliminated under consolidation.
  F-50




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (2)
    
    Material transactions occurred directly between the Company and its mainland China
investee companies and material transactions occurred indirectly between the Company and
its mainland China investee companies via enterprises in other areas:
 i.
    
    Property transaction between the parent company and the subsidiary for the year ended
December 31, 2008:
 2008OtherName of properties
    
    Selling price
    
    
    Book value
    
    
    Gain on sale
    
    
    receivablesNT$
    
    
    NT$
    
    
    NT$
    
    
    NT$Siliconware Technology (Suzhou) Limited
    
    Equipments
    
    
    48,382
    
    
    
    25,252
    
    
    
    23,130
    
    
    
    25,563
 ii.
    
    Transaction above was eliminated under consolidation.
 D.
    
    The business relationships and the significant transactions as well as amounts between the
parent company and the subsidiary.
 (1)
    
    For the year ended December 31, 2006:
 TransactionCompany
    
    
    
    
    
    General ledger
    
    
    
    
    
    Transaction
    
    Percentage of consolidatedNo.
    
    Name
    
    Counterparty
    
    Relationship
    
    account
    
    Amount
    
    
    terms
    
    revenues or total assetsNT$0
    
    Siliconware Precision Industries Co., Ltd.
    
    Siliconware USA, Inc.
    
    Indirect owned subsidiary
    
    Operating expense
    
    
    478,608
    
    
    As specified in contract
    
    
    0.84
    %
  F-51




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (2)
    
    For the year ended December 31, 2007:
 TransactionCompany
    
    
    
    
    
    General ledger
    
    
    
    
    
    Transaction
    
    Percentage of consolidatedNo.
    
    Name
    
    Counterparty
    
    Relationship
    
    account
    
    Amount
    
    
    terms
    
    revenues or total assetsNT$0
    
    Siliconware Precision Industries Co., Ltd.
    
    Siliconware USA, Inc.
    
    Indirect owned subsidiary
    
    Operating expense
    
    
    542,974
    
    
    As specified in contract
    
    
    0.82
    %0
    
    Siliconware Precision Industries Co., Ltd.
    
    Siliconware USA, Inc.
    
    Indirect owned subsidiary
    
    Accrued expense
    
    
    50,314
    
    
    As specified in contract
    
    
    0.06
    %
 (3)
    
    For the year ended December 31, 2008:
 TransactionCompany
    
    
    
    
    
    General ledger
    
    
    
    
    
    Transaction
    
    Percentage of consolidatedNo.
    
    Name
    
    Counterparty
    
    Relationship
    
    account
    
    Amount
    
    
    terms
    
    revenues or total assetsNT$0
    
    Siliconware Precision Industries Co., Ltd.
    
    Siliconware USA, Inc.
    
    Indirect owned subsidiary
    
    Operating expense
    
    
    500,451
    
    
    As specified in contract
    
    
    0.80
    %0
    
    Siliconware Precision Industries Co., Ltd.
    
    Siliconware USA, Inc.
    
    Indirect owned subsidiary
    
    Accrued expense
    
    
    155,016
    
    
    As specified in contract
    
    
    0.21
    %
  F-52




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 32.
    
    Segment Information
 A.
    
    Operation in Different IndustriesThe Company principally operates in one industry. The Companys operation involves assembly,
testing and turnkey services of integrated circuits. Besides, the chief operating decision maker
reviews the operating results of the entire consolidated company to make decisions for allocating
resources and evaluating performance. The Company as a whole is treated as only one operating and
reportable segment.B.
    
    Operations in Different Geographic AreasThe Company has no significant foreign operations.C.
    
    Sales
 For the years ended December 31,Geographic areas
    
    2006
    
    
    2007
    
    
    2008NT$
    
    
    NT$
    
    
    NT$Taiwan
    
    
    20,500,146
    
    
    
    23,462,544
    
    
    
    21,020,922U.S.
    
    
    28,278,609
    
    
    
    33,039,895
    
    
    
    28,631,910Canada
    
    
    5,766,647
    
    
    
    4,801,804
    
    
    
    3,668,015Others
    
    
    2,580,518
    
    
    
    4,873,086
    
    
    
    9,082,08757,125,920
    
    
    
    66,177,329
    
    
    
    62,402,934
 Sales by geographic region are identified by the locations where customers are headquartered.D.
    
    Major CustomersA major customer is identified as the party that accounts for more than 10% of the Companys net
sales in any given year. No identity of segment for each major customer listed below is applicable
due to the Companys unclassified segment operation.
 For the years ended December 31,2006
    
    
    2007
    
    
    2008% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % ofCustomers
    
    Amount
    
    
    net sale
    
    
    Amount
    
    
    net sale
    
    
    Amount
    
    
    net saleNT$
    
    
    
    
    
    
    NT$
    
    
    
    
    
    
    NT$Customer A
    
    
    5,733,910
    
    
    
    10
    
    
    
    6,735,258
    
    
    
    10
    
    
    
    6,874,567
    
    
    
    11Customer B
    
    
    4,540,738
    
    
    
    8
    
    
    
    6,993,244
    
    
    
    11
    
    
    
    5,164,169
    
    
    
    810,274,648
    
    
    
    18
    
    
    
    13,728,502
    
    
    
    21
    
    
    
    12,038,736
    
    
    
    19
  F-53




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 33.
    
    US GAAP ReconciliationThe accompanying consolidated financial statements have been prepared in conformity with Rules
Governing the Preparation of Financial Reports by Securities Issuers and accounting principles
generally accepted in the Republic of China (ROC GAAP), which differ in certain material respects
from generally accepted accounting principles in the United States (US GAAP). Such differences
involve methods for measuring the amounts shown in the financial statements, as well as additional
disclosures required by US GAAP.The following is a summary of the material adjustments to net income and shareholders equity,
which would be required in reconciling the significant differences between ROC GAAP and US GAAP:
 Reconciliation of consolidated net income:
 For the years ended December 31,2006
    
    
    2007
    
    
    2008NT$
    
    
    NT$
    
    
    NT$
    
    
    US$Net income as reported under ROC GAAP
    
    
    13,329,069
    
    
    
    17,489,351
    
    
    
    6,313,530
    
    
    
    192,721US GAAP adjustments:Compensated absences
    
    
    (12,868
    )
    
    
    (12,975
    )
    
    
    (2,264
    )
    
    
    (69
    )Compensation
    
    
    (1,909,445
    )
    
    
    (3,634,483
    )
    
    
    (1,581,727
    )
    
    
    (48,282
    )Employee stock option
    
    
    (27,331
    )
    
    
    (2,356
    )
    
    
    
    
    
    
    Impairment on long-term investments
    
    
    28,885
    
    
    
    
    
    
    
    (279,843
    )
    
    
    (8,542
    )Embedded derivative
    
    
    (2,986,828
    )
    
    
    (1,181,410
    )
    
    
    
    
    
    
    Defined benefit pension plan  net peroidic pension cost
    
    
    
    
    
    
    7,160
    
    
    
    240
    
    
    
    7Equity investments:Net income variance between USGAAP and ROC GAAP
    
    
    9,409
    
    
    
    6,672
    
    
    
    
    
    
    
    Gain on disposal of investments
    
    
    
    
    
    
    402,781
    
    
    
    
    
    
    
    Total US GAAP adjustments
    
    
    (4,898,178
    )
    
    
    (4,414,611
    )
    
    
    (1,863,594
    )
    
    
    (56,886
    )Taxation effect
    
    
    (17,529
    )
    
    
    24,336
    
    
    
    (56,164
    )
    
    
    (1,715
    )Net income under US GAAP
    
    
    8,413,362
    
    
    
    13,099,076
    
    
    
    4,393,772
    
    
    
    134,120
 For the years ended December 31,2006
    
    
    2007
    
    
    2008NT$
    
    
    NT$
    
    
    NT$
    
    
    US$Earnings per share under US GAAP (in dollars)Basic
    
    
    3.02
    
    
    
    4.33
    
    
    
    1.42
    
    
    
    0.04Diluted
    
    
    3.01
    
    
    
    4.32
    
    
    
    1.42
    
    
    
    0.04Weighted average number of common
stock outstanding (in thousands)Basic
    
    
    2,782,519
    
    
    
    3,026,156
    
    
    
    3,088,843
    
    
    
    3,088,843Effect of dilutive securites 
employee stock option
    
    
    15,288
    
    
    
    6,251
    
    
    
    14,650
    
    
    
    14,650Diluted
    
    
    2,797,807
    
    
    
    3,032,407
    
    
    
    3,103,493
    
    
    
    3,103,493
  F-54




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Reconciliation of consolidated shareholders equity:
 December 31,2006
    
    
    2007
    
    
    2008NT$
    
    
    NT$
    
    
    NT$
    
    
    US$Total shareholders equity as reported under
ROC GAAP
    
    
    62,936,213
    
    
    
    68,908,154
    
    
    
    59,314,121
    
    
    
    1,810,565US GAAP adjustments:Compensated absences
    
    
    (42,968
    )
    
    
    (55,943
    )
    
    
    (58,207
    )
    
    
    (1,777
    )Compensation
    
    
    (1,294,248
    )
    
    
    (1,728,916
    )
    
    
    
    
    
    
    Impairment on long-term investments
    
    
    (170,424
    )
    
    
    
    
    
    
    
    
    
    
    Embedded derivative
    
    
    (1,185,762
    )
    
    
    
    
    
    
    
    
    
    
    Defined benefit pension plan
    
    
    (209,558
    )
    
    
    (316,665
    )
    
    
    (171,901
    )
    
    
    (5,247
    )Equity investments:Net income variance between US
GAAP and ROC GAAP
    
    
    185,989
    
    
    
    
    
    
    
    
    
    
    
    Technology and know-how contributed
to
a joint venture investee
    
    
    (210,417
    )
    
    
    
    
    
    
    
    
    
    
    Adjustment for the variances between
net
income and shareholders equity
    
    
    (14,730
    )
    
    
    
    
    
    
    
    
    
    
    Acquisition of Siliconware Corp.
    
    
    4,873,500
    
    
    
    4,873,500
    
    
    
    4,873,500
    
    
    
    148,764Taxation effect
    
    
    (8,481
    )
    
    
    15,855
    
    
    
    (40,309
    )
    
    
    (1,230
    )Shareholders equity under US GAAP
    
    
    64,859,114
    
    
    
    71,695,985
    
    
    
    63,917,204
    
    
    
    1,951,075
  F-55




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Movements in shareholders equity in accordance with US GAAP:
 For the years ended December 31,2006
    
    
    2007
    
    
    2008NT$
    
    
    NT$
    
    
    NT$
    
    
    US$Balance at January 1, as reported
    
    
    51,390,757
    
    
    
    64,859,114
    
    
    
    71,695,985
    
    
    
    2,188,522Net income under US GAAP
    
    
    8,413,362
    
    
    
    13,099,076
    
    
    
    4,393,772
    
    
    
    134,120Employee stock bonus
    
    
    882,991
    
    
    
    2,257,602
    
    
    
    2,053,181
    
    
    
    62,673Employee stock option  amortized compensation
    
    
    27,331
    
    
    
    2,356
    
    
    
    
    
    
    
    Adjustment for investee companies capital reserve
    
    
    67,945
    
    
    
    (18,200
    )
    
    
    5,507
    
    
    
    168Cumulative translation adjustment on long-term
investment
    
    
    25,187
    
    
    
    107,202
    
    
    
    211,940
    
    
    
    6,469Change in fair value of available-for-sale marketable
securities
    
    
    (4,576,257
    )
    
    
    (3,819,090
    )
    
    
    (880,816
    )
    
    
    (26,887
    )Employee stock option exercised
    
    
    147,470
    
    
    
    94,485
    
    
    
    7,395
    
    
    
    226Conversion of Euro convertible bonds
    
    
    8,471,206
    
    
    
    2,736,620
    
    
    
    
    
    
    
    Cash Dividends
    
    
    (4,169,558
    )
    
    
    (9,974,332
    )
    
    
    (13,836,139
    )
    
    
    (422,349
    )Adjustment for investee companys unrecognized
pension cost
    
    
    41
    
    
    
    1,787
    
    
    
    
    
    
    
    Adjustment for investee companys treasury stock
variances
    
    
    33,178
    
    
    
    1,366
    
    
    
    
    
    
    
    Cash dividends for treasury stock held by subsidiaries
    
    
    53,391
    
    
    
    117,976
    
    
    
    161,415
    
    
    
    4,927ECB conversion  APIC
    
    
    4,316,358
    
    
    
    2,367,172
    
    
    
    
    
    
    
    Defined benefit pension plan
    
    
    (209,558
    )
    
    
    (151,879
    )
    
    
    104,964
    
    
    
    3,204Adjustment for the variances between net
income and shareholders equity
    
    
    (14,730
    )
    
    
    14,730
    
    
    
    
    
    
    
    Balance at December 31
    
    
    64,859,114
    
    
    
    71,695,985
    
    
    
    63,917,204
    
    
    
    1,951,075
  F-56




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 The balance sheet accounts under US GAAP is as follows:
 December 31,2007
    
    
    2008NT$
    
    
    NT$
    
    
    US$Current AssetsCash and cash equivalents
    
    
    22,278,258
    
    
    
    12,941,842
    
    
    
    395,050Short-term investments
    
    
    346,400
    
    
    
    5,899,123
    
    
    
    180,071Notes receivable, net
    
    
    116,622
    
    
    
    46,173
    
    
    
    1,409Accounts receivable, net
    
    
    11,257,006
    
    
    
    7,290,315
    
    
    
    222,537Inventories
    
    
    3,460,983
    
    
    
    2,383,067
    
    
    
    72,743Other current assets
    
    
    2,589,233
    
    
    
    1,593,045
    
    
    
    48,62840,048,502
    
    
    
    30,153,565
    
    
    
    920,438Long-term investments
    
    
    5,592,339
    
    
    
    1,397,516
    
    
    
    42,659Property, plant and equipment
    
    
    38,622,365
    
    
    
    38,839,633
    
    
    
    1,185,581Intangible assets
    
    
    4,873,500
    
    
    
    4,873,500
    
    
    
    148,764Other assets
    
    
    1,699,761
    
    
    
    3,101,076
    
    
    
    94,660Total Assets
    
    
    90,836,467
    
    
    
    78,365,290
    
    
    
    2,392,102Current liabilities
    
    
    15,464,180
    
    
    
    11,752,799
    
    
    
    358,754Long-term liabilities
    
    
    2,995,871
    
    
    
    2,248,065
    
    
    
    68,622Other liabilities
    
    
    680,431
    
    
    
    447,222
    
    
    
    13,651Total Liabilities
    
    
    19,140,482
    
    
    
    14,448,086
    
    
    
    441,027Total Stockholders Equity
    
    
    71,695,985
    
    
    
    63,917,204
    
    
    
    1,951,075Total Liabilities and Stockholders Equity
    
    
    90,836,467
    
    
    
    78,365,290
    
    
    
    2,392,102
  (1)
    
    Consolidation
    F-57




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (2)
    
    Compensated Absences
  (3)
    
    Share-based Compensation
 Employee Stock Option
 A.
    
    From January 1, 2006, the Company adopted SFAS No. 123(R) (Revised
2004), Share-Based Payment which eliminated the alternative to use APB 25s
intrinsic value method and required the use of the fair value method with
forfeitures estimated at the time of grant and revised in subsequent periods if
actual forfeitures differ from those estimates. In addition, the exercise price of
the Companys stock options is subject to change due to the distribution of stock
dividends. The Company was required to measure the effects of the modification and
record incremental compensation cost, if any. For the years ended December 31,
2006 and 2007, the Company recorded share-based compensation expense of NT$27,331
and NT$2,356, respectively.
 B.
    
    The following table summarizes the effects of employee stock option
resulting from the application of SFAS No. 123(R):
 For the year endedDecember 31, 2006NT$Effects in net income from employee stock option
    
    
    (27,331
    )Net effect of employee stock option on basic earnings per share (in dollars)
    
    
    (0.02
    )Net effect of employee stock option on diluted earnings per share (in dollars)
    
    
    (0.01
    )
 C.
    
    For computing the fair value of options granted, we use the
Black-Scholes option-pricing model with input assumptions of expected volatility,
expected life, expected dividend rate and expected risk-free rate of return. We
applied the historical volatility based on the historical stock price volatility
over the historical time period commensurate with the expected term of the employee
stock option. The expected term is based on our contractual term. We estimated
dividend yield by historical experience. Besides, we used the yield of Taiwan
Government Bond with the contract term equal to the expected term of the share
options as our risk-free interest rate pursuant to SFAS No. 123 (R), which required
entities based in jurisdiction outside the United States to use the implied yield
of zero-coupon government bonds currently available in the market where the shares
are primarily traded when estimating the risk-free interest rate. The fair value of
the Companys stock options used to compute the 2006 and 2007 compensation expense
is the estimated present value at grant date using the Black-Scholes option pricing
model with the following weighted average assumptions:
  F-58




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Volatility
    
    59.96% ~67.12 %Risk-free interest rate
    
    1.70% ~3.04 %Expected holding period
    
    3 ~ 5 yearsDividend yield
    
    0%
   D.
    
    Additional information concerning our employee stock option is summarized
as following:
 For the years ended December 31,2006
    
    
    2007
    
    
    2008NT$
    
    
    NT$
    
    
    NT$Total intrinsic value of the
options exercised
    
    
    413,106
    
    
    
    563,999
    
    
    
    54,131Total fair value of options vested
    
    
    113,174
    
    
    
    87,942
    
    
    
    
 December 31,2007
    
    
    2008NT$
    
    
    NT$Aggregate intrinsic value of exercisable options
    
    
    79,459
    
    
    
    Aggregate intrinsic value of outstanding options
    
    
    79,459
    
    
    
    
 Compensation to Directors and Employees
 Net income impact of
    
    For the years ended December 31,compensation adjustment
    
    2006
    
    
    2007
    
    
    2008NT$
    
    
    NT$
    
    
    NT$
    
    
    US$US GAAP adjustment:Remuneration to directors
    
    
    120,798
    
    
    
    157,404
    
    
    
    
    
    
    
    Employee bonuses accrual
    
    
    1,173,450
    
    
    
    1,571,512
    
    
    
    
    
    
    
    Adjustment to fair market value
    
    
    615,197
    
    
    
    1,905,567
    
    
    
    1,581,727
    
    
    
    48,282Total employee bonuses
    
    
    1,788,647
    
    
    
    3,477,079
    
    
    
    1,581,727
    
    
    
    48,282Total net income adjustment relating
to compensation
    
    
    1,909,445
    
    
    
    3,634,483
    
    
    
    1,581,727
    
    
    
    48,282
 Shareholders equity impact of
    
    December 31,compensation adjustment
    
    2006
    
    
    2007
    
    
    2008NT$
    
    
    NT$
    
    
    NT$
    
    
    US$US GAAP adjustment:Remuneration to directors
    
    
    120,798
    
    
    
    157,404
    
    
    
    
    
    
    
    Employee bonuses
    
    
    1,173,450
    
    
    
    1,571,512
    
    
    
    
    
    
    
    Total shareholders equity adjustment
relating to compensation
    
    
    1,294,248
    
    
    
    1,728,916
    
    
    
    
    
    
    
    
  F-59




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (i)
    
    Remuneration to directors
   (ii)
    
    Employee bonuses
    F-60




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (4)
    
    Equity Investments
  (i)
    
    Net income (loss) variance between US GAAP and R.O.C. GAAP
  (ii)
    
    Technology and know-how contributed to a joint venture investee
    (iii)
    
    Adjustment for the variances between net income and shareholders equity under US GAAP
   F-61




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 (5)
    
    Defined Benefit Pension Plan
 (i)
    
    Net periodic pension cost variance between US GAAP and R.O.C. GAAP
  (ii)
    
    Adjustment for the US GAAP funding status
  (6)
    
    10% Tax on Undistributed Earnings and Tax Effect of US GAAP Adjustments
  (7)
    
    Earnings Per Share (EPS)
   F-62




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   (8)
    
    Marketable Securities
   (9)
    
    Goodwill Acquired from Merger
    F-63




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (10)
    
    Stock Dividends
  (11)
    
    Impairment of Long-lived Assets and Equity Investments
 (i)
    
    Impairment of long-lived assets
      F-64




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (ii)
    
    Impairment of equity investments
   (12)
    
    Embedded Derivative  The Companys Accounting as an Issuer
     F-65




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   (13)
    
    Disposal of ChipMOS Technologies Inc. with Subscription of ChipMOS Technologies (Bermuda)
Ltd.
 .
  34.
    
    Additional Disclosure Required by US GAAP
 (1)
    
    Risks and Uncertainties
   F-66




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    (2)
    
    Maturity of Long-term Liabilities
  Years ending December 31,
    
    AmountsNT$
    
    
    US$2009
    
    
    750,000
    
    
    
    22,8942010
    
    
    1,500,000
    
    
    
    45,7872011
    
    
    750,000
    
    
    
    22,8942012
    
    
    
    
    
    
    2013
    
    
    
    
    
    
    3,000,000
    
    
    
    91,575
 (3)
    
    Uncertainty in Income Taxes
    F-67




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (4)
    
    Cash and Cash Flow Statements
 A.
    
    Under ROC GAAP, all certificates of deposit are classified as cash and
cash equivalents. Under US GAAP, cash equivalents are short-term, highly liquid
investments that are readily convertible to known amounts of cash and have original
maturities of three months or less. In addition, payment for employees cash bonuses
are classified as cash used in operating activities under US GAAP compared to which
classified as cash used in financing activities under ROC GAAP. Summarized cash
flow information under US GAAP would be presented as follows:
 For the years ended December 31,2006
    
    
    2007
    
    
    2008NT$
    
    
    NT$
    
    
    NT$
    
    
    US$Net cash provided by operating activities
    
    
    20,250,012
    
    
    
    23,601,166
    
    
    
    20,504,634
    
    
    
    625,905Net cash (used in) provided by investing activities
    
    
    (20,393,997
    )
    
    
    2,891,936
    
    
    
    (16,108,193
    )
    
    
    (491,703
    )Net cash provided by financing activies
    
    
    (6,039,930
    )
    
    
    (10,335,263
    )
    
    
    (13,827,063
    )
    
    
    (422,072
    )Effect on foreign exchange
    
    
    7,712
    
    
    
    22,231
    
    
    
    94,206
    
    
    
    2,876Net (decrease) increase in cash and cash equivalents
    
    
    (6,176,203
    )
    
    
    16,180,070
    
    
    
    (9,336,416
    )
    
    
    (284,994
    )Cash and cash equivalents at beginning of the year
    
    
    12,274,391
    
    
    
    6,098,188
    
    
    
    22,278,258
    
    
    
    680,045Cash and cash equivalents at the end of the year
    
    
    6,098,188
    
    
    
    22,278,258
    
    
    
    12,941,842
    
    
    
    395,051
 B.
    
    Non-cash financing activity:
 (1)
    
    Additional 166,354,273 shares of common stock were issued upon the
conversion of the 2002 Euro convertible bonds with principal amounts of US$128,360
in 2006. All of the convertible bonds issued in 2002 have been converted into
common stocks, redeemed, or retired after being repurchased from the market as of
March 31, 2007.
 (2)
    
    Additional 111,515,378 shares and 80,711,248 shares of common stock
were issued upon the conversion of the 2004 Euro convertible bonds with principal
amounts of US$116,979 and US$83,020 in 2006 and 2007, respectively. All of the
convertible bonds issued in 2004 have been converted into common stocks or
redeemed as of September 30, 2007.
  F-68




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 (5)
    
    Comprehensive Income
  For the years ended December 31,2006
    
    
    2007
    
    
    2008NT$
    
    
    NT$
    
    
    NT$
    
    
    US$Net income
    
    
    13,329,069
    
    
    
    17,489,351
    
    
    
    6,313,530
    
    
    
    192,721Other comprehensive income (loss), net of taxesCumulative translation adjustment on equity investment
    
    
    25,187
    
    
    
    107,202
    
    
    
    211,940
    
    
    
    6,469Remuneration to directors and supervisors
    
    
    (149,324
    )
    
    
    (120,797
    )
    
    
    (157,405
    )
    
    
    (4,805
    )Employees cash bonus
    
    
    (463,284
    )
    
    
    (821,415
    )
    
    
    (1,100,058
    )
    
    
    (33,579
    )Adjustment for unrealized (loss) gain on available-for-sale financial assets
    
    
    4,765,885
    
    
    
    (3,604,489
    )
    
    
    (1,160,659
    )
    
    
    (35,429
    )Adjustment for investee companies capital reserve
    
    
    67,945
    
    
    
    (18,200
    )
    
    
    5,507
    
    
    
    168Adjustment for investee companies unrecognized pension cost
    
    
    41
    
    
    
    1,787
    
    
    
    
    
    
    
    Net loss not recognized as pension cost
    
    
    
    
    
    
    (37,613
    )
    
    
    (39,559
    )
    
    
    (1,208
    )Comprehensive income
    
    
    17,575,519
    
    
    
    12,995,826
    
    
    
    4,073,296
    
    
    
    124,337
 As of December 31,2007
    
    
    2008NT$
    
    
    NT$
    
    
    US$Accumulated other comprehensive income balancesCumulative translation adjustment on equity investment
    
    
    82,283
    
    
    
    294,223
    
    
    
    8,981Remuneration to directors and supervisors
    
    
    (401,532
    )
    
    
    (558,937
    )
    
    
    (17,062
    )Employees cash bonus
    
    
    (1,534,300
    )
    
    
    (2,634,358
    )
    
    
    (80,414
    )Adjustment for change in equity investment holding ratio
    
    
    15,063
    
    
    
    15,063
    
    
    
    460Adjustment for unrealized loss on available-for-sale financial assets
    
    
    1,160,659
    
    
    
    
    
    
    
    Adjustment for investee companies capital reserve
    
    
    ( 509
    )
    
    
    4,998
    
    
    
    153Net loss not recognized as pension cost
    
    
    (37,613
    )
    
    
    (77,172
    )
    
    
    (2,356
    )Accumulated other comprehensive income
    
    
    (715,949
    )
    
    
    (2,956,183
    )
    
    
    (90,238
    )
  F-69




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (6)
    
    Employers Disclosure about Pension Benefit
 (i)
    
    The following tables set forth the actuarial assumptions, funded status
and amounts recognized for the Companys defined benefit pension plan pursuant to
SFAS No. 87 and SFAS No. 158:
 (1)
    
    Assumptions:
 For the years ended December 31,2007
    
    
    2008Discounted rate
    
    
    2.75
    %
    
    
    2.20
    %Long-term rate of compensation increase
    
    
    2.00
    %
    
    
    1.00
    %Expected rate of return on plan assets
    
    
    3.00
    %
    
    
    2.50
    %
  (2)
    
    Change in Benefit Obligation:
 For the years ended December 31,2007
    
    
    2008NT$
    
    
    NT$Benefit obligation at the beginning of the year
    
    
    (1,321,342
    )
    
    
    (1,620,782
    )Service cost
    
    
    (35,315
    )
    
    
    (35,463
    )Interest cost
    
    
    (42,793
    )
    
    
    (45,252
    )Plan amendments
    
    
    
    
    
    
    59,238Actuarial loss
    
    
    (226,759
    )
    
    
    76,848Benefits paid
    
    
    5,427
    
    
    
    20,680Projected benefit obligation at the end of the year
    
    
    (1,620,782
    )
    
    
    (1,544,731
    )
  F-70




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (3)
    
    Change in Plan Assets:
 For the years ended December 31,2007
    
    
    2008NT$
    
    
    NT$Fair value of plan assets at the beginning of the year
    
    
    981,250
    
    
    
    1,059,039Actual return on plan assets
    
    
    28,021
    
    
    
    38,553Employer contributions
    
    
    55,195
    
    
    
    53,625Benefits paid
    
    
    (5,427
    )
    
    
    (20,680
    )Fair value of plan assets at the end of the year
    
    
    1,059,039
    
    
    
    1,130,537
 (4)
    
    Funded Status:
 December 31,2007
    
    
    2008NT$
    
    
    NT$Projected benefit obligation
    
    
    (1,620,782
    )
    
    
    (1,544,731
    )Fair value of plan assets
    
    
    1,059,039
    
    
    
    1,130,537Funded status
    
    
    (561,743
    )
    
    
    (414,194
    )Unrecognized transition assets
    
    
    (2,738
    )
    
    
    (1,825
    )Net prior service cost
    
    
    
    
    
    
    (57,814
    )Unrecognized net loss
    
    
    538,202
    
    
    
    439,599Accrued pension cost  before adjustment
    
    
    (26,279
    )
    
    
    (34,234
    )Additional liability
    
    
    (535,464
    )
    
    
    (379,960
    )Accrued pension cost  after adjustment
    
    
    (561,743
    )
    
    
    (414,194
    )
 (5)
    
    Net Pension Cost:
 For the years ended December 31,2007
    
    
    2008NT$
    
    
    NT$Service cost
    
    
    35,315
    
    
    
    35,463Interest cost
    
    
    42,793
    
    
    
    45,252Expected return on assets
    
    
    (32,636
    )
    
    
    (32,470
    )Amortization of unrecognized transition assets
    
    
    (913
    )
    
    
    (913
    )Net prior service cost
    
    
    
    
    
    
    (1,424
    )Amortization of unrecognized net loss
    
    
    7,279
    
    
    
    15,672Net periodic pension cost
    
    
    51,838
    
    
    
    61,580
 (6)
    
    Other Required Disclosure:
 December 31,2007
    
    
    2008NT$
    
    
    NT$Accumulated benefit obligation
    
    
    (1,130,091
    )
    
    
    (1,249,343
    )
  F-71




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (ii)
    
    Valuation and allocation of plan assets
  (iii)
    
    Additional disclosures under SFAS No.132 (R) regarding pension benefits are as follows:
 A.
    
    Estimated future benefit payments:
  AmountsNT$
    
    
    US$2009
    
    
    5,938
    
    
    
    1812010
    
    
    5,524
    
    
    
    1692011
    
    
    14,282
    
    
    
    4362012
    
    
    10,221
    
    
    
    3122013
    
    
    12,249
    
    
    
    374Year 2014 to 2018
    
    
    169,579
    
    
    
    5,176
 B.
    
    Contributions:
  (7)
    
    Inventory Provision
  (8)
    
    Revenue Recognition Accounting Policy
   F-72




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (9)
    
    Sales Returns
  (10)
    
    Major Debt Covenants
  a.
    
    Current ratio should be larger than 100%.b.
    
    Liability to equity ratio should be lower than 100%.c.
    
    Interest coverage ratio should be larger than 400%.
 (11)
    
    Operating Leases
  (12)
    
    Valuation and Qualifying Accounts and Reserves
  Balance atbeginning
    
    
    Balance at endDescription
    

of period
    
    
    of periodNT$
    
    
    NT$For the year ended 2006Allowance for doubtful accounts
    
    
    12,280
    
    
    
    24,270Allowance for sales discounts
    
    
    67,180
    
    
    
    55,475Allowance for loss on obsolescence
and decline in market value of inventory
    
    
    50,693
    
    
    
    47,787Allowance for deferred income tax assets, current
    
    
    
    
    
    
    141Allowance for deferred income tax assets, noncurrent
    
    
    303,287
    
    
    
    174,343For the year ended 2007Allowance for doubtful accounts
    
    
    24,270
    
    
    
    33,114Allowance for sales discounts
    
    
    55,475
    
    
    
    35,943Allowance for loss on obsolescence
and decline in market value of inventory
    
    
    47,787
    
    
    
    66,385Allowance for deferred income tax assets, current
    
    
    141
    
    
    
    5,161Allowance for deferred income tax assets, noncurrent
    
    
    174,343
    
    
    
    189,828For the year ended 2008Allowance for doubtful accounts
    
    
    33,114
    
    
    
    304,287Allowance for sales discounts
    
    
    35,943
    
    
    
    156,096Allowance for loss on obsolescence
and decline in market value of inventory
    
    
    66,385
    
    
    
    75,581Allowance for deferred income tax assets, current
    
    
    5,161
    
    
    
    Allowance for deferred income tax assets, noncurrent
    
    
    189,828
    
    
    
    256,714
  F-73




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (13)
    
    Recent Accounting Pronouncements
 US GAAP
 A.
    
    In September 2006, the FASB issued SFAS No. 157, Fair Value
Measurement to define fair value, which establishes a framework for measuring fair
value under generally accepted accounting principles and expands disclosures about
fair value measurements. This statement will apply whenever another statement
requires or permits assets or liabilities to be measured at fair value. The
standard does not expand the use of fair value in any new circumstances. SFAS No.
157 is effective for financial statements issued for fiscal years beginning after
November 15, 2007. However, in February 2008, the FASB issued FSP FAS 157-2,
Effective Date of FASB Statement No. 157 to delay the effective date of SFAS
No.157 for all nonfinancial assets and nonfinancial liabilities, except those that
are recognized or disclosed at fair value in the consolidated financial statements
on a recurring basis until the beginning of the first quarter of 2009. Currently,
we are evaluating the impact of adopting SFAS No.157 on those assets and
liabilities subject to the delay application in accordance with FSP FAS 157-2.
However, the Company does not expect any significant impact on its consolidated
financial statements.B.
    
    In October 2008, the FASB issued FSP FAS No.157-3, Determining the
Fair Value of a Financial Asset When the Market for That Asset Is Not Active,
which clarifies the application of SFAS No.157,  Fair Value Measurements  in a
market that is not active and provides an example to illustrate key considerations
in determining the fair value of a financial asset when the market for that
financial asset is not active. This FSP is effective upon issuance, including prior
periods for which financial statements have not been issued. No significant impact
is expected on the adoption of FSP FAS No.157-3.C.
    
    In February 2007, the FASB issued SFAS No. 159, The Fair Value Option
for Financial Assets and Financial Liabilities  Including an amendment of FASB
Statement No. 115, which permits all entities to choose, on specified election
dates, to measure eligible financial instruments and certain other items at fair
value. Unrealized gains and losses on items for which the fair value option has
been elected will be recognized in earnings on each subsequent reporting date. SFAS
No. 159 is effective for an entitys fiscal year beginning after November 15, 2007.
The adoption of SFAS No. 159 is expected not to have any significant impact on the
Companys financial results.D.
    
    In December 2007, the FASB issued SFAS No. 141 (revised 2007),
Business Combinations, which requires an acquirer to recognize the assets
acquired, the liabilities assumed, any noncontrolling interest and contractual
contingencies and contingent consideration in the acquiree at the acquisition date,
measured at their fair values as of that date, with limited exceptions. It also
requires that acquisition-related costs be recognized separately from the
acquisition and expensed as incurred. This statement is effective for fiscal years
beginning after December 15, 2008 and its effect will depend on the terms and
timing of future acquisitions.E.
    
    In December 2007, the FASB issued SFAS No. 160, Noncontrolling
Interests in Consolidated Financial Statements  an amendment of ARB No. 51, which
requires that minority ownership interest be presented in the consolidated
statement of financial position within equity, but separate from the parents
equity. This statement is effective for fiscal years beginning on or after December
15, 2008. Currently, the Company does not expect any significant impact on the
adoption of SFAS No. 160 on its consolidated financial statements.
  F-74




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##### Table of Contents



SILICONWARE PRECISION INDUSTRIES CO., LTD. AND SUBSIDIARIES  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 F.
    
    In March 2008, the FASB issued SFAS No. 161, Disclosures about
Derivative Instruments and Hedging Activities  An Amendment of SFAS No. 133,
which requires qualitative disclosures about how and why an entity uses derivative
instruments, quantitative disclosures about fair value amounts of gains and losses
on derivative instruments, and disclosures about credit-risk-related contingent
features in derivative agreements. This statement is effective for fiscal years and
interim periods beginning after November 15, 2008, with earlier application
encouraged. The adoption of SFAS No. 161 is expected not to have any significant
impact on the Companys financial results.G.
    
    In May 2008, the FASB issued FSP APB No. 14-1, Accounting for
Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including
Partial Cash Settlement), which requires the issuer of certain convertible debt
instruments that may be settled in cash or other assets on conversion to separately
account for the liability and equity components of the instrument in a manner that
reflects the issuers nonconvertible borrowing rate. In addition, this FSP requires
bifurcation of a component of the debt, classification of that component to equity,
and then accretion of the resulting discount on the
debt to result in the economic interest cost reflected in the statement of
operations. This FSP is effective for fiscal years and interim periods beginning
after December 15, 2008 and does not permit early application. The Company does not
expect any significant impact on the adoption of FSP APB No.14-1.H.
    
    In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally
Accepted Accounting Principles for nongovernmental entities, which imposes the
GAAP hierarchy on the reporting entities, not their auditors, based on the
long-standing mandate that the entitys management, not their auditors, is
responsible for selecting and applying the appropriate GAAP to their financial
statements. In addition, SFAS 162 improved the GAAP hierarchy in three ways: (1) in
its presentation, (2) in defining the driver for category (a), and (3) in making
additions to the hierarchy. This statement is effective from 60 days following the
SECs approval of the PCAOB amendment to AU Section 411, The Meaning of Present
Fairly in Conformity With Generally Accepted Accounting Principles. The Company
does not expect any significant impact on the adoption of SFAS No.162.
 R.O.C. GAAP
   F-75




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##### Table of Contents



MOORE
STEPHENS
  
 
 The Board of Directors and Shareholders
ChipMOS TECHNOLOGIES INC.
    
    Tel: 886 2 25629889
Fax: 886 2 25815955
E-Mail: tpe@moorestephens.com.tw
     
 F-76




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##### Table of Contents



December 312005
    
    2006NT$
    
    NT$
    
    US$(Note 3)ASSETSCURRENT ASSETSCash and cash equivalents (Note 2)
    
    
    3,154,097
    
    
    
    1,877,501
    
    
    
    57,601Restricted cash and cash equivalents (Note 20)
    
    
    123,947
    
    
    
    81,283
    
    
    
    2,494Financial assets at fair value through profit and loss (Notes 2 and 4)
    
    
    186,136
    
    
    
    1,929,124
    
    
    
    59,185Notes receivable
    
    
    30,581
    
    
    
    31,103
    
    
    
    954Accounts receivable  net of allowance for doubtful receivables and
sales return allowances of NT$373,597 in 2005 and NT$117,046 in 2006
(Notes 2 and 6)
    
    
    2,401,045
    
    
    
    3,045,346
    
    
    
    93,430Receivables from related parties (Notes 2, 6 and 19):Notes and accounts  net of allowance for doubtful receivables and
sales return allowances of NT$9,429 in 2005 and NT$22,837 in 2006
    
    
    1,419,976
    
    
    
    1,838,964
    
    
    
    56,419Others receivable  net of allowance for doubtful receivables of
NT$8,520 in 2005 and NT$8,520 in 2006
    
    
    5,315
    
    
    
    9,979
    
    
    
    306Other receivable  net of allowance for doubtful receivables of
NT$9,754 in 2005 and NT$9,754 in 2006 (Notes 2 and 6)
    
    
    169,337
    
    
    
    36,276
    
    
    
    1,113Inventories  net (Notes 2 and 7)
    
    
    540,422
    
    
    
    888,518
    
    
    
    27,259Deferred income tax  net (Notes 2 and 18)
    
    
    239,202
    
    
    
    134,337
    
    
    
    4,121Prepaid expenses and other current assets
    
    
    60,807
    
    
    
    95,381
    
    
    
    2,926Total Current Assets
    
    
    8,330,865
    
    
    
    9,967,812
    
    
    
    305,808FUNDS AND LONG-TERM INVESTMENTS (Notes 2, 8 and 9)
    
    
    413,125
    
    
    
    366,743
    
    
    
    11,252PROPERTY, PLANT AND EQUIPMENT (Notes 2 and 10)CostLand
    
    
    530,268
    
    
    
    530,269
    
    
    
    16,269Buildings and auxiliary equipment
    
    
    4,626,061
    
    
    
    5,454,623
    
    
    
    167,345Machinery and equipment
    
    
    23,510,371
    
    
    
    35,580,645
    
    
    
    1,091,598Furniture and fixtures
    
    
    579,390
    
    
    
    713,646
    
    
    
    21,895Transportation equipment
    
    
    30,351
    
    
    
    28,596
    
    
    
    877Tools
    
    
    1,390,087
    
    
    
    2,221,133
    
    
    
    68,143Leasehold improvements
    
    
    3,167
    
    
    
    1,915
    
    
    
    59Total cost
    
    
    30,669,695
    
    
    
    44,530,827
    
    
    
    1,366,186Accumulated depreciation
    
    
    (15,029,981
    )
    
    
    (19,250,030
    )
    
    
    ( 590,582
    )Construction in progress and advance payment
    
    
    3,346,985
    
    
    
    2,573,585
    
    
    
    78,956Net Property, Plant and Equipment
    
    
    18,986,699
    
    
    
    27,854,382
    
    
    
    854,560INTANGIBLE ASSETS  NET (Notes 2 and 11)
    
    
    103,371
    
    
    
    144,317
    
    
    
    4,427OTHER ASSETSEmployee dormitory building  net of accumulated depreciation
of NT$64,911 in 2005 and NT$80,868 in 2006 (Note 2)
    
    
    165,380
    
    
    
    170,110
    
    
    
    5,219Refundable deposits
    
    
    17,846
    
    
    
    29,529
    
    
    
    906Restricted cash and cash equivalents (Note 20)
    
    
    1,500
    
    
    
    
    
    
    
    Goodwill (Note 2)
    
    
    75,773
    
    
    
    102,134
    
    
    
    3,133Total Other Assets
    
    
    260,499
    
    
    
    301,773
    
    
    
    9,258TOTAL ASSETS
    
    
    28,094,559
    
    
    
    38,635,027
    
    
    
    1,185,305
 (Forward)
 F-77




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##### Table of Contents



December 312005
    
    2006NT$
    
    NT$
    
    US$(Note 3)LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIESBank loans (Note 12)
    
    
    467,834
    
    
    
    853,360
    
    
    
    26,181Commercial paper payable (Note 13)
    
    
    149,413
    
    
    
    
    
    
    
    Notes payable
    
    
    3,927
    
    
    
    
    
    
    
    Accounts payable
    
    
    657,963
    
    
    
    728,150
    
    
    
    22,339Payables to related parties (Note 19):Accounts payable
    
    
    2,214
    
    
    
    4,295
    
    
    
    132Others
    
    
    45,490
    
    
    
    30,990
    
    
    
    951Payables to contractors and equipment suppliers
    
    
    372,329
    
    
    
    855,228
    
    
    
    26,238Accrued expenses and other current liabilities
    
    
    884,930
    
    
    
    1,402,613
    
    
    
    43,031Current portion of long-term liabilities (Notes 14)
    
    
    2,300,916
    
    
    
    2,335,284
    
    
    
    71,645Total Current Liabilities
    
    
    4,885,016
    
    
    
    6,209,920
    
    
    
    190,517LONG-TERM LIABILITIESLong-term loans (Note 14)
    
    
    4,433,851
    
    
    
    10,202,068
    
    
    
    312,995Total Long-Term Liabilities
    
    
    4,433,851
    
    
    
    10,202,068
    
    
    
    312,995OTHER LIABILITIESDeferred income tax  net (Notes 2 and 18)
    
    
    148,951
    
    
    
    298,223
    
    
    
    9,149Accrued pension cost (Notes 2 and 15)
    
    
    81,658
    
    
    
    47,572
    
    
    
    1,460Deferred credits(Note 19)
    
    
    593,666
    
    
    
    561,137
    
    
    
    17,215Guarantee deposits
    
    
    1,454
    
    
    
    5,833
    
    
    
    179Total Other Liabilities
    
    
    825,729
    
    
    
    912,765
    
    
    
    28,003Total Liabilities
    
    
    10,144,596
    
    
    
    17,324,753
    
    
    
    531,515Minority Interests
    
    
    3,494,210
    
    
    
    3,482,966
    
    
    
    106,856COMMITMENTS AND CONTINGENCIES (Note 21)SHAREHOLDERS EQUITY (Notes 2, 16 and 17)Capital stock  NT$10 par valueAuthorized  970,000 thousand sharesIssued   893,442 thousand shares in 2005 and 2006
    
    
    8,934,423
    
    
    
    8,934,423
    
    
    
    274,104Capital surplus
    
    
    2,145,998
    
    
    
    2,154,694
    
    
    
    66,105Retained earnings:Appropriated as legal reserve
    
    
    577,474
    
    
    
    801,311
    
    
    
    24,584Unappropriated earnings
    
    
    2,921,486
    
    
    
    6,062,385
    
    
    
    185,991Unrealized loss on financial instrument
    
    
    (1,673
    )
    
    
    
    
    
    
    Cumulative translation adjustments
    
    
    (1,803
    )
    
    
    (2,162
    )
    
    
    (66
    )Treasury stock (Note 2 and 16)
    
    
    (120,152
    )
    
    
    (123,343
    )
    
    
    (3,784
    )Total Shareholders Equity
    
    
    14,455,753
    
    
    
    17,827,308
    
    
    
    546,934TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    
    28,094,559
    
    
    
    38,635,027
    
    
    
    1,185,305
 The accompanying notes are an integral part of the condolidated financial statements.
 F-78




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##### Table of Contents



Year Ended December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(Note 3)NET REVENUES (Notes 2 and 19)Related parties
    
    
    4,847,570
    
    
    
    4,614,013
    
    
    
    5,660,398
    
    
    
    173,659Third parties
    
    
    10,020,307
    
    
    
    10,142,510
    
    
    
    14,164,163
    
    
    
    434,550Total Net Revenues
    
    
    14,867,877
    
    
    
    14,756,523
    
    
    
    19,824,561
    
    
    
    608,209COST OF REVENUE (Note 19)Related parties
    
    
    3,236,183
    
    
    
    3,435,771
    
    
    
    4,222,566
    
    
    
    129,546Third parties
    
    
    7,508,045
    
    
    
    7,401,916
    
    
    
    9,246,407
    
    
    
    283,676Total Cost of Revenue
    
    
    10,744,228
    
    
    
    10,837,687
    
    
    
    13,468,973
    
    
    
    413,222GROSS PROFIT
    
    
    4,123,649
    
    
    
    3,918,836
    
    
    
    6,355,588
    
    
    
    194,987OPERATING EXPENSES (Note 19)Research and development
    
    
    295,777
    
    
    
    274,433
    
    
    
    274,751
    
    
    
    8,429General and administrative
    
    
    480,596
    
    
    
    557,983
    
    
    
    555,715
    
    
    
    17,050Marketing
    
    
    323,300
    
    
    
    228,329
    
    
    
    101,352
    
    
    
    3,109Total Operating Expenses
    
    
    1,099,673
    
    
    
    1,060,745
    
    
    
    931,818
    
    
    
    28,588INCOME FROM OPERATIONS
    
    
    3,023,976
    
    
    
    2,858,091
    
    
    
    5,423,770
    
    
    
    166,399NON-OPERATING INCOMEGain on sales of investments (Note 2)
    
    
    
    
    
    
    
    
    
    
    1,032
    
    
    
    32Rental (Note 19)
    
    
    28,467
    
    
    
    27,698
    
    
    
    23,373
    
    
    
    717Interest
    
    
    31,463
    
    
    
    45,584
    
    
    
    29,558
    
    
    
    907Subsidy income
    
    
    6,100
    
    
    
    9,769
    
    
    
    9,592
    
    
    
    294Cash dividends
    
    
    
    
    
    
    16,897
    
    
    
    3,490
    
    
    
    107Recovery of allowance for loss on
 inventory
    
    
    67,002
    
    
    
    74,581
    
    
    
    
    
    
    
    Gain on appraisal of financial assets
(Notes 2 and 4)
    
    
    
    
    
    
    85,958
    
    
    
    41,427
    
    
    
    1,271Gain on disposal of property, plant and equipment
(Note 2)
    
    
    45,520
    
    
    
    41,511
    
    
    
    24,929
    
    
    
    765Gain on disposal of idle assets
    
    
    
    
    
    
    29,846
    
    
    
    
    
    
    
    Foreign exchange gain  net (Note2)
    
    
    
    
    
    
    61,501
    
    
    
    12,332
    
    
    
    378Other (Note 19)
    
    
    96,094
    
    
    
    117,596
    
    
    
    96,988
    
    
    
    2,976Total Non-Operating Income
    
    
    274,646
    
    
    
    510,941
    
    
    
    242,721
    
    
    
    7,447
 (Forward)
 F-79




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##### Table of Contents



Year Ended December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(Note 3)NON-OPERATING EXPENSESLoss on sales of investments (Note 2)
    
    
    6,561
    
    
    
    33,024
    
    
    
    
    
    
    
    Interest
    
    
    257,144
    
    
    
    223,389
    
    
    
    258,770
    
    
    
    7,939Loss on appraisal of financial assets (Note 4)
    
    
    52,274
    
    
    
    
    
    
    
    
    
    
    
    Investments loss recognized by equity
method  net (Notes 2 and 8)
    
    
    29,160
    
    
    
    126,802
    
    
    
    
    
    
    
    Other investment loss
    
    
    49,833
    
    
    
    4,854
    
    
    
    
    
    
    
    Impairment loss (Notes 2 and 8)
    
    
    214,403
    
    
    
    320,293
    
    
    
    58,379
    
    
    
    1,791Financing cost
    
    
    15,369
    
    
    
    6,474
    
    
    
    10,437
    
    
    
    320Loss on disposal of property, plant and equipment
(Note 2)
    
    
    21,447
    
    
    
    24,231
    
    
    
    521
    
    
    
    16Foreign exchange loss  net (Note 2)
    
    
    141,496
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    43,278
    
    
    
    156,370
    
    
    
    78,206
    
    
    
    2,400Total Non-Operating Expenses
    
    
    830,965
    
    
    
    895,437
    
    
    
    406,313
    
    
    
    12,466INCOME BEFORE INCOME TAX AND
    
    
    2,467,657
    
    
    
    2,473,595
    
    
    
    5,260,178
    
    
    
    161,380MINORITY INTERESTSINCOME TAX BENEFIT (EXPENSE) (Notes 2 and 18)
    
    
    132,599
    
    
    
    (44,665
    )
    
    
    (546,604
    )
    
    
    (16,770
    )INCOME FOR MINORITY INTERESTS
    
    
    (305,151
    )
    
    
    (320,894
    )
    
    
    (575,304
    )
    
    
    (17,650
    )PRE-ACQUISITION EARNINGS
    
    
    27,655
    
    
    
    
    
    
    
    
    
    
    
    NET INCOME
    
    
    2,322,760
    
    
    
    2,108,036
    
    
    
    4,138,270
    
    
    
    126,960EARNINGS PER SHAREBased on weighted-average number of shares
outstanding of 887,227 thousand shares in 2004
and 885,686 thousand shares in 2005 and 886,012 thousand
shares in 2006
    
    
    2.62
    
    
    
    2.38
    
    
    
    4.67
    
    
    
    0.14Based on weighted-average number of shares
outstanding  retroactively adjusted
    
    
    2.62
    
    
    
    2.38
    
    
    
    4.67
    
    
    
    0.14
 The accompanying notes are an integral part of the consolidated financial statements.
 F-80




---



##### Table of Contents



CAPITAL SURPLUS (Notes 2 and 17)
    
    
    RETAINED EARNINGS (Note 17)CAPITAL STOCK ISSUEDUNREALIZEDLOSSUnappropriated
    
    
    
    
    
    
    CUMULATIVE
    
    
    
    
    
    
    ONAdditional
    
    
    
    
    
    
    Long-
    
    
    
    
    
    
    
    
    
    
    Earnings
    
    
    
    
    
    
    TRANSLATION
    
    
    TREASURY
    
    
    FINANCIAL
    
    
    TOTALShares
    
    
    
    
    
    
    Paid-
    
    
    
    
    
    
    term
    
    
    
    
    
    
    Legal
    
    
    (Accumulated
    
    
    
    
    
    
    ADJUSTMENT
    
    
    STOCK
    
    
    INSTRUMENT
    
    
    SHAREHOLDERS(Thousand)
    
    
    Amount
    
    
    in Capital
    
    
    Merger
    
    
    investments
    
    
    Total
    
    
    Reserve
    
    
    Deficits)
    
    
    Total
    
    
    (Note 2)
    
    
    (Note 16)
    
    
    (Note 2)
    
    
    EQUITYNT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$
    
    
    NT$BALANCE, JANUARY 1, 2000
    
    
    646,929
    
    
    
    6,469,289
    
    
    
    
    
    
    
    3,051
    
    
    
    
    
    
    
    3,051
    
    
    
    175,816
    
    
    
    948,646
    
    
    
    1,124,462
    
    
    
    47
    
    
    
    
    
    
    
    
    
    
    #REF!Appropriation of 1999 earnings:Legal reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    94,597
    
    
    
    (94,597
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Remuneration to
directors and
supervisors
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,027
    )
    
    
    (17,027
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (#REF!
    )Bonus to employees-stock
    
    
    8,513
    
    
    
    85,137
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (85,137
    )
    
    
    (85,137
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock dividends-11.6%
    
    
    75,044
    
    
    
    750,437
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (750,437
    )
    
    
    (750,437
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of capital stock,
August 10, 2000
    
    
    100,000
    
    
    
    1,000,000
    
    
    
    2,500,000
    
    
    
    
    
    
    
    
    
    
    
    2,500,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    #REF!Net income in 2000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,539,021
    
    
    
    1,539,021
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    #REF!Translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (343
    )
    
    
    
    
    
    
    
    
    
    (#REF!
    )Gain on disposal of property,
plant and equipment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,081
    
    
    
    
    
    
    
    3,081
    
    
    
    
    
    
    
    (3,081
    )
    
    
    (3,081
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Unrealized loss on long-term
investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (#REF!
    )BALANCE, JANUARY 1, 2004
    
    
    887,227
    
    
    
    8,872,272
    
    
    
    2,084,757
    
    
    
    
    
    
    
    13,663
    
    
    
    2,098,420
    
    
    
    424,007
    
    
    
    (788,093
    )
    
    
    (364,086
    )
    
    
    (619
    )
    
    
    
    
    
    
    
    
    
    
    10,605,987Net income in 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,322,760
    
    
    
    2,322,760
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,322,760Adjustment of equity method
for long-term investment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    190,530
    
    
    
    190,530
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    190,530Cumulative translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,015
    )
    
    
    
    
    
    
    
    
    
    
    (3,015
    )Unrealized loss on market
value decline of long-term
investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (805
    )
    
    
    (805
    )BALANCE, DECEMBER 31, 2004
    
    
    887,227
    
    
    
    8,872,272
    
    
    
    2,084,757
    
    
    
    
    
    
    
    204,193
    
    
    
    2,288,950
    
    
    
    424,007
    
    
    
    1,534,667
    
    
    
    1,958,674
    
    
    
    (3,634
    )
    
    
    
    
    
    
    (805
    )
    
    
    13,115,457Appropriations of 2004
earnings:- Appropriated as legal
reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    153,467
    
    
    
    (153,467
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    - Cash dividend
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (532,336
    )
    
    
    (532,336
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (532,336
    )- Remuneration paid to
directors and supervisors
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,624
    )
    
    
    (27,624
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,624
    )- Employees bonus
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (138,120
    )
    
    
    (138,120
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (138,120
    )Adjustment of equity method
for long-term investment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (170,713
    )
    
    
    (170,713
    )
    
    
    
    
    
    
    130,330
    
    
    
    130,330
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (40,383
    )Cumulative translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,831
    
    
    
    
    
    
    
    
    
    
    
    1,831Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (115,402
    )
    
    
    
    
    
    
    (115,402
    )Outstanding shares owned by
subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,750
    )
    
    
    
    
    
    
    (4,750
    )Unrealized loss on financial
instrument
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (868
    )
    
    
    (868
    )Issuance of new stocks for
merger
    
    
    6,215
    
    
    
    62,151
    
    
    
    
    
    
    
    27,761
    
    
    
    
    
    
    
    27,761
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    89,912Net income in 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,108,036
    
    
    
    2,108,036
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,108,036BALANCE, DECEMBER 31, 2005
    
    
    893,442
    
    
    
    8,934,423
    
    
    
    2,084,757
    
    
    
    27,761
    
    
    
    33,480
    
    
    
    2,145,998
    
    
    
    577,474
    
    
    
    2,921,486
    
    
    
    3,498,960
    
    
    
    (1,803
    )
    
    
    (120,152
    )
    
    
    (1,673
    )
    
    
    14,455,753Appropriations of 2005
earnings:- Appropriated as legal
reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    223,837
    
    
    
    (223,837
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    - Cash dividend
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (531,791
    )
    
    
    (531,791
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (531,791
    )- Remuneration paid to
directors and supervisors
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (40,290
    )
    
    
    (40,290
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (40,290
    )- Employees bonus
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (201,453
    )
    
    
    (201,453
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (201,453
    )Adjustment of equity method
for long-term investment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,696
    
    
    
    8,696
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,696Cumulative translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (359
    )
    
    
    
    
    
    
    
    
    
    
    (359
    )Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,191
    )
    
    
    
    
    
    
    (3,191
    )Unrealized loss on financial
instrument
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,673
    
    
    
    1,673Net income in 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,138,270
    
    
    
    4,138,270
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,138,270BALANCE, DECEMBER 31, 2006
    
    
    893,442
    
    
    
    8,934,423
    
    
    
    2,084,757
    
    
    
    27,761
    
    
    
    42,176
    
    
    
    2,154,694
    
    
    
    801,311
    
    
    
    6,062,385
    
    
    
    6,863,696
    
    
    
    (2,162
    )
    
    
    (123,343
    )
    
    
    
    
    
    
    17,827,308
 The accompanying notes are an integral part of the consolidated financial statements.
 F-81




---



##### Table of Contents



Year Ended December 312004
    
    
    2005
    
    
    2006NT$
    
    
    NT$
    
    
    NT$
    
    
    US$CASH FLOWS FROM OPERATING ACTIVITIESNet income
    
    
    2,322,760
    
    
    
    2,108,036
    
    
    
    4,138,270
    
    
    
    126,960Adjustment to reconcile net income to net cash
provided by operating activities:Depreciation
    
    
    3,353,537
    
    
    
    4,087,487
    
    
    
    5,249,548
    
    
    
    161,054Amortization
    
    
    104,150
    
    
    
    132,702
    
    
    
    96,930
    
    
    
    2,974Investment loss  net
    
    
    78,993
    
    
    
    131,656
    
    
    
    
    
    
    
    Loss (gain) on appraisal of financial assets
    
    
    52,274
    
    
    
    (85,958
    )
    
    
    (41,427
    )
    
    
    (1,271
    )Loss (gain) on sales of investments
    
    
    6,561
    
    
    
    
    
    
    
    (1,032
    )
    
    
    (32
    )Gain on disposal of property, plant
and equipment  net
    
    
    (60,997
    )
    
    
    (5,986
    )
    
    
    (5,719
    )
    
    
    (175
    )Deferred income tax  net
    
    
    (174,527
    )
    
    
    (45,826
    )
    
    
    254,137
    
    
    
    7,797Accrued pension cost
    
    
    22,619
    
    
    
    (21,016
    )
    
    
    (34,086
    )
    
    
    (1,046
    )Deferred credits
    
    
    534,412
    
    
    
    (32,530
    )
    
    
    (28,742
    )
    
    
    (882
    )Impairment losses
    
    
    214,403
    
    
    
    320,293
    
    
    
    58,379
    
    
    
    1,791Changes in operating assets and liabilities:Decrease (increase) in financial assts at fair
value through profit and loss
    
    
    (1,976,291
    )
    
    
    2,740,805
    
    
    
    (1,698,705
    )
    
    
    (52,116
    )Notes receivable and accounts receivable
    
    
    (420,188
    )
    
    
    (550,001
    )
    
    
    (1,063,811
    )
    
    
    (32,637
    )Other receivables
    
    
    1,630,417
    
    
    
    28,898
    
    
    
    128,397
    
    
    
    3,939Inventories
    
    
    (55,812
    )
    
    
    66,753
    
    
    
    (348,096
    )
    
    
    (10,679
    )Prepaid expenses and other current assets
    
    
    286,919
    
    
    
    61,899
    
    
    
    (34,574
    )
    
    
    (1,061
    )Notes payable and accounts payable
    
    
    (12,914
    )
    
    
    71,601
    
    
    
    68,341
    
    
    
    2,097Other payables
    
    
    (611,407
    )
    
    
    (15,541
    )
    
    
    (14,500
    )
    
    
    (445
    )Income tax payable
    
    
    
    
    
    
    87,643
    
    
    
    206,192
    
    
    
    6,326Accrued expenses and other current liabilities
    
    
    222,988
    
    
    
    (136,728
    )
    
    
    311,491
    
    
    
    9,556Minority interest
    
    
    139,575
    
    
    
    181,769
    
    
    
    (30,092
    )
    
    
    (923
    )Net Cash Provided by Operating Activities
    
    
    5,657,472
    
    
    
    9,125,956
    
    
    
    7,210,901
    
    
    
    221,227CASH FLOWS FROM INVESTING ACTIVITIESDecrease in restricted cash and cash equivalents
    
    
    146,632
    
    
    
    21,299
    
    
    
    44,164
    
    
    
    1,355Proceeds from sales of:Property, plant and equipment
    
    
    382,177
    
    
    
    201,369
    
    
    
    216,200
    
    
    
    6,633Funds and long-term investments
    
    
    869,421
    
    
    
    
    
    
    
    10,032
    
    
    
    308Acquisitions of:Funds and Long-term investments
    
    
    (140,788
    )
    
    
    (116,400
    )
    
    
    (20,741
    )
    
    
    (636
    )Property, plant and equipment
    
    
    (7,568,722
    )
    
    
    (6,620,676
    )
    
    
    (13,862,110
    )
    
    
    (425,283
    )Intangible assets
    
    
    (89,795
    )
    
    
    (125,117
    )
    
    
    (115,072
    )
    
    
    (3,530
    )Employee dormitory building
    
    
    (475
    )
    
    
    (3,304
    )
    
    
    (14,676
    )
    
    
    (450
    )Decrease (increase) in refundable deposits
    
    
    52,160
    
    
    
    (1,573
    )
    
    
    (11,683
    )
    
    
    (359
    )Decrease in other financial assets
    
    
    339,700
    
    
    
    
    
    
    
    
    
    
    
    Cash inflow from acquisition of subsidiary (Note 22)
    
    
    94,337
    
    
    
    7,261
    
    
    
    
    
    
    
    Cash inflow from disposal of subsidiary (Note 22)
    
    
    
    
    
    
    48,035
    
    
    
    
    
    
    
    Net Cash Used in Investing Activities
    
    
    (5,915,353
    )
    
    
    (6,589,106
    )
    
    
    (13,753,886
    )
    
    
    (421,962
    )
 (Forward)
 F-82




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##### Table of Contents



Year Ended December 312004
    
    
    2005
    
    
    2006NT$
    
    
    NT$
    
    
    NT$
    
    
    US$CASH FLOWS FROM FINANCING ACTIVITIESPayments on:Bank loans
    
    
    (863,204
    )
    
    
    (314,968
    )
    
    
    
    
    
    
    Commercial papers
    
    
    
    
    
    
    
    
    
    
    (149,413
    )
    
    
    (4,584
    )long-term bonds payable
    
    
    
    
    
    
    (333,195
    )
    
    
    
    
    
    
    Long-term loans
    
    
    
    
    
    
    (888,664
    )
    
    
    
    
    
    
    Proceeds from:Bank loans
    
    
    
    
    
    
    
    
    
    
    385,526
    
    
    
    11,828Commercial papers
    
    
    
    
    
    
    149,413
    
    
    
    
    
    
    
    Long-term loans
    
    
    2,784,163
    
    
    
    
    
    
    
    5,802,585
    
    
    
    178,021Increase (Decrease) in guarantee deposits
    
    
    (584
    )
    
    
    314
    
    
    
    4,379
    
    
    
    134Employee bonus
    
    
    
    
    
    
    (138,120
    )
    
    
    (201,453
    )
    
    
    (6,181
    )Dividends
    
    
    
    
    
    
    (532,336
    )
    
    
    (531,791
    )
    
    
    (16,315
    )Remuneration paid to directors and supervisors
    
    
    
    
    
    
    (27,624
    )
    
    
    (40,290
    )
    
    
    (1,236
    )Purchase of treasury stock
    
    
    
    
    
    
    (115,402
    )
    
    
    (3,191
    )
    
    
    (98
    )Net Cash Provided by (Used in) Financing Activities
    
    
    1,920,375
    
    
    
    (2,200,582
    )
    
    
    5,266,352
    
    
    
    161,569Effect of Exchange Rate Changes
    
    
    
    
    
    
    (327
    )
    
    
    37
    
    
    
    1NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS
    
    
    1,662,494
    
    
    
    335,941
    
    
    
    (1,276,596
    )
    
    
    (39,165
    )CASH AND EQUIVALENTS, BEGINNING OF THE YEAR
    
    
    1,155,662
    
    
    
    2,818,156
    
    
    
    3,154,097
    
    
    
    96,766CASH AND EQUIVALENTS, END OF THE YEAR
    
    
    2,818,156
    
    
    
    3,154,097
    
    
    
    1,877,501
    
    
    
    57,601SUPPLEMENTAL INFORMATIONIncome tax paid
    
    
    834
    
    
    
    2,351
    
    
    
    87,844
    
    
    
    2,695Interest paid (excluding the amounts of NT$73,641
capitalized in 2005 and NT$106,229 capitalized in 2006)
    
    
    259,947
    
    
    
    210,327
    
    
    
    238,600
    
    
    
    7,320NON-CASH INVESTING AND FINANCING ACTIVITIESCurrent portion of long-term loans
    
    
    3,026,974
    
    
    
    2,300,916
    
    
    
    2,335,284
    
    
    
    71,645Credit balances of long-term investments under equity method presented
as part of other receivables from related parties
    
    
    5,429
    
    
    
    
    
    
    
    
    
    
    
    Reclassification of property, plant, and equipment into long-term
investments under equity method
    
    
    648,248
    
    
    
    
    
    
    
    
    
    
    
    Reclassification of property, plant, and equipment into other
assets
    
    
    36,846
    
    
    
    64,168
    
    
    
    6,611
    
    
    
    203Reclassification of property, plant, and equipment into intangible assests
    
    
    
    
    
    
    1,263
    
    
    
    22,804
    
    
    
    700PARTIAL CASH PAID FOR INVESTING ACTIVITIESCash paid for acquisition of property, plant and equipment:Total acquisitions
    
    
    7,633,275
    
    
    
    6,680,444
    
    
    
    14,345,009
    
    
    
    440,098Increase in payables to contractors and
equipment suppliers
    
    
    (64,553
    )
    
    
    (59,768
    )
    
    
    (482,899
    )
    
    
    (14,815
    )7,568,722
    
    
    
    6,620,676
    
    
    
    13,862,110
    
    
    
    425,283
 The accompanying notes are an integral part of the financial statements.
 F-83




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##### Table of Contents



ChipMOS TECHNOLOGIES INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    
    F-84




---



##### Table of Contents



Basis of presentation
  F-85




---



##### Table of Contents



Classification in the balance sheet
  Cash equivalents
  Financial assets
      F-86




---



##### Table of Contents



Allowance for doubtful receivables
  Allowances for sales returns and discounts
  Inventories
  Investments Accounted for Using Equity Method
  Property, plant and equipment and non-operating properties
    F-87




---



##### Table of Contents



Goodwill
   Intangible assets
  Revenue recognition
  Foreign-currency transactions
  Pension costs
   Income tax
  F-88




---



##### Table of Contents



Derivative financial instruments
   Treasury stock
  Impairment losses of assets
 F-89




---



##### Table of Contents



Reclassifications
     F-90




---



##### Table of Contents



December 312005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)Trading Purpose Financial Assets:Stocks
    
    
    153,303
    
    
    
    257,652
    
    
    
    7,905Open-ended funds
    
    
    32,833
    
    
    
    1,671,472
    
    
    
    51,280Total
    
    
    186,136
    
    
    
    1,929,124
    
    
    
    59,185
       December 312005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)Integrated Silicon Solution, Inc. (ISSI)
    
    
    2,856
    
    
    
    
    
    
    
    Loss on appraisal of financial assets
    
    
    (2,856
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    F-91




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##### Table of Contents



Year Ended December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Balance, beginning of year
    
    
    97,288
    
    
    
    292,051
    
    
    
    401,300
    
    
    
    12,312Additions
    
    
    194,763
    
    
    
    109,249
    
    
    
    88,413
    
    
    
    2,712Reversals
    
    
    
    
    
    
    
    
    
    
    (54,684
    )
    
    
    (1,678
    )Write offs
    
    
    
    
    
    
    
    
    
    
    (276,872
    )
    
    
    (8,494
    )Balance, end of year
    
    
    292,051
    
    
    
    401,300
    
    
    
    158,157
    
    
    
    4,852
  December 312005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)Finished goods
    
    
    25,672
    
    
    
    38,113
    
    
    
    1,169Work in process
    
    
    202,951
    
    
    
    216,839
    
    
    
    6,653Raw materials
    
    
    394,261
    
    
    
    709,668
    
    
    
    21,772622,884
    
    
    
    964,620
    
    
    
    29,594Less  allowance for losses
    
    
    (82,462
    )
    
    
    (76,102
    )
    
    
    (2,335
    )540,422
    
    
    
    888,518
    
    
    
    27,259
  Year Ended December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Balance, beginning of year
    
    
    41,546
    
    
    
    111,074
    
    
    
    82,462
    
    
    
    2,530Additions
    
    
    150,231
    
    
    
    45,969
    
    
    
    
    
    
    
    Reversals
    
    
    (67,002
    )
    
    
    (74,581
    )
    
    
    (6,360
    )
    
    
    (195
    )Write offs
    
    
    (13,701
    )
    
    
    
    
    
    
    
    
    
    
    Balance, end of year
    
    
    111,074
    
    
    
    82,462
    
    
    
    76,102
    
    
    
    2,335
  December 312005
    
    2006Carrying
    
    % of
    
    Carrying
    
    % ofValue
    
    Ownership
    
    Value
    
    OwnershipNT$
    
    
    
    
    
    NT$
    
    US$Ultima Technology Corp.
(Ultima Technology)
    
    
    246,434
    
    
    
    30
    
    
    
    246,089
    
    
    
    7,550
    
    
    
    30Less: Accumulated impairment
    
    
    (188,310
    )
    
    
    
    
    
    
    ( 246,089
    )
    
    
    (7,550
    )58,124
    
    
    
    
    
    
    
    
    
    
    
    
  Year Ended December 312004
    
    2005NT$
    
    NT$(In Thousands)ChipMOS Japan
    
    
    704
    
    
    
    ChipMOS USA
    
    
    4,584
    
    
    
    
 F-92




---



##### Table of Contents



Year Ended December 312004
    
    2005NT$
    
    NT$(In Thousands)AMCT
    
    
    (24,953
    )
    
    
    Hua Shen
    
    
    (84
    )
    
    
    Chantek International
    
    
    (9,411
    )
    
    
    Ultima Technology
    
    
    
    
    
    
    (126,802
    )(29,160
    )
    
    
    (126,802
    )
       December 312005
    
    
    
    
    
    2006NT$
    
    
    
    
    
    NT$
    
    US$(In Thousands)Ultima Technology
    
    
    188,310
    
    
    
    
    
    
    
    57,779
    
    
    
    1,773
  December 312005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)Ultima Technology:Current assets
    
    
    2,216
    
    
    
    150
    
    
    
    5Non-current assets
    
    
    53,015
    
    
    
    (21,736
    )
    
    
    (667
    )Current liabilities
    
    
    317
    
    
    
    1,734
    
    
    
    53Non-current liabilities
    
    
    
    
    
    
    
    
    
    
    
 F-93




---



##### Table of Contents



December 312005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)Ultima Technology.Net revenue
    
    
    
    
    
    
    
    
    
    
    Cost of revenues
    
    
    
    
    
    
    
    
    
    
    Gross loss
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    (111,624
    )
    
    
    (74,629
    )
    
    
    (2,281
    )
 F-94




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##### Table of Contents



December 312005
    
    2006Carrying
    
    % of
    
    Carrying
    
    % ofValue
    
    Ownership
    
    Value
    
    OwnershipNT$
    
    
    
    
    
    NT$
    
    US$G-Link Technology.,
Taiwan (G-Link)
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    DigiMedia Technology
Co., Ltd., Taiwan
(DigiMedia Taiwan)
    
    
    197,880
    
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    DigiMedia Technology
Co., Ltd., Cayman
(DigiMedia Cayman)
    
    
    
    
    
    
    
    
    
    
    198,666
    
    
    
    6,095
    
    
    
    12Best Home Corp. Ltd.
(Best Home)
    
    
    
    
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    Sun Fund Securities
Ltd. (Sun Fund)
    
    
    148,120
    
    
    
    17
    
    
    
    148,120
    
    
    
    4,544
    
    
    
    17CDIB High Tech
Investment Inc.
(CDIB)
    
    
    9,001
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    Validity Sensors Inc.
(VSI)
    
    
    
    
    
    
    
    
    
    
    19,957
    
    
    
    613
    
    
    
    355,001
    
    
    
    
    
    
    
    366,743
    
    
    
    11,252
     Year Ended December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)G-Link
    
    
    
    
    
    
    4,855
    
    
    
    
    
    
    
    Sun Fund
    
    
    83,217
    
    
    
    17,830
    
    
    
    
    
    
    
    Best Home
    
    
    89,850
    
    
    
    
    
    
    
    
    
    
    
    Vigour
    
    
    41,336
    
    
    
    
    
    
    
    
    
    
    
    214,403
    
    
    
    22,685
    
    
    
    
    
    
    
    
    F-95




---



##### Table of Contents



December 312005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)Buildings and auxiliary equipment
    
    
    1,543,312
    
    
    
    1,760,726
    
    
    
    54,018Machinery and equipment
    
    
    12,266,880
    
    
    
    15,994,968
    
    
    
    490,719Furniture and fixtures
    
    
    345,307
    
    
    
    338,698
    
    
    
    10,391Transportation equipment
    
    
    15,976
    
    
    
    14,155
    
    
    
    434Tools
    
    
    857,137
    
    
    
    1,141,078
    
    
    
    35,008Leasehold improvements
    
    
    1,369
    
    
    
    405
    
    
    
    1215,029,981
    
    
    
    19,250,030
    
    
    
    590,582
    December 312005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)CostTechnology know-how
    
    
    115,803
    
    
    
    148,498
    
    
    
    4,556Software and other deferred expense
    
    
    314,330
    
    
    
    389,746
    
    
    
    11,957430,133
    
    
    
    538,244
    
    
    
    16,513Accumulated amortizationTechnology know-how
    
    
    (105,402
    )
    
    
    (143,297
    )
    
    
    (4,397
    )Software and other
deferred expense
    
    
    (221,360
    )
    
    
    (250,630
    )
    
    
    (7,689
    )(326,762
    )
    
    
    (393,927
    )
    
    
    (12,086
    )Carrying value
    
    
    103,371
    
    
    
    144,317
    
    
    
    4,427
  F-96




---



##### Table of Contents



December 312005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)Unsecured loan:Working capital loansNT$50,000 thousand,
repayable by
December 2006,
annual interest at
3.75%
    
    
    50,000
    
    
    
    
    
    
    
    NT$100,000 thousand,
repayable by
January 2006,
annual interest at
2.20%
    
    
    100,000
    
    
    
    
    
    
    
    NT$100,000 thousand,
repayable by
January 2006,
annual interest at
1.55%
    
    
    100,000
    
    
    
    
    
    
    
    USD$26,181 thousand,
repayable by June 2007,
annual interest at
6.02%-6.35%
    
    
    
    
    
    
    853,360
    
    
    
    26,181Loan for imports of machineryJPY$779,090 thousand,
repayable by June
2006, annual
interest at 0.7505%
- 0.90%
    
    
    217,834
    
    
    
    
    
    
    
    467,834
    
    
    
    853,360
    
    
    
    26,181
   December 312005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)Commercial paper
    
    
    150,000
    
    
    
    
    
    
    
    Discount on par value
    
    
    (587
    )
    
    
    
    
    
    
    149,413
    
    
    
    
    
    
    
    
  F-97




---



##### Table of Contents



December 312005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)Bank loans, repayable
quarterly from November
2004 to February 2007,
interest at fixed rate
(3.4% as of December 31,
2005 and 2006
respectively)
    
    
    150,000
    
    
    
    30,000
    
    
    
    920Bank loans, repayable
quarterly from February
2006 to November 2009,
interest at fixed rate
(4.69% as of December 31,
2005 and 2006,
respectively)
    
    
    500,000
    
    
    
    375,000
    
    
    
    11,505Bank loans, repayable
semi-annually from March
2005 to September 2006,
interest at floating rate
( 3.645% as of December
31, 2005)
    
    
    134,000
    
    
    
    
    
    
    
    Syndicated bank loans
collateralized by
equipment, repayable
semi-annually from
September 2004 to
September 2007, interest
at floating rate (4.72%
and 5.03% as of December
31, 2005 and 2006,
respectively)
    
    
    1,142,840
    
    
    
    571,400
    
    
    
    17,530Syndicated bank loans,
repayable semi-annually
from September 2004 to
September 2007, interest
at floating rate (4.845%
and 5.155% as of December
31, 2005 and 2006,
respectively)
    
    
    285,710
    
    
    
    142,850
    
    
    
    4,383Syndicated bank loans
collateralized by
equipment, repayable
quarterly from June 2004
to March 2008, interest at
floating rate (3.97% and
4.24% as of December 31,
2005 and 2006
respectively)
    
    
    1,277,308
    
    
    
    709,615
    
    
    
    21,770Syndicated bank loans
collateralized by
equipment, repayable
semi-annually from
November 2006 to May 2010,
interest rate at floating
rate (3.72% and 3.99% as
of December 31, 2005 and
2006 respectively)
    
    
    1,000,000
    
    
    
    875,000
    
    
    
    26,845(Forward)
 F-98




---



##### Table of Contents



December 312005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)(Followed)Research and development subsidy loan,
collateralized by time deposits in
amounts of NT25,000 thousand, repayable
quarterly from July 2003 to July 2006,
with zero interest rate
    
    
    6,181
    
    
    
    
    
    
    
    Research and development subsidy loan,
repayable quarterly from January 2006 to
April 2010, interest at fixed rate (1% as
of December 31, 2005 and 2006)
    
    
    29,120
    
    
    
    22,649
    
    
    
    695Syndicated bank loans collateralized by
equipment, repayable on September 2009,
interest at floating rate (3.195% and
3.505% as of December 31, 2005 and 2006
respectively)
    
    
    500,000
    
    
    
    500,000
    
    
    
    15,340Bank loans collateralized by equipment,
repayable quarterly from December 2004 to
September 2007, interest at floating rate
(3.89% and 4.25% as of December 31, 2005
and 2006 respectively)
    
    
    103,000
    
    
    
    39,000
    
    
    
    1,197Bank loans collateralized by equipment,
repayable quarterly from February 2005 to
November 2008, interest at floating rate
(2.9% and 3.14% as of December 31, 2005
and 2006 respectively)
    
    
    262,505
    
    
    
    175,005
    
    
    
    5,369Bank loans collateralized by equipment,
repayable quarterly from March 2006 to
December 2010, interest at floating rate.
(3.2% and 3.08% as of December 31, 2005
and 2006 respectively)
    
    
    440,000
    
    
    
    352,000
    
    
    
    10,799Bank loans collateralized by property,
repaid at January 2006, interest at
floating rate, (2.5% as of December 31,
2005)
    
    
    130,000
    
    
    
    
    
    
    
    Syndicated bank loans collateralized by
equipment, repayable quarterly April 2005
to January 2011, interest at floating
rate (3.08% and 3.45% as of December 31,
2005 and 2006 respectively)
    
    
    539,131
    
    
    
    431,305
    
    
    
    13,232Syndicated bank loans collateralized by
equipment, repayable quarterly December
2003 to September 2008, interest at
floating rate (3.08% and 3.45% as of
December 31, 2005 and 2006 respectively)
    
    
    234,972
    
    
    
    149,528
    
    
    
    4,587(Forward)
 F-99




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##### Table of Contents



December 312005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)(Followed)Syndicated bank
loans collateralized
by equipment,
repayable
semi-annually from
April 2008 to April
2011, interest at
floating rate (3.14%
as of December 31,
2006)
    
    
    
    
    
    
    6,000,000
    
    
    
    184,077Bank loans,
repayable on April
2008, interest at
floating rate
(3.655% as of
December 31, 2006)
    
    
    
    
    
    
    500,000
    
    
    
    15,340Syndicated bank
loans collateralized
by equipment,
repayable quarterly
from July 2006 to
April 2008, interest
at fixed rate (3.2%
as of December 31,
2006)
    
    
    
    
    
    
    150,000
    
    
    
    4,602Bank loans,
repayable quarterly
from September 2007
to June 2009,
interest at floating
rate (3.24% as of
December 31, 2006)
    
    
    
    
    
    
    200,000
    
    
    
    6,136Bank loans,
repayable on April
2009 interest at
fixed rate (2.89% as
of December 31,
2006)
    
    
    
    
    
    
    200,000
    
    
    
    6,136Bank loans,
repayable quarterly
from December 2007
to December 2009,
interest at floating
rate (3.01% as of
December 31, 2006)
    
    
    
    
    
    
    400,000
    
    
    
    12,272Syndicated bank
loans collateralized
by equipment,
repayable
semi-annually from
June 2009 to
December 2013,
interest at floating
rate (3.09% as of
December 31, 2006)
    
    
    
    
    
    
    450,000
    
    
    
    13,806Syndicated bank
loans collateralized
by equipment,
repayable quarterly
from May 2007 to
February 2012,
interest at floating
rate (2.75% as of
December 31, 2006)
    
    
    
    
    
    
    264,000
    
    
    
    8,0996,734,767
    
    
    
    12,537,352
    
    
    
    384,640Less: current portion
    
    
    (2,300,916
    )
    
    
    (2,335,284
    )
    
    
    (71,645
    )4,433,851
    
    
    
    10,202,068
    
    
    
    312,995
   (1)
    
    Ensure that ChipMOS Bermuda and SPIL maintain a percentage of direct ownership in
ChipMOS Taiwan of at least 50% of outstanding shares and have control over its operation.(2)
    
    Maintain certain financial ratios.
ChipMOS Taiwan was in compliance with the financial ratio requirements as of December 31,
2005.
  F-100




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##### Table of Contents



AmountNT$
    
    US$(In Thousands)2007
    
    
    2,335,284
    
    
    
    71,6452008
    
    
    3,465,885
    
    
    
    106,3322009
    
    
    3,361,873
    
    
    
    103,1412010
    
    
    2,181,138
    
    
    
    66,9162011 and thereafter
    
    
    1,193,172
    
    
    
    36,60612,537,352
    
    
    
    384,640
       Year Ended December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Service cost
    
    
    56,065
    
    
    
    30,021
    
    
    
    1,688
    
    
    
    52Interest cost
    
    
    8,038
    
    
    
    8,159
    
    
    
    7,790
    
    
    
    239Projected return on plan assets
    
    
    (5,304
    )
    
    
    (4,500
    )
    
    
    (4,740
    )
    
    
    (146
    )Amortization
    
    
    (143
    )
    
    
    1,031
    
    
    
    780
    
    
    
    24Unrecognized net (gain)/loss
    
    
    655
    
    
    
    53
    
    
    
    53
    
    
    
    259,311
    
    
    
    34,764
    
    
    
    5,571
    
    
    
    171
  F-101




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##### Table of Contents



December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Actuarial present value of
benefit obligationsVested benefit obligation
    
    
    374
    
    
    
    415
    
    
    
    1,028
    
    
    
    32Nonvested accumulated
benefit obligation
    
    
    169,835
    
    
    
    142,011
    
    
    
    141,408
    
    
    
    4,338Additional benefits
based on future salaries
    
    
    143,915
    
    
    
    140,827
    
    
    
    175,209
    
    
    
    5,375Projected benefit obligation
    
    
    314,124
    
    
    
    283,253
    
    
    
    317,645
    
    
    
    9,745Plan assets at fair value
    
    
    (174,349
    )
    
    
    (156,989
    )
    
    
    (199,991
    )
    
    
    (6,135
    )Projected benefit obligation
in excess of plan assets
    
    
    139,775
    
    
    
    126,264
    
    
    
    117,654
    
    
    
    3,610Unrecognized net transition
obligation
    
    
    (3,043
    )
    
    
    (663
    )
    
    
    (610
    )
    
    
    (19
    )Unrecognized net loss
    
    
    (34,058
    )
    
    
    (43,943
    )
    
    
    (69,472
    )
    
    
    (2,131
    )Accrued pension cost
    
    
    102,674
    
    
    
    81,658
    
    
    
    47,572
    
    
    
    1,460
  Year Ended December 312004
    
    2005
    
    2006Discount rate
    
    
    3.25
    %
    
    
    2.75
    %
    
    
    2.75
    %Future salary increase rate
    
    
    3.25
    %
    
    
    3.25
    %
    
    
    3.50%~5.00
    %Expected rate of return on plan assets
    
    
    3.25
    %
    
    
    2.75
    %
    
    
    2.75
    %
  Year Ended December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Contributions
    
    
    32,160
    
    
    
    29,892
    
    
    
    39,656
    
    
    
    1,217Payment of benefits
    
    
    
    
    
    
    
    
    
    
    
  December 312005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)Outstanding shares held by subsidiaries
    
    
    4,750
    
    
    
    4,750
    
    
    
    146Purchase of treasury stock
    
    
    115,402
    
    
    
    118,593
    
    
    
    3,638120,152
    
    
    
    123,343
    
    
    
    3,784
   F-102




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##### Table of Contents



F-103




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##### Table of Contents



a.
    
    A reconciliation of income tax expense  current before tax credits and income tax
expense on income before income tax at statutory rate is shown below:
 Year Ended December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Income tax expense on
income before income tax
at statutory rate
    
    
    674,082
    
    
    
    709,515
    
    
    
    1,391,161
    
    
    
    42,680Tax effects of adjustments:Loss carry forward
    
    
    (260,217
    )
    
    
    (489,380
    )
    
    
    (253,116
    )
    
    
    (7,766
    )Tax-exempt income
    
    
    (166,653
    )
    
    
    (157,808
    )
    
    
    (234,689
    )
    
    
    (7,200
    )Permanent difference
    
    
    (19,795
    )
    
    
    40,061
    
    
    
    (113,928
    )
    
    
    (3,495
    )Temporary difference
    
    
    175,091
    
    
    
    41,694
    
    
    
    (97,278
    )
    
    
    (2,984
    )Income tax expense-
current before tax credits
    
    
    402,508
    
    
    
    144,082
    
    
    
    692,150
    
    
    
    21,235
 b.
    
    Income tax expense (benefit) consists of:
 Year Ended December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Income tax expense  current
before tax credits
    
    
    402,508
    
    
    
    144,082
    
    
    
    692,150
    
    
    
    21,235Tax on the unappropriated earnings
    
    
    
    
    
    
    163,838
    
    
    
    111,066
    
    
    
    3,407Separate and foreign income tax
    
    
    86
    
    
    
    746
    
    
    
    209
    
    
    
    6Income tax credits
    
    
    (355,923
    )
    
    
    (218,672
    )
    
    
    (506,285
    )
    
    
    (15,532
    )Income tax for the current year
    
    
    46,671
    
    
    
    89,994
    
    
    
    297,140
    
    
    
    9,116(Forward)
(Followed)
Net change of deferred income tax
assets (liabilities) for the year
Tax credits
    
    
    (70,003
    )
    
    
    76,611
    
    
    
    (206,923
    )
    
    
    (6,348
    )Temporary difference
    
    
    (128,593
    )
    
    
    (234,688
    )
    
    
    97,278
    
    
    
    2,984Valuation allowance
    
    
    (560,053
    )
    
    
    (405,487
    )
    
    
    230,050
    
    
    
    7,058Loss carry forward
    
    
    584,122
    
    
    
    517,738
    
    
    
    133,732
    
    
    
    4,103Adjustment of prior years taxes
and others
    
    
    (4,743
    )
    
    
    497
    
    
    
    (4,673
    )
    
    
    (143
    )Income tax (benefit) expense
    
    
    (132,599
    )
    
    
    44,665
    
    
    
    546,604
    
    
    
    16,770
 ChipMOS Taiwan under Science Park Regulations is entitled to an exemption from ROC income
taxes for a period of four years on income attributable to the expansion of its production
capacity as a result of purchases of equipment funded by capital increases. Such tax
exemption will expire on December 31, 2008.c.
    
    Deferred income tax assets and liabilities are summarized as follows:
 F-104




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##### Table of Contents



December 312005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)Net current deferred income tax assets:Unrealized foreign exchange loss
    
    
    3,496
    
    
    
    3,679
    
    
    
    113Unrealized loss provision on
sales allowance
    
    
    9,455
    
    
    
    21,912
    
    
    
    672Loss of market price decline and
obsolete and slow-moving
inventories
    
    
    20,616
    
    
    
    19,026
    
    
    
    584Allowance for bad-debts
    
    
    81,424
    
    
    
    77,533
    
    
    
    2,378Tax credits
    
    
    110,103
    
    
    
    491
    
    
    
    15Others
    
    
    14,108
    
    
    
    11,696
    
    
    
    359239,202
    
    
    
    134,337
    
    
    
    4,121Less: valuation allowance
    
    
    
    
    
    
    
    
    
    
    239,202
    
    
    
    134,337
    
    
    
    4,121Net non-current deferred income tax
assets (liabilities):Tax credits for investment in
machinery and equipment and
R&D expenditures
    
    
    801,450
    
    
    
    1,117,985
    
    
    
    34,299Loss carry forwards
    
    
    133,732
    
    
    
    
    
    
    
    Depreciation differences
    
    
    (556,316
    )
    
    
    (650,012
    )
    
    
    (19,942
    )Other
    
    
    266,057
    
    
    
    257,728
    
    
    
    7,907644,923
    
    
    
    725,701
    
    
    
    22,264Less: Valuation allowance
    
    
    (793,874
    )
    
    
    (1,023,924
    )
    
    
    (31,413
    )(148,951
    )
    
    
    (298,223
    )
    
    
    (9,149
    )
 The rate at which deferred income tax components are measured was 25% as of
December 31, 2005 and 2006.d.
    
    Integrated income tax informationChipMOS Taiwan, the balances of the ICA were NT$52,445 thousand and NT$71,486 thousand as
of December 31, 2005 and 2006, respectively.ChipMOS Taiwan, the imputation credit allocated to each shareholder shall be based on the
balance in the ICA on the date of distribution of dividends. Tax creditable ratio was
2.85% and 1.18% for 2005 and 2006, respectively.
 F-105




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##### Table of Contents



e.
    
    The balance and year of expiry of unused investment tax credits as of December 31,
2006 are as follows:
 Year of Expiry
    
    Machinery & Equipment
    
    R&D ExpenditureNT$
    
    NT$(In Thousands)2007
    
    
    267,082
    
    
    
    34,1842008
    
    
    254,505
    
    
    
    2009
    
    
    43,416
    
    
    
    42,7322010
    
    
    476,556
    
    
    
    1,041,559
    
    
    
    76,916
 The deferred tax assets related to the investment tax credits on R&D expenditures and
purchases of machinery and equipment will expire from 2007 to 2010. Under ROC tax
regulations, tax credits can be utilized to reduce current income tax obligations only to
the extent of 50% of such income tax obligations except in the year when such tax credit
will expire, in which case, the entire amount of expiring tax credit may be utilized to
reduce the current income tax obligation. The foregoing limitation on the utilization of
tax credits, the expiry dates of the tax credits, the level of tax credits expected to be
generated from future operations and the level of non-taxable income attributable to the
four-year income tax holiday on capacity expansion led management to conclude that it is
unlikely that these investment tax credits will be fully realized. Loss carry forwards can
be used to deduct current income tax obligation up to the extent of taxable income and will
be expired after 5 years if not fully utilized by the Company. Accordingly, a valuation
allowance on deferred tax assets is recognized as of December 31, 2005 and 2006.The tax authorities have examined and assessed the income tax returns of ChipMOS Taiwan and
ThaiLin through 2003 and 2004, respectively.According to ROC tax law, unappropriated earnings generated in 1998 and thereafter are
subject to a tax of 10% in the year when the shareholders resolve that such earnings shall
be retained. The retained earnings (accumulated deficit) of ChipMOS Taiwan as of December
31, 2005 and 2006 were generated during and after 1998.
 F-106




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##### Table of Contents



Name
    
    RelationshipChipMOS Bermuda
    
    A major shareholderSPIL
    
    A major shareholderMVI
    
    An indirect major shareholderChipMOS Japan
    
    A 100% owned subsidiaryChipMOS U.S.A.
    
    A 100% owned subsidiaryPlusMOS
    
    A former 25% owned investee. It merged
with CHANTEK in April 2004.ProMOS Technology Inc. (ProMOS)
    
    An investee of MVIDenMOS Technology Inc. (DenMOS)
    
    An investee of MVIMouFu Investment Ltd.
(Mou-Fu)
    
    An investee of MVIBest Home
    
    A 19% owned investee; ChipMOS Taiwan is
a major shareholder.Sun Fund
    
    A 17% owned investee; ChipMOS Taiwan is
a major shareholder.AMCT
    
    A former 100% owned investee. It was
liquidated in October 2004.ChipMOS TECHNOLOGIES (H.K.) Ltd.
(ChipMOS H.K.)
    
    A subsidiary of ChipMOS Bermuda
(Note: It used to be called ChipMOS FAR
EAST Ltd., and was renamed as ChipMOS
TECHNOLOGIES (H.K.) Ltd. in May 2005.)ChipMOS TECHNOLOGIES (H.K.)
Ltd., Taiwan Branch (ChipMOS
(H.K.) Taiwan Branch)
    
    A subsidiary of ChipMOS Bermuda
  Year Ended December 312004
    
    
    2005
    
    
    2006NT$
    
    
    NT$
    
    
    NT$
    
    
    US$(In Thousands)During the yearSalesMVI
    
    
    14,274
    
    
    
    6
    
    
    
    
    
    
    
    PlusMOS
    
    
    16,751
    
    
    
    
    
    
    
    
    
    
    
    ProMOS
    
    
    4,231,658
    
    
    
    4,332,058
    
    
    
    5,529,273
    
    
    
    169,636ChipMOS H.K.
    
    
    17,845
    
    
    
    10,556
    
    
    
    6,172
    
    
    
    189SPIL
    
    
    
    
    
    
    
    
    
    
    83
    
    
    
    3DenMOS
    
    
    567,042
    
    
    
    271,393
    
    
    
    124,870
    
    
    
    3,8314,847,570
    
    
    
    4,614,013
    
    
    
    5,660,398
    
    
    
    173,659(Forward)
 F-107




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##### Table of Contents



Year Ended December 312004
    
    
    2005
    
    
    2006NT$
    
    
    NT$
    
    
    NT$
    
    
    US$(In Thousands)(Followed)Rental revenueMVI
    
    
    4,800
    
    
    
    4,800
    
    
    
    2,160
    
    
    
    66DenMOS
    
    
    455
    
    
    
    30
    
    
    
    
    
    
    
    ProMOS
    
    
    14,057
    
    
    
    9,371
    
    
    
    9,371
    
    
    
    28819,312
    
    
    
    14,201
    
    
    
    11,531
    
    
    
    354Other revenueSPIL
    
    
    
    
    
    
    
    
    
    
    62
    
    
    
    2PlusMOS
    
    
    41
    
    
    
    
    
    
    
    
    
    
    
    ChipMOS H.K.
    
    
    4,455
    
    
    
    1,982
    
    
    
    11,996
    
    
    
    368ChipMOS U.S.A.
    
    
    526
    
    
    
    
    
    
    
    
    
    
    
    ProMOS
    
    
    507
    
    
    
    522
    
    
    
    73
    
    
    
    2AMCT
    
    
    126
    
    
    
    
    
    
    
    
    
    
    
    5,655
    
    
    
    2,504
    
    
    
    12,131
    
    
    
    372PurchasesAMCT
    
    
    10,732
    
    
    
    
    
    
    
    
    
    
    
    ChipMOS H.K.
    
    
    89,599
    
    
    
    3,120
    
    
    
    
    
    
    
    MVI
    
    
    637,089
    
    
    
    11,964
    
    
    
    
    
    
    
    ChipMOS U.S.A.
    
    
    149
    
    
    
    
    
    
    
    
    
    
    
    SPIL
    
    
    
    
    
    
    75
    
    
    
    
    
    
    
    737,569
    
    
    
    15,159
    
    
    
    
    
    
    
    Subcontract expensesChipMOS H.K.
    
    
    214,127
    
    
    
    73,905
    
    
    
    28,326
    
    
    
    869Operating expensesAdministrative expensesMVI
    
    
    1,950
    
    
    
    
    
    
    
    
    
    
    
    Mou-Fu
    
    
    2,275
    
    
    
    3,900
    
    
    
    1,950
    
    
    
    604,225
    
    
    
    3,900
    
    
    
    1,950
    
    
    
    60Service feeChipMOS U.S.A.
    
    
    32,175
    
    
    
    
    
    
    
    
    
    
    
    ChipMOS Japan
    
    
    15,045
    
    
    
    
    
    
    
    
    
    
    
    47,220
    
    
    
    
    
    
    
    
    
    
    
    Rental expenseMVI
    
    
    2,218
    
    
    
    593
    
    
    
    
    
    
    
    ProMOS
    
    
    
    
    
    
    1,245
    
    
    
    
    
    
    
    2,218
    
    
    
    1,838
    
    
    
    
    
    
    
    Fee for stock registry serviceMou-Fu
    
    
    1,977
    
    
    
    493
    
    
    
    
    
    
    
    (Forward)
 F-108




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##### Table of Contents



Year Ended December 312004
    
    
    2005
    
    
    2006NT$
    
    
    NT$
    
    
    NT$
    
    
    US$(In Thousands)(Followed)Consultation feeChipMOS Bermuda
    
    
    25,191
    
    
    
    32,014
    
    
    
    32,695
    
    
    
    1,003Other expensePlusMOS
    
    
    88
    
    
    
    
    
    
    
    
    
    
    
    MVI
    
    
    148
    
    
    
    148
    
    
    
    144
    
    
    
    4ProMOS
    
    
    1,027
    
    
    
    
    
    
    
    
    
    
    
    1,263
    
    
    
    148
    
    
    
    144
    
    
    
    4
 December 312005
    
    
    2006NT$
    
    
    NT$
    
    
    US$(In Thousands)At the end of yearNotes and accounts receivableDenMOS
    
    
    54,901
    
    
    
    10,332
    
    
    
    317ProMOS
    
    
    1,372,950
    
    
    
    1,851,469
    
    
    
    56,802ChipMOS H.K.
    
    
    1,554
    
    
    
    
    
    
    
    1,429,405
    
    
    
    1,861,801
    
    
    
    57,119Other receivableChipMOS Bermuda
    
    
    8,862
    
    
    
    1,526
    
    
    
    47MVI
    
    
    852
    
    
    
    613
    
    
    
    19SPIL
    
    
    
    
    
    
    65
    
    
    
    2DenMOS
    
    
    317
    
    
    
    162
    
    
    
    5ChipMOS H.K.
    
    
    493
    
    
    
    3,003
    
    
    
    92ProMOS
    
    
    3,174
    
    
    
    13,118
    
    
    
    402ChipMOS (H.K.) Taiwan Branch
    
    
    137
    
    
    
    12
    
    
    
    13,835
    
    
    
    18,499
    
    
    
    567Accounts payableChipMOS H.K.
    
    
    2,214
    
    
    
    4,295
    
    
    
    132Other payableMVI
    
    
    28
    
    
    
    25
    
    
    
    1ProMOS
    
    
    781
    
    
    
    
    
    
    
    ChipMOS H.K.
    
    
    3,191
    
    
    
    
    
    
    
    SPIL
    
    
    79
    
    
    
    
    
    
    
    ChipMOS Bermuda
    
    
    41,063
    
    
    
    30,965
    
    
    
    950Mou-Fu
    
    
    348
    
    
    
    
    
    
    
    45,490
    
    
    
    30,990
    
    
    
    951
    F-109




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##### Table of Contents



December 312005
    
    
    2006NT$
    
    
    NT$
    
    
    US$(In Thousands)Time deposits (matures from
January 2007 to October 2007)
    
    
    125,447
    
    
    
    81,283
    
    
    
    2,494
   a.
    
    As of December 31, 2006, ChipMOS Taiwan leases parcels of land from the Hsinchu and
Tainan Science Based Industrial Park (SBIP) under several agreements expiring on various
dates from 2002 to 2017, with renewal options.
 F-110




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##### Table of Contents



AmountYear
    
    NT$
    
    US$(In Thousands)2007
    
    
    17,362
    
    
    
    5322008
    
    
    17,362
    
    
    
    5322009
    
    
    17,362
    
    
    
    5322010
    
    
    17,362
    
    
    
    532Thereafter
    
    
    121,536
    
    
    
    3,731Total minimum lease payments
    
    
    190,984
    
    
    
    5,859
 b.
    
    As of December 31, 2006, ChipMOS Taiwan leases a parcel of machinery under an
agreement expiring on 2009.The future minimum lease payments under the above-mentioned leases as of December 31, 2006
are as follows:
 AmountYear
    
    NT$
    
    US$(In Thousands)2007
    
    
    44,376
    
    
    
    1,3612008
    
    
    44,376
    
    
    
    1,3612009
    
    
    33,282
    
    
    
    1,022Total minimum lease payments
    
    
    122,034
    
    
    
    3,744
 c.
    
    Pursuant to the semiconductor packaging technology license agreement (see Note 19),
ChipMOS Taiwan is obligated to make future payments of license fee amounted to US$18,250
thousand to ChipMOS Bermuda as of December 31, 2006.d.
    
    The Company has unused letters of credit aggregating approximately USD$17,690
thousand, JPY 1,553,265 thousand, EUR$182 thousand, and GBP$16 thousand as of December 31,
2006.e.
    
    In 2003, tax authorities have assessed and increase the 2000 income taxes of ChipMOS
Taiwan by NT$30,526 thousand. ChipMOS Taiwan has filed an appealing for the assessment.
In 2006, the 2000 income tax was increased by NT$1,786 thousand based on a ruling given
by the Court.f.
    
    As of December 31, 2006, ChipMOS Taiwan had capital commitments in relation to
purchase of machinery in the amount of US$7,000 thousand (2005: US$110,000 thousand).
 F-111




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##### Table of Contents



g.
    
    On April 20, 1999, ChipMOS Taiwan entered into a semiconductor packaging technology
license agreement with Tessera Technologies, Inc. (Tessera). Under this agreement,
ChipMOS Taiwan agreed to pay a license fee of US$500 thousand and a royalty fee at a
certain percentage of the net sales of certain products. ChipMOS Taiwan paid the total
license fee of approximately US$500 thousand (NT$15,888 thousand) in 1999 and amortized
the amount over 5 years using the straight-line method. ChipMOS Taiwan also paid
approximately US$500 thousand (NT$16,708 thousand) in 2004 as the cumulative production
and sales quantity of products bearing Tessera Compliant Chip packages did not meet the
commitment schedule as set in the agreement. In February 2006, ChipMOS Taiwan and ChipMOS
USA have received notice of a patent infringement lawsuit brought by Tessera, alleging
infringement of several Tessera patents and breach of an existing license agreement with
ChipMOS Taiwan. According to Companys counsel, fact discovery has been ongoing and is
scheduled to close on March 31, 2007, although it may be extended beyond that date by
order of the Court. Therefore, expert discovery will be continued and the trial date
could be moved to April 2008. The Companys counsel has not formed an opinion as to the
outcome of the case.h.
    
    On October 16, 2006, Freescale Semiconductor, Inc. (Freescale) unilaterally
terminated an Immunity Agreement, (the Agreement) ChipMOS Taiwan and Freescale,
formerly part of Motorola, Inc. (Motorola), entered into in 1999 for ChipMOS Taiwans
alleged breach of the Agreement. Under the Agreement, ChipMOS Taiwan promised to pay
royalties and licensee fees to Motorola for using certain patents owned by Motorola.
Freescale replaced Motorola as a party to the Agreement, after Freescale was spun off from
Motorola. Freescale has alleged that ChipMOS Taiwan breached the Agreement by failing to
pay royalties on certain packages assembled by ChipMOS Taiwan. Freescale claims that such
packages are covered by one or more Freescale patents identified in the Agreement while
ChipMOS Taiwan contends that such packages are not covered by any patents in the
Agreement, or, if covered, those patents are invalid. As such, ChipMOS Taiwan argues
Freescales unilateral termination of the Agreement has no legal effect. ChipMOS Taiwan
has continued to make royalty payments for products it believes are covered by the
Agreement. Any payments returned by Freescale have been deposited in a separate escrow
account. If Freescale initiates a lawsuit, ChipMOS Taiwan expect to vigorously defend
itself. The Companys counsel has not formed any opinion as to the outcome of the case.
 F-112




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December 31,2005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)Net assets acquired:Cash and bank balances
    
    
    7,261
    
    
    
    
    
    
    
    Current assets
    
    
    27,519
    
    
    
    
    
    
    
    Property, plant and equipment
    
    
    9,197
    
    
    
    
    
    
    
    Other assets
    
    
    1,415
    
    
    
    
    
    
    
    Current liabilities
    
    
    (20,925
    )
    
    
    
    
    
    
    Other liabilities
    
    
    (16
    )
    
    
    
    
    
    
    24,451
    
    
    
    
    
    
    
    Goodwill on acquisition
    
    
    
    
    
    
    
    
    
    
    24,451
    
    
    
    
    
    
    
    Satisfied by:Cash
    
    
    
    
    
    
    
    
    
    
    Reclassification to interest
in subsidiary
    
    
    24,451
    
    
    
    
    
    
    
    24,451
    
    
    
    
    
    
    
    
  December 31,2005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)Cash and bank balances acquired
    
    
    7,261
    
    
    
    
    
    
    
    Less: cash consideration
    
    
    
    
    
    
    
    
    
    
    7,261
    
    
    
    
    
    
    
    
 F-113




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Year Ended December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Net assets disposed:Cash and bank balances
    
    
    
    
    
    
    35,909
    
    
    
    
    
    
    
    Accounts receivable
    
    
    
    
    
    
    6,708
    
    
    
    
    
    
    
    Inventories
    
    
    
    
    
    
    38
    
    
    
    
    
    
    
    Prepayment and other assets
    
    
    
    
    
    
    619
    
    
    
    
    
    
    
    Property, plant and equipment
    
    
    
    
    
    
    32,969
    
    
    
    
    
    
    
    Intangible assets
    
    
    
    
    
    
    1,954
    
    
    
    
    
    
    
    Bank loans
    
    
    
    
    
    
    (17,791
    )
    
    
    
    
    
    
    Accrued and other liabilities
    
    
    
    
    
    
    (3,799
    )
    
    
    
    
    
    
    Longterm loans
    
    
    
    
    
    
    (5,290
    )
    
    
    
    
    
    
    Minority interest
    
    
    
    
    
    
    (30,303
    )
    
    
    
    
    
    
    
    
    
    
    21,014
    
    
    
    
    
    
    
    Goodwill
    
    
    
    
    
    
    66,786
    
    
    
    
    
    
    
    Loss on disposal of a subsidiary
    
    
    
    
    
    
    (3,856
    )
    
    
    
    
    
    
    
    
    
    
    83,944
    
    
    
    
    
    
    
    Cash consideration
    
    
    
    
    
    
    83,944
    
    
    
    
    
    
    
    
  Cash consideration
    
    
    
    
    
    
    83,944
    
    
    
    
    
    
    
    Less: cash and bank balances disposed
    
    
    
    
    
    
    ( 35,909
    )
    
    
    
    
    
    
    
    
    
    
    48,035
    
    
    
    
    
    
    
    
   a.
    
    Forward, exchange contractsAs of December 31, 2005 and 2006, there were no outstanding forward contracts. Net exchange
gains on forward exchange contracts were NT$1,528 thousand and NT$2,257 thousand for the year
ended December 31, 2005 and 2006.
 F-114




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b.
    
    European optionsChipMOS Taiwan expects to receive U.S. dollars from its export sales and to pay Japanese yen
for its importation of materials, machinery, and equipment. It has entered into foreign
currency option contracts with banks to hedge exchange rate risks. As of December 31, 2005
and 2006, ChipMOS Taiwan had no outstanding foreign currency option contracts. For the years
ended December 31, 2005 and 2006, ChipMOS Taiwan didnt realize premium income of NT$36 and
nil thousand, respectively.c.
    
    Interest Rate RisksChipMOS Taiwan has entered into interest rate swap agreements to manage interest rate risk by
exchanging a quarto stepping interest rate for a floating rate and keeps records when
transactions are settled. The difference of the interests is calculated quarterly and is
credited or charged to the income in the current period. The benefit of interest rate swaps
recognized as non-operating income in 2005 and 2006 were NT$11,190 thousand and nil
respectively.d.
    
    Transaction risks
 1)
    
    Credit risk. The banks with which the Company has entered into the above
contracts are reputable and, therefore, the Company does not expected to be exposed to
significant credit risks.2)
    
    Market risk and hedge strategy. The Company is exposed to market risks arising
from changes in currency exchange rates due to U.S. dollar denominated accounts
receivable, Yen denominated accounts payable and U.S. dollar denominated debt. In order
to manage these exposures, the Company entered into forward contracts and option
contracts occasionally.3)
    
    Liquidity and cash requirements. The cash flow requirements with respect to the
Companys forward contracts are limited to the periodic premium payments and the net
differences of the contracted settlement rates. On the other hand, call/put options may
not have to be exercised at all in cases where the strike price is higher/lower than the
related market price at exercise dates.
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e.
    
    The estimated fair values of the Companys financial instruments are as follows:
 December 31, 2005
    
    December 31, 2006Carrying
    
    
    
    
    
    CarryingValue
    
    Fair Value
    
    Value
    
    Fair ValueNT$
    
    NT$
    
    NT$
    
    NT$(In Thousands)Non-derivative financial instrumentsAssetsCash
    
    
    3,154,097
    
    
    
    3,154,097
    
    
    
    1,877,501
    
    
    
    1,877,501Restricted cash and cash equivalents
    
    
    125,447
    
    
    
    125,447
    
    
    
    81,283
    
    
    
    81,283Financial assets at fair value
through profit and loss
    
    
    186,136
    
    
    
    186,136
    
    
    
    1,929,124
    
    
    
    1,929,124Notes receivable
    
    
    30,581
    
    
    
    30,581
    
    
    
    31,103
    
    
    
    31,103Accounts receivable
    
    
    2,401,045
    
    
    
    2,401,045
    
    
    
    3,045,346
    
    
    
    3,045,346Receivables from related partiesNotes and accounts
    
    
    1,419,976
    
    
    
    1,419,976
    
    
    
    1,838,964
    
    
    
    1,838,964Others
    
    
    5,315
    
    
    
    5,315
    
    
    
    9,979
    
    
    
    9,979Other receivable
    
    
    169,337
    
    
    
    169,337
    
    
    
    36,276
    
    
    
    36,276Long-term investments under equity
method
    
    
    58,124
    
    
    
    58,124
    
    
    
    
    
    
    
    Financial assets valued by cost
    
    
    355,001
    
    
    
    355,001
    
    
    
    366,743
    
    
    
    366,743Refundable deposits
    
    
    17,846
    
    
    
    17,846
    
    
    
    29,529
    
    
    
    29,529LiabilitiesBank loans
    
    
    467,834
    
    
    
    467,834
    
    
    
    853,360
    
    
    
    853,360Commercial paper payable
    
    
    149,413
    
    
    
    149,413
    
    
    
    
    
    
    
    Notes payable
    
    
    3,927
    
    
    
    3,927
    
    
    
    
    
    
    
    Accounts payable
    
    
    657,963
    
    
    
    657,963
    
    
    
    728,150
    
    
    
    728,150Payable to related partiesTrade
    
    
    2,214
    
    
    
    2,214
    
    
    
    4,295
    
    
    
    4,295Others
    
    
    45,490
    
    
    
    45,490
    
    
    
    30,990
    
    
    
    30,990Payables to contractors and
equipment suppliers
    
    
    372,329
    
    
    
    372,329
    
    
    
    855,228
    
    
    
    855,228Long-term loans (including current
portion)
    
    
    6,734,767
    
    
    
    6,734,767
    
    
    
    12,537,352
    
    
    
    12,537,352Guarantee deposits
    
    
    1,454
    
    
    
    1,454
    
    
    
    5,833
    
    
    
    5,833
  1)
    
    Short-term financial instruments  market values.2)
    
    Financial assets at fair value through profit and loss  market values.3)
    
    Long-term investments under equity method and financial assets valued by cost -
market value for listed companies and net equity value for the others.4)
    
    Refundable deposits and guarantee deposits  future values.
 F-116




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##### Table of Contents



5)
    
    Long-term liabilities  based on forecasted cash flows discounted at current
interest rates of similar long-term liabilities. Other long-term liabilities are their
carrying values as they use floating interest rates.
    a.
    
    The Company provides semiconductor testing, assembly, turnkey services and LCD and
other flat-panel display driver semiconductors services.
 2004Segment
    
    Corporate &
    
    ConsolidatedTesting
    
    Assembly
    
    Turnkey
    
    LCD
    
    Bumping
    
    Totals
    
    Other Assets
    
    TotalsNT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$(In Thousands)Revenues from
customers
    
    
    5,950,174
    
    
    
    5,734,592
    
    
    
    473,588
    
    
    
    2,655,201
    
    
    
    54,322
    
    
    
    14,867,877
    
    
    
    
    
    
    
    14,867,877Cost of revenues
    
    
    3,744,781
    
    
    
    4,795,074
    
    
    
    466,676
    
    
    
    1,615,799
    
    
    
    121,898
    
    
    
    10,744,228
    
    
    
    
    
    
    
    10,744,228Segment gross profit
    
    
    2,205,393
    
    
    
    939,518
    
    
    
    6,912
    
    
    
    1,039,402
    
    
    
    (67,576
    )
    
    
    4,123,649
    
    
    
    
    
    
    
    4,123,649Depreciation and
amortization
    
    
    2,445,481
    
    
    
    410,721
    
    
    
    
    
    
    
    578,835
    
    
    
    22,650
    
    
    
    3,457,687
    
    
    
    
    
    
    
    3,457,687Segment assets
    
    
    12,352,842
    
    
    
    4,634,992
    
    
    
    
    
    
    
    2,961,478
    
    
    
    504,130
    
    
    
    20,453,442
    
    
    
    7,394,399
    
    
    
    27,847,841Expenditure for
segment assets
    
    
    4,698,036
    
    
    
    1,028,155
    
    
    
    
    
    
    
    1,380,372
    
    
    
    526,712
    
    
    
    7,633,275
    
    
    
    
    
    
    
    7,633,275
 2005Segment
    
    Corporate &
    
    ConsolidatedTesting
    
    Assembly
    
    LCD
    
    Bumping
    
    Module
    
    Totals
    
    Other Assets
    
    TotalsNT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$(In Thousands)Revenues from
customers
    
    
    6,371,845
    
    
    
    4,901,030
    
    
    
    2,945,040
    
    
    
    153,129
    
    
    
    385,479
    
    
    
    14,756,523
    
    
    
    
    
    
    
    14,756,523Cost of revenues
    
    
    4,337,442
    
    
    
    3,867,653
    
    
    
    1,885,241
    
    
    
    337,646
    
    
    
    409,705
    
    
    
    10,837,687
    
    
    
    
    
    
    
    10,837,687Segment gross
profit
    
    
    2,034,403
    
    
    
    1,033,377
    
    
    
    1,059,799
    
    
    
    (184,517
    )
    
    
    (24,226
    )
    
    
    3,918,836
    
    
    
    
    
    
    
    3,918,836Depreciation and
amortization
    
    
    2,618,466
    
    
    
    672,053
    
    
    
    836,665
    
    
    
    90,862
    
    
    
    2,143
    
    
    
    4,220,189
    
    
    
    
    
    
    
    4,220,189Segment assets
    
    
    13,453,184
    
    
    
    3,236,351
    
    
    
    3,733,320
    
    
    
    1,683,367
    
    
    
    52,328
    
    
    
    22,158,550
    
    
    
    5,877,885
    
    
    
    28,036,435Expenditure for
segment assets
    
    
    3,412,550
    
    
    
    1,044,114
    
    
    
    1,613,308
    
    
    
    581,599
    
    
    
    28,873
    
    
    
    6,680,444
    
    
    
    
    
    
    
    6,680,444
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##### Table of Contents



2006Segment
    
    Corporate &
    
    ConsolidatedTesting
    
    Assembly
    
    LCD
    
    Bumping
    
    Module
    
    Totals
    
    Other Assets
    
    TotalsNT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$
    
    NT$(In Thousands)Revenues from
customers
    
    
    9,210,007
    
    
    
    5,845,164
    
    
    
    3,964,136
    
    
    
    479,988
    
    
    
    325,266
    
    
    
    19,824,561
    
    
    
    
    
    
    
    19,824,361Cost of revenues
    
    
    5,420,636
    
    
    
    4,320,150
    
    
    
    2,702,920
    
    
    
    702,832
    
    
    
    322,435
    
    
    
    13,468,973
    
    
    
    
    
    
    
    13,468,973Segment gross
profit
    
    
    3,789,371
    
    
    
    1,525,014
    
    
    
    1,261,216
    
    
    
    (222,844
    )
    
    
    2,831
    
    
    
    6,355,588
    
    
    
    
    
    
    
    6,355,588Depreciation and
amortization
    
    
    3,148,028
    
    
    
    819,564
    
    
    
    1,014,327
    
    
    
    335,481
    
    
    
    29,078
    
    
    
    5,346,478
    
    
    
    
    
    
    
    5,346,478Segment assets
    
    
    16,443,840
    
    
    
    5,053,814
    
    
    
    4,610,879
    
    
    
    2,495,225
    
    
    
    53,518
    
    
    
    28,657,276
    
    
    
    9,977,751
    
    
    
    38,635,027Expenditure for
segment assets
    
    
    8,516,332
    
    
    
    2,630,769
    
    
    
    1,992,147
    
    
    
    1,175,556
    
    
    
    30,205
    
    
    
    14,345,009
    
    
    
    
    
    
    
    14,345,009
     Year Ended December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$(In Thousands)AreaROC
    
    
    12,182,691
    
    
    
    11,924,655
    
    
    
    15,455,922USA
    
    
    1,597,962
    
    
    
    1,548,927
    
    
    
    2,563,771JAPAN
    
    
    541,747
    
    
    
    482,587
    
    
    
    541,961OTHERS
    
    
    545,477
    
    
    
    800,354
    
    
    
    1,262,90714,867,877
    
    
    
    14,756,523
    
    
    
    19,824,561
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##### Table of Contents



d.
    
    Net sales to customers representing at least 10% of net total sales:
 Year Ended December 312004
    
    2005
    
    2006Customer
    
    Amount
    
    %
    
    Amount
    
    %
    
    Amount
    
    %NT$
    
    
    
    
    
    NT$
    
    
    
    
    
    NT$(In Thousands)ProMOS
    
    
    4,231,658
    
    
    
    29
    
    
    
    4,332,058
    
    
    
    29
    
    
    
    5,529,273
    
    
    
    28PowerChip
    
    
    1,721,993
    
    
    
    12
    
    
    
    2,233,503
    
    
    
    15
    
    
    
    2,834,956
    
    
    
    14HiMAX
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,244,818
    
    
    
    11
   a.
    
    Bonuses to employees, directors and supervisorsAccording to ROC regulations and the Articles of Incorporation of ChipMOS Taiwan, a portion
of distributable earnings should be appropriated as bonuses to employees and
remuneration to directors and supervisors. The remuneration to directors and
supervisors is paid in cash, while bonuses to employees may be granted in cash or
stock or both. These appropriations, including stock bonuses, which are valued at par
value of NT$10, are charged against retained earnings under ROC GAAP, after such
appropriations are formally approved by the shareholders in the following year.Under U.S. GAAP, such bonuses and remuneration are charged to income currently and
included in operating expenses as compensation expenses. Since the amount and form of
such bonuses and remuneration are not finally determinable until approved by the
shareholders, the total amount of such bonuses and remuneration is initially accrued
based on the amount to be paid as provided by ChipMOS Taiwans Articles of
Incorporation. The percentage to be paid in stock is determined at the next
shareholders meeting in the following year. The number of shares to be issued is
determined by dividing the amount to be paid in stock by the par value of the shares.
Any difference between the initially accrued amount (the cash portion plus the par
value of the shares) and the fair market value of the bonuses settled (the cash
portion plus the fair value of the shares) is recognized in the year of approval by
the shareholders.b.
    
    Financial assetsPrior to January 1, 2006 under ROC GAAP, marketable equity securities are carried at the
lower of aggregate cost or market value, and debt securities at cost, with only unrealized
losses recognized when losses are irrecoverable. Under 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, available-for-sale
or held-to-maturity securities. Debt securities that the Company has the positive intent
and ability to hold to maturity are classified as held-to-maturity securities and reported
at amortized cost. Debt and equity securities that are bought and traded for short-term
profit are classified as trading
securities and reported at fair value, with unrealized gains and losses included in
earnings. Debt and equity
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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. The 2004 and 2005 adjustment below
relates to the Companys equity securities that are classified as trading and
available-for-sale securities under U.S. GAAP. There is no difference between ROC GAAP and
U.S. GAAP effective January 1, 2006.
 c.
    
    Long-term investmentsUnder both ROC and U.S. GAAP, investments in shares of companies wherein the
Company owns over 20% of the outstanding common stock and exercises significant
influence over operating and financial policies of the investee companies are
generally accounted for under the equity method. However, there are differences in
applying equity accounting under ROC and U.S. GAAP. The Companys proportionate share
of the income (loss) from an equity investee may differ if the equity investees net
income (loss) under ROC GAAP differs from that under U.S. GAAP. The differences
between ROC GAAP and U.S. GAAP for the equity investees have been adjusted and
included in the reconciliation below.Under the equity method, the Companys proportionate share of the income (loss) of
the investee is generally recognized in the year the income (loss) is earned.
However, in 2004 under ROC GAAP, if audited financial statements of an investee are
not available for the Company to apply the equity method due to time constraints and
such equity interests are below certain materiality threshold, the Company is
permitted to delay the recognition of income (loss) until 2005. Under US GAAP, there
are no provisions that allow the investor company to delay recognition of its equity
in the investees income or loss. The US GAAP represents the proportionate share of
loss of long-term investment in 2004. In 2005 and 2006, there was no such difference.d.
    
    Technologies transferred in payment of capital stockAs discussed in Note 11, MVI and SPIL contributed, as payment to their subscription in the shares of stock of ChipMOS Taiwan, technologies relating to the testing and assembly of
semiconductors at an agreed value of NT$750,000 thousand. Under ROC GAAP, such technology
transfers in payment of capital stock are recorded as an intangible asset, and amortized by
systematic charges to income over the periods estimated to be benefited. As permitted
under ROC GAAP, ChipMOS Taiwan uses a 5 years amortization period. Under U.S. GAAP, the
technology contribution cannot be recognized due to the unavailability of a fair value for
the technologies. Therefore, the carrying value of the technologies has been adjusted to
zero under U.S. GAAP.
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e.
    
    Start-up costsROC GAAP requires start-up costs to be deferred and amortized in a systematic manner over
the periods of the expected benefit. Start-up costs include all costs incurred prior to
production readiness. On the other hand, U.S. GAAP primarily requires that start-up costs
be expensed as incurred.f.
    
    Depreciation of fixed assets and employee dormitory buildingUnder ROC GAAP, the estimated life of a building can be as long as 55 years based on the
ROC Internal Revenue Code. For U.S. GAAP purpose, building lives are estimated to be 25
years.g.
    
    Transfer of building and facilities from MVIChipMOS Taiwan purchased building and facilities from MVI in 1997. The actual costs of
assets purchased from MVI were based on MVIs book value of such building and facilities on
a specified cut-off date plus an additional payment of NT$173,174 thousand representing
compensation to MVI. ChipMOS Taiwan capitalized, allowed under ROC GAAP such additional
payment of NT $173,174 thousand. Under U.S. GAAP, assets acquired are recorded at amounts
that do not exceed their fair values. Also, generally under U.S. GAAP, the transferee
should evaluate the assets transferred from related parties with significant influence at
the predecessors basis. Therefore, the assets transferred from MVI were evaluated at
MVIs predecessor cost basis and the NT$173,174 thousand was deducted from the capital
surplus and building and facilities for U.S. GAAP.h.
    
    InventoryAs discussed in paragraphs e. f. and g., the amortization of start-up costs, the
depreciation on fixed assets and employee dormitory building, and the depreciation on the
assets transferred from MVI were reconciled for U.S. GAAP purposes. Some of such expenses
were recorded in the manufacturing expenses and therefore affect ending inventory balances
under U.S. GAAP.i.
    
    Capital surplusUnder ROC GAAP, the following items are treated as capital surplus: (a) premium on
issuance of common stocks; and (b) gain, net of applicable income tax, on disposal of
properties. Under U.S. GAAP, item (a) is the same as in ROC GAAP; and item (b) is recorded
as part of net income, which is then included as a component of retained earnings.
However, starting in 2001, the treatment of item (b) under ROC GAAP has become the same as
under U.S. GAAP.j.
    
    Impairment of long-lived assetsUnder U.S. GAAP, impairment losses for assets to be held and used are recorded in
current period earnings and create a new cost basis for related assets going forward,
and cannot be reversed subsequently. Under U.S. GAAP, in accordance with SFAS No.
144, Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived
assets 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. For purposes of evaluating the recoverability of long-lived assets, the
recoverability test is performed by comparing undiscounted net cash flows of the
assets to the net book value of the assets. If the recoverability test indicates that
impairment has occurred, the impairment loss is the amount of
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the assets net book value in excess of the related fair value. Prior to January 1, 2005,
there is no requirement provided for impairment of long-lived assets under ROC GAAP.
Therefore, the Company applied US GAAP to evaluate the long-lived assets for impairment
purpose in 2004. In 2005, the adjustment for impairment of long-term investment
represented the additional impairment to be recognized after the reversal of amortization
of goodwill in respect of the long-term investment. In 2006, the adjustment represents the
reversal of impairment loss recognized under ROC GAAP that were already recognized under
U.S. GAAP in 2005.
 k.
    
    Stock bonus and dividendUnder ROC GAAP, stock bonus and dividends are recorded at par value with a charge to
retained earnings. Under U.S. GAAP, if the ratio of distribution is less than 25 percent of
the same class of shares outstanding, the fair value of the shares issued should be charged
to retained earnings and capital surplus. Accordingly, an adjustment of NT$61,632 thousand
was included in the reconciliation, representing the difference between the fair value and
the par value of ThaiLin stock.l.
    
    Earnings per share (EPS)In calculating the weighted average number of shares outstanding for EPS
purposes under ROC GAAP, employee bonus shares have been treated as outstanding for
all periods in a manner similar to a stock split or stock dividend. Under U.S. GAAP,
employee bonus shares have been considered separately from the stock dividend or split
and have been treated as outstanding from the date of shareholder approval.m.
    
    Interest capitalizationUnder ROC GAAP, interests on borrowings during construction conceptually should be
capitalized in the assets that are constructed or produced for a companys own use.
However, if equity capital is raised during a year, no capitalization interest is
recorded for the amount of property acquired up to the equity capital raised in that
year. UnderU.S. GAAP, SFAS No. 34 Capitalization of Interest Cost, interest is generally
capitalized on assets until they are available and ready for use.n.
    
    Goodwill and negative goodwillPrior to January 1, 2006 under ROC GAAP, goodwill arises as the difference between
acquisition cost and the equity of the subsidiary and is amortized using a systematic
method, whereas under U.S. GAAP such goodwill is not amortized, but is subject to
impairment tests.
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Negative goodwill arises when the fair values of the net assets acquired exceed the
purchase price. Under ROC GAAP, negative goodwill is amortized over a five-year period
whereas under U.S. GAAP, that negative goodwill is firstly allocated pro rata reduce
amounts assigned to acquired assets. If negative goodwill still remains, it is
recognized as extraordinary gain in the period in which the business combination is
initially recognized. The negative goodwill of NT$20,275 thousand arising from the
merger of CHANTEK into ChipMOS Taiwan was credited to property, plant and equipment
under U.S. GAAP.There is no difference between ROC GAAP and U.S. GAAP since January 1, 2006.o.
    
    Pension expensesROC SFAS No. 18, which is similar in many respects to SFAS No. 87 and SFAS No.
88, was effective in 1996. However, the treatment of certain expenses that comply
with ROC SFAS No. 18 is different from SFAS No. 87 and SFAS No. 88.The company adopted SFAS No. 158, Employers Accounting for Defined Benefit
Pension and Other Postretirement Plans (SFAS No. 158) effective December 31, 2006.
SFAS No. 158 requires an employer that sponsors one or more defined benefit pension
plans or other postretirement plans to recognize the funded status of a plan, measured
as the difference between plan assets at fair value and the benefit obligation in the
balance sheet and recognize in shareholders equity as a component of accumulated
other comprehensive loss, net of tax, the gains or losses and prior service costs or
credits that arise during the period but are not yet recognized as components of net
periodic benefit cost as of the balance sheet date.The adoption of SFAS No. 158 resulted in a decrease in total shareholders equity
of NT$63,395 thousand (US$1,945 thousand) as of December 31, 2006.p.
    
    Allowance for loss and scrap loss on inventoriesROC GAAP does not specify the classification of allowance for loss on
inventories, therefore the recovery of allowance for loss on inventories of NT$67,002
thousand and NT$74,581 thousand for 2004 and 2005 has been classified under
non-operating income. Under U.S. GAAP, the allowance for loss on inventories should
be classified in the income statement as a component of cost of revenue.ROC GAAP does not specify the classification of scrap loss on inventories;
therefore, in 2006, NT$75,602 thousand has been classified under non-operating
expense. Under U.S. GAAP, the scrap of inventories should be classified in the income
statement as a component of cost of revenue.
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Year Ended December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Net incomeNet income based on ROC GAAP
    
    
    2,322,760
    
    
    
    2,108,036
    
    
    
    4,138,270
    
    
    
    126,960Adjustments:Amortization of start-up costs
    
    
    9,916
    
    
    
    2,305
    
    
    
    2,237
    
    
    
    68Depreciation of fixed assets and employee dormitory building
    
    
    (14,444
    )
    
    
    (14,957
    )
    
    
    (22,200
    )
    
    
    (681
    )Transfer of building and facilities from MVI
    
    
    1,299
    
    
    
    1,075
    
    
    
    741
    
    
    
    23Financial assets at fair value through profit and loss
    
    
    10,567
    
    
    
    (3,956
    )
    
    
    (3,035
    )
    
    
    (93
    )Depreciation of interest capitalization
    
    
    (19,793
    )
    
    
    (19,793
    )
    
    
    (19,793
    )
    
    
    (607
    )Long-term investment under equity methold
    
    
    (3,358
    )
    
    
    (34,105
    )
    
    
    17,001
    
    
    
    522Employee bonus and director remuneration
    
    
    
    
    
    
    (460,044
    )
    
    
    (537,463
    )
    
    
    (16,489
    )Effect of U.S. GAAP adjustment on minority interest
    
    
    
    
    
    
    48,767
    
    
    
    49,749
    
    
    
    1,526Effect of U.S. GAAP adjustment on income taxes
    
    
    5,755
    
    
    
    4,327
    
    
    
    9,753
    
    
    
    299Net decrease in net income
    
    
    (10,058
    )
    
    
    (476,381
    )
    
    
    (503,010
    )
    
    
    (15,432
    )Net income based on U.S. GAAP
    
    
    2,312,702
    
    
    
    1,631,655
    
    
    
    3,635,260
    
    
    
    111,528Earnings per share
    
    
    2.61
    
    
    
    1.84
    
    
    
    4.10
    
    
    
    0.13Number of weighted average shares
outstanding under U.S. GAAP
    
    
    887,227
    
    
    
    885,686
    
    
    
    886,012
    
    
    
    886,012
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December 312005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)Shareholders equityShareholders equity based on ROC GAAP
    
    
    14,455,753
    
    
    
    17,827,308
    
    
    
    546,934Adjustments:Technology transfer in payment of capital stocksOriginal cost
    
    
    (750,000
    )
    
    
    (750,000
    )
    
    
    (23,010
    )Accumulated amortization of technology
transfer in payment of capital stocks
    
    
    750,000
    
    
    
    750,000
    
    
    
    23,010Start-up costsOriginal cost
    
    
    (61,107
    )
    
    
    (60,151
    )
    
    
    (1,846
    )Accumulated depreciation of start-up costs
    
    
    53,400
    
    
    
    54,668
    
    
    
    1,677Net effect on inventories
    
    
    (53
    )
    
    
    (40
    )
    
    
    (1
    )Depreciation of fixed assets and employee
dormitory buildingDepreciation of fixed assets and employee
dormitory building
    
    
    (100,710
    )
    
    
    (122,959
    )
    
    
    (3,772
    )Net effects on inventories
    
    
    322
    
    
    
    371
    
    
    
    11Transfer of building and facilities from MVIOriginal cost
    
    
    (173,174
    )
    
    
    (173,174
    )
    
    
    (5,313
    )Depreciation and gain on disposal of
building and facilities from MVI
    
    
    169,155
    
    
    
    169,883
    
    
    
    5,212Net effects on inventories
    
    
    (26
    )
    
    
    (13
    )
    
    
    Financial assets at fair value through profit
and loss
    
    
    3,035
    
    
    
    
    
    
    
    Pension expenses
    
    
    (1,898
    )
    
    
    (65,293
    )
    
    
    (2,003
    )Interest capitalization
    
    
    118,757
    
    
    
    118,757
    
    
    
    3,643Depreciation of interest capitalization
    
    
    (51,769
    )
    
    
    (71,562
    )
    
    
    (2,195
    )Long-term investment under equity method
    
    
    (25,470
    )
    
    
    (8,469
    )
    
    
    (260
    )Employee bonus and director remuneration
    
    
    (294,300
    )
    
    
    (523,387
    )
    
    
    (16,057
    )Effect of U.S.GAAP adjustment on minority
interest
    
    
    48,767
    
    
    
    49,749
    
    
    
    1,526Effect of U.S. GAAP adjustment on income taxes
    
    
    7,785
    
    
    
    17,538
    
    
    
    538Net decrease in shareholders equity
    
    
    (307,286
    )
    
    
    (614,082
    )
    
    
    (18,840
    )Shareholders equity based on U.S. GAAP
    
    
    14,148,467
    
    
    
    17,213,226
    
    
    
    528,094
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Year Ended December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Changes in shareholders equity
based on U.S. GAAPBalance, beginning of the year
    
    
    10,593,316
    
    
    
    13,093,797
    
    
    
    14,148,467
    
    
    
    434,069Reversal of unrealized loss (gain)
on available-for-sale securities
    
    
    5,618
    
    
    
    805
    
    
    
    1,673
    
    
    
    51Cash dividend
    
    
    
    
    
    
    (532,336
    )
    
    
    (531,791
    )
    
    
    (16,315
    )Purchase of treasury stock
    
    
    
    
    
    
    (115,402
    )
    
    
    (3,191
    )
    
    
    (98
    )Outstanding shares owned by
subsidiaries
    
    
    
    
    
    
    (4,750
    )
    
    
    
    
    
    
    Issuance of new stock for merger
    
    
    
    
    
    
    89,912
    
    
    
    
    
    
    
    Unrealized loss on
available-for-sale securities
    
    
    (805
    )
    
    
    (1,673
    )
    
    
    
    
    
    
    Cumulative translation adjustments
    
    
    (7,564
    )
    
    
    6,380
    
    
    
    (359
    )
    
    
    (11
    )Adjustment for long-term investments
    
    
    190,530
    
    
    
    (19,921
    )
    
    
    26,562
    
    
    
    815Unrecognized pension cost
    
    
    
    
    
    
    
    
    
    
    (63,395
    )
    
    
    (1,945
    )Net income for the year
    
    
    2,312,702
    
    
    
    1,631,655
    
    
    
    3,635,260
    
    
    
    111,528Balance, end of the year
    
    
    13,093,797
    
    
    
    14,148,467
    
    
    
    17,213,226
    
    
    
    528,094
 December 312005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)Current assetsAs reported
    
    
    8,330,865
    
    
    
    9,967,812
    
    
    
    305,808U.S. GAAP adjustmentsFinancial assets at fair value
through profit and loss
    
    
    3,035
    
    
    
    
    
    
    
    Effect of inventory adjustments:Start-up costs
    
    
    (53
    )
    
    
    (40
    )
    
    
    (1
    )Depreciation of fixed
assets and employee
dormitory building
    
    
    322
    
    
    
    371
    
    
    
    11Transfer of building and
facilities from MVI
    
    
    (26
    )
    
    
    (13
    )
    
    
    As adjusted
    
    
    8,334,143
    
    
    
    9,968,130
    
    
    
    305,818Funds and long-term investmentsAs reported
    
    
    413,125
    
    
    
    366,743
    
    
    
    11,252U.S. GAAP adjustmentsAdjustment for investment income
    
    
    53,893
    
    
    
    
    
    
    
    Impairment loss
    
    
    (79,363
    )
    
    
    (8,469
    )
    
    
    (260
    )As adjusted
    
    
    387,655
    
    
    
    358,274
    
    
    
    10,992(Forward)(Followed)Property, plant and equipment  netAs reported
    
    
    18,986,699
    
    
    
    27,854,382
    
    
    
    854,560
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December 312005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)U.S. GAAP adjustmentsStart-up costs
    
    
    (7,707
    )
    
    
    (5,483
    )
    
    
    (168
    )Depreciation of fixed assets
    
    
    (89,178
    )
    
    
    (109,796
    )
    
    
    (3,369
    )Transfer of building and facilities from MVI
    
    
    (4,019
    )
    
    
    (3,291
    )
    
    
    (101
    )Interest capitalization
    
    
    66,988
    
    
    
    47,195
    
    
    
    1,448Negative goodwill of merging Chantek
    
    
    (20,275
    )
    
    
    (20,275
    )
    
    
    (622
    )As adjusted
    
    
    18,932,508
    
    
    
    27,762,732
    
    
    
    851,748Other assetsAs reported
    
    
    260,499
    
    
    
    301,773
    
    
    
    9,258U.S. GAAP adjustmentsDepreciation of employee dormitory building
    
    
    (11,532
    )
    
    
    (13,163
    )
    
    
    (404
    )Goodwill
    
    
    20,275
    
    
    
    20,275
    
    
    
    622As adjusted
    
    
    269,242
    
    
    
    308,885
    
    
    
    9,476Current liabilitiesAs reported
    
    
    4,885,016
    
    
    
    6,209,920
    
    
    
    190,517U.S, GAAP adjustmentsAccrued employee bonds and director
remuneration
    
    
    294,300
    
    
    
    523,387
    
    
    
    16,058As adjusted
    
    
    5,179,316
    
    
    
    6,733,307
    
    
    
    206,575Other liabilitiesAs reported
    
    
    825,729
    
    
    
    912,765
    
    
    
    28,003U.S. GAAP adjustmentsPension expenses
    
    
    1,898
    
    
    
    65,293
    
    
    
    2,003Effect of U.S. GAAP adjustment on income
taxes
    
    
    (7,785
    )
    
    
    (17,538
    )
    
    
    (538
    )As adjusted
    
    
    819,842
    
    
    
    960,520
    
    
    
    29,468Minority interestAs reported
    
    
    3,494,210
    
    
    
    3,482,966
    
    
    
    106,856U.S. GAAP adjustmentsAccrued employee bonds and director
remuneration
    
    
    (48,767
    )
    
    
    (49,749
    )
    
    
    (1,526
    )As adjusted
    
    
    3,445,443
    
    
    
    3,433,217
    
    
    
    105,330
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Year Ended December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Net revenue
    
    
    14,867,877
    
    
    
    14,756,523
    
    
    
    19,824,561
    
    
    
    608,209Cost of revenue
    
    
    (10,746,166
    )
    
    
    (10,848,673
    )
    
    
    (13,486,578
    )
    
    
    (413,762
    )Gross profit
    
    
    4,121,711
    
    
    
    3,907,850
    
    
    
    6,337,983
    
    
    
    194,447Operating expenses
    
    
    ( 1,095,053
    )
    
    
    ( 1,540,563
    )
    
    
    ( 1,489,060
    )
    
    
    ( 45,684
    )Income from operations
    
    
    3,026,658
    
    
    
    2,367,287
    
    
    
    4,848,923
    
    
    
    148,763Non-operating expenses  net
    
    
    (   574,814
    )
    
    
    (   423,167
    )
    
    
    (   151,257
    )
    
    
    (  4,641
    )Income before income tax
    
    
    2,451,844
    
    
    
    1,944,120
    
    
    
    4,697,666
    
    
    
    144,122Net income
    
    
    2,312,702
    
    
    
    1,631,655
    
    
    
    3,635,260
    
    
    
    111,528
  a.
    
    Recent accounting pronouncementsThe Company is required by SEC Staff Accounting Bulletin No. 74 to make certain disclosures
about the effect that recently issued accounting standards will have on the financial
statements adopted for future periods.On September 29, 2006, the FASB issued SFAS No. 158, Employers Accounting for Defined
Benefit Pension and Other Postretirement Plans (SFAS No. 158). SFAS No. 158 requires an
employer that sponsors one or more defined benefit pension plans or other postretirement
plans to 1) recognize the funded status of a plan, measured as the difference between plan
assets at fair value and the benefit obligation, in the balance sheet; 2) recognize in
shareholders equity as a component of accumulated other comprehensive loss, net of tax, the
gains or losses and prior service costs or credits that arise during the period but are not
yet recognized as components of net periodic benefit cost; 3) measure defined benefit plan
assets and obligations as of the date of the employers fiscal year-end balance sheet; and 4)
disclose in the notes to the financial statements additional information about the effects on
net periodic benefit cost for the next fiscal year that arise from delayed recognition of the
gains or losses, prior service costs or credits, and transition asset or obligation.The FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments (SFAS
No. 155) in February 2006. SFAS No. 155 amends SFAS No. 133 Accounting for Derivative
Instruments and Hedging Activities, and SFAS No. 140 Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities and addresses the application of SFAS
No. 133 to beneficial interests in securitized financial assets. SFAS No. 155 establishes a
requirement to evaluate interests in securitized financial assets to identify interests that
are freestanding derivatives or that are hybrid financial instruments that contain an
embedded derivative requiring bifurcation. Additionally, SFAS No. 155 permits fair value
measurement for any hybrid financial instrument that contains an embedded derivative that
otherwise would require bifurcation. SFAS No. 155 is effective for fiscal years beginning
after September 15, 2006. The Company is currently assessing the impact SFAS No. 155 will
have on the consolidated financial statements but do not anticipate it will be material.The FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets an amendment of
FASB Statement No. 140 (SFAS No. 156) in March 2006. SFAS No. 156 requires a company to
recognize a servicing asset or servicing liability each time it undertakes an obligation to
service a financial asset. A company would recognize a servicing asset or servicing liability
initially at fair value. A company
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will then be permitted to choose to subsequently recognize servicing assets and liabilities
using the amortization method or fair value measurement method. SFAS No. 156 is effective
for fiscal years beginning after September 15, 2006. The Company is currently assessing
the impact SFAS No. 156 will have on the consolidated financial statements but do not
anticipate it will be material.On July 13, 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty
in Income Taxes-an Interpretation of FASB Statement No. 109 (FIN No. 48). FIN No. 48
clarifies what criteria must be met prior to recognition of the financial statement benefit
of a position taken in an income tax return. FIN No. 48 will require companies to include
additional qualitative and quantitative disclosures within their financial statements. The
disclosures will include potential tax benefits from positions taken for tax return
purposes that have not been recognized for financial reporting purposes and a tabular
presentation of significant changes during each period. The disclosures will also include a
discussion of the nature of uncertainties, factors that could cause a change, and an
estimated range of reasonably possible changes in tax uncertainties. FIN No. 48 will also
require a company to recognize a financial statement benefit for a position taken for tax
return purposes when it will be more-likely-than-not that the position will be sustained.
FIN No. 48 will be effective for fiscal years beginning after December 15, 2006. The
Company is currently assessing the impact FIN No. 48 will have on the consolidated
financial statements but do not anticipate it will be material.On September 15, 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS No.
157). SFAS No. 157 addresses how companies should measure fair value when they are
required to use a fair value measure for recognition and disclosure purposes under
generally accepted accounting principles. SFAS No. 157 will require the fair value of an
asset or liability to be based on a market based measure, which will reflect the credit
risk of the company. SFAS No. 157 will also require expanded disclosure requirements, which
will include the methods and assumptions used to measure fair value and the effect of fair
value measures on earnings. SFAS No. 157 will be applied prospectively and will be
effective for fiscal years beginning after November 15, 2007 and to interim periods within
those fiscal years. The Company is currently assessing the impact SFAS No. 157 will have on
the consolidated financial statements.In September 2006, the U.S. SEC staff issued Staff Accounting Bulletin No. 108,
Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in
Current Year Financial Statements (SAB 108). SAB 108 was issued to provide interpretive
guidance on how the effects of the carryover or reversal of prior year misstatements should
be considered in quantifying a current year misstatement. The Company adopted the
provisions of SAB 108 effective December 31, 2006. The adoption of SAB 108 did not have an
impact on the consolidated financial statements.b.
    
    Financial assets at fair value through profit and loss.On December 31, 2005 and 2006, certain investments carried at cost under ROC GAAP were
revalued for purposes of U.S. GAAP presentation:
 (ROC GAAP)
    
    (U.S. GAAP)Carrying Value
    
    Fair Value2005
    
    2006
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    NT$(In Thousands)
    
    (In Thousands)Available-for-sale securities
    
    
    186,136
    
    
    
    1,929,124
    
    
    
    189,171
    
    
    
    1,929,124
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Prior to January 1, 2006, the Company uses the weighted-average cost method for
available-for-sale securities when determining the cost basis.The following table shows the gross unrealized losses and fair value of short-term
investments with unrealized losses that are not deemed to be other-than-temporarily
impaired, aggregated by investment category that individual securities have been in a
continuous unrealized loss position, at December 31, 2005 and 2006.
 December 31, 2006Less than 12 months
    
    12 months or greaterUnrealized
    
    
    
    
    
    
    
    
    
    UnrealizedFair value
    
    losses/(gains)
    
    Fair value
    
    losses/(gains)NT$
    
    US$
    
    NT$
    
    US$
    
    NT$
    
    US$
    
    NT$
    
    US$(In Thousands)Stock
    
    
    100,820
    
    
    
    3,093
    
    
    
    (6,604
    )
    
    
    (203
    )
    
    
    156,832
    
    
    
    4,812
    
    
    
    (2,006
    )
    
    
    (62
    )Open-ended funds
    
    
    1,641,472
    
    
    
    50,360
    
    
    
    
    
    
    
    
    
    
    
    30,000
    
    
    
    920
    
    
    
    
    
    
    
    1,742,292
    
    
    
    53,453
    
    
    
    (6,604
    )
    
    
    (203
    )
    
    
    186,832
    
    
    
    5,732
    
    
    
    (2,006
    )
    
    
    (62
    )
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c.
    
    Income tax expense (benefit)
 Year Ended December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Income tax current payable
    
    
    86
    
    
    
    87,643
    
    
    
    293,835
    
    
    
    9,015Deferred income tax
    
    
    (133,697
    )
    
    
    (47,802
    )
    
    
    247,689
    
    
    
    7,598Adjustment of prior years income taxes
    
    
    (4,743
    )
    
    
    497
    
    
    
    (4,673
    )
    
    
    (143
    )Income tax expense (benefit)
    
    
    (138,354
    )
    
    
    40,338
    
    
    
    536,851
    
    
    
    16,470
 Reconciliation of the income tax calculated on pre-tax financial statement income
based on statutory tax rate and the income tax expense (benefit), which conforms to U.S.
GAAP as follows:
 Year Ended December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Tax on pretax income at ROC statutory rate (25%)
    
    
    670,129
    
    
    
    196,559
    
    
    
    684,511
    
    
    
    21,000SBIP tax exemption (5%)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Tax on pretax income at SBIP statutory rate
    
    
    670,129
    
    
    
    196,559
    
    
    
    684,511
    
    
    
    21,000Other tax and assessed additional income tax
    
    
    86
    
    
    
    164,584
    
    
    
    111,328
    
    
    
    3,415Tax effect of:Tax-exempt income
    
    
    (426,870
    )
    
    
    (185,377
    )
    
    
    1,752
    
    
    
    54Permanent differencesNon-taxable gain on sales of investment
    
    
    (12,557
    )
    
    
    (18,630
    )
    
    
    
    
    
    
    Non-deductible investment (gain) loss
    
    
    (12,246
    )
    
    
    82,152
    
    
    
    (75,151
    )
    
    
    (2,306
    )Others
    
    
    (714
    )
    
    
    
    
    
    
    56,637
    
    
    
    1,738Temporary differences
    
    
    50,418
    
    
    
    (169,637
    )
    
    
    111,873
    
    
    
    3,432Tax credits - utilized
    
    
    (355,923
    )
    
    
    (218,672
    )
    
    
    (506,285
    )
    
    
    (15,533
    )- deferred
    
    
    (70,003
    )
    
    
    76,611
    
    
    
    (206,923
    )
    
    
    (6,348
    )Valuation allowance
    
    
    (560,053
    )
    
    
    (405,487
    )
    
    
    230,050
    
    
    
    7,058Loss carry forward
    
    
    584,122
    
    
    
    517,738
    
    
    
    133,732
    
    
    
    4,103Adjustment of prior years income tax
    
    
    (4,743
    )
    
    
    497
    
    
    
    (4,673
    )
    
    
    (143
    )Income tax (benefit) expense
    
    
    (138,354
    )
    
    
    40,338
    
    
    
    536,851
    
    
    
    16,470
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December 312005
    
    2006NT$
    
    NT$
    
    US$(In Thousands)Deferred income tax assetsCurrentUnrealized foreign exchange loss
    
    
    3,496
    
    
    
    3,679
    
    
    
    113Loss of market price decline and obsolescence
and slow-moving inventories
    
    
    20,616
    
    
    
    19,026
    
    
    
    584Sales allowance
    
    
    9,455
    
    
    
    21,912
    
    
    
    672Bad-debt allowance
    
    
    81,424
    
    
    
    77,533
    
    
    
    2,378Tax credits for investment in machinery and
equipment and R&D expenditures
    
    
    110,103
    
    
    
    491
    
    
    
    15Others
    
    
    14,108
    
    
    
    11,696
    
    
    
    359239,202
    
    
    
    134,337
    
    
    
    4,121Valuation allowance
    
    
    
    
    
    
    
    
    
    
    239,202
    
    
    
    134,337
    
    
    
    4,121Deferred income tax liabilitiesNon-currentTax credits for investment in machinery and
equipment and R & D expenditures
    
    
    801,450
    
    
    
    1,117,985
    
    
    
    34,299Depreciation differences
    
    
    (531,219
    )
    
    
    (619,365
    )
    
    
    (19,002
    )Interest capitalization
    
    
    (16,747
    )
    
    
    (11,799
    )
    
    
    (362
    )Loss carry forward
    
    
    133,732
    
    
    
    
    
    
    
    Transferred assets from MVI
    
    
    1,011
    
    
    
    826
    
    
    
    26Start-up costs
    
    
    1,940
    
    
    
    1,380
    
    
    
    42Others
    
    
    262,541
    
    
    
    254,212
    
    
    
    7,799652,708
    
    
    
    743,239
    
    
    
    22,802Valuation allowance
    
    
    (793,874
    )
    
    
    (1,023,924
    )
    
    
    (31,413
    )(141,166
    )
    
    
    (280,685
    )
    
    
    (8,611
    )98,036
    
    
    
    (146,348
    )
    
    
    (4,490
    )
 d.
    
    Pension plansOn September 29, 2006, the FASB issued SFAS No. 158 Employers Accounting for
Defined benefit Pension and Other Postretirement Plans. The company adopted SFAS. No.
158 effective December 31, 2006. The impact of the adoption of SFAS No. 158 has been
reflected within the consolidated financial statements as of December 31, 2006. The
incremental effect of applying SFAS No. 158 has been disclosed as par of this
footnote.
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Year Ended December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Components of net periodic benefit costService cost
    
    
    51,970
    
    
    
    30,021
    
    
    
    1,688
    
    
    
    52Interest cost
    
    
    7,599
    
    
    
    8,713
    
    
    
    7,781
    
    
    
    239Projected return on plan assets
    
    
    (4,892
    )
    
    
    (4,659
    )
    
    
    (4,732
    )
    
    
    (145
    )Net amortization and deferral:Unrecognized net transition obligation
    
    
    (477
    )
    
    
    (305
    )
    
    
    (319
    )
    
    
    (10
    )Unrecognized net loss
    
    
    809
    
    
    
    1,209
    
    
    
    879
    
    
    
    27Curtailment Loss Recognition
    
    
    
    
    
    
    458
    
    
    
    
    
    
    
    Net periodic benefit cost
    
    
    55,009
    
    
    
    35,437
    
    
    
    5,297
    
    
    
    163Recognized in other comprehensive incomeUnrealized net transition obligation
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    Unrealized actuarial loss
    
    
    
    
    
    
    
    
    
    
    63,388
    
    
    
    1,945Total recognized in other comprehensive income
    
    
    
    
    
    
    
    
    
    
    63,395
    
    
    
    1,945Total recognized in total benefit cost and
other comprehensive
    
    
    
    
    
    
    
    
    
    
    68,692
    
    
    
    2,108
 The estimated net transition obligation and actuarial loss for the defined benefit pension plans
tat will be amortized from accumulated other comprehensive income into benefits cost in 2007 is
NT$1 thousand (US$0) and NT$3,233 thousand (US $99 thousand), respectively.
 Changes in plan assetsFair value of plan assets at beginning of year
    
    
    135,893
    
    
    
    174,349
    
    
    
    156,172
    
    
    
    4,791Actual return on plan assets
    
    
    1,796
    
    
    
    1,971
    
    
    
    4,163
    
    
    
    128Employer contribution
    
    
    32,160
    
    
    
    29,892
    
    
    
    39,656
    
    
    
    1,217Effect of merger
    
    
    4,500
    
    
    
    (49,223
    )
    
    
    
    
    
    
    174,349
    
    
    
    156,989
    
    
    
    199,991
    
    
    
    6,136
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Changes in benefit obligationBenefit obligation at beginning of year
    
    
    167,979
    
    
    
    314,124
    
    
    
    283,253
    
    
    
    8,690Service cost
    
    
    51,970
    
    
    
    30,021
    
    
    
    1,688
    
    
    
    52Interest cost
    
    
    7,599
    
    
    
    8,713
    
    
    
    7,781
    
    
    
    239Actuarial loss (gain)
    
    
    20,751
    
    
    
    (2,024
    )
    
    
    24,924
    
    
    
    765Acquisition of subsidiary
    
    
    65,825
    
    
    
    
    
    
    
    
    
    
    
    Effect of merger
    
    
    
    
    
    
    (67,581
    )
    
    
    
    
    
    
    Benefit obligation at end of year
    
    
    314,124
    
    
    
    283,253
    
    
    
    317,646
    
    
    
    9,746Funds status
    
    
    (139,775
    )
    
    
    (126,264
    )
    
    
    (117,655
    )
    
    
    (3,610
    )Unrecognized actuarial loss
    
    
    48,918
    
    
    
    42,708
    
    
    
    68,185
    
    
    
    2,092Net amount recognized
(recognized as accrued pension cost)
    
    
    (90,857
    )
    
    
    (83,556
    )
    
    
    (49,470
    )
    
    
    (1,518
    )Actuarial assumptionsDiscount rate
    
    
    3.25
    %
    
    
    2.75
    %
    
    
    2.75
    %
    
    
    2.75
    %Rate of compensation increase
    
    
    3.25
    %
    
    
    3.25
    %
    
    
    3.50
    %
    
    
    3.50
    %Expected return on plan assets
    
    
    3.25
    %
    
    
    2.75
    %
    
    
    2.75
    %
    
    
    2.75
    %
 The following table is req
uired as part of adopting SFAS No. 158.Incremental effect of applying SFAS No. 158 on individual line items in the consolidated
balance sheet as of December 31, 2006:
 Before application
    
    
    
    
    
    
    After application ofof SFAS No. 158
    
    
    Adjustments
    
    
    SFAS No. 158NT$
    
    
    NT$
    
    
    NT$
    
    
    US$(In Thousands)Accured pension cost
    
    
    49,470
    
    
    
    63,395
    
    
    
    112,865
    
    
    
    3,463Total other liabilities
    
    
    897,125
    
    
    
    63,395
    
    
    
    960,520
    
    
    
    29,468Accumulated other
comprehensive income
    
    
    (2,162
    )
    
    
    (63,395
    )
    
    
    (65,557
    )
    
    
    (2,011
    )Total shareholders equity
    
    
    17,276,621
    
    
    
    (63,395
    )
    
    
    17,213,226
    
    
    
    (528,094
    )
 The Company has no other post-retirement or post-employment benefit plans. The company
expects to contribute NT$39,155 thousand to its pension plans during 2007. The plan assets
are all invested in the Central Trust of China.
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e.
    
    Statements of cash flowsROC SFAS No. 17, Statement of Cash Flows has been applied. Its objectives and principles
are similar to those set out in the SFAS No. 95, Statement of Cash Flows. The principle
differences between the standards relate to classification. Cash flows from changes in
short-term investments, refundable deposits, other assets and guarantee deposits and bonus
to directors and supervisors are included as operating activities under SFAS No. 95.
Summarized cash flow data by operating, investing and financing activities in accordance
with SFAS No. 95 are as follows:
 Year Ended December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Net cash inflow (outflow) from:Operating activities
    
    
    5,764,200
    
    
    
    8,958,953
    
    
    
    6,961,854
    
    
    
    213,587Investing activities
    
    
    (6,169,297
    )
    
    
    (6,587,533
    )
    
    
    (13,742,203
    )
    
    
    (421,605
    )Financing activities
    
    
    2,067,591
    
    
    
    (2,035,152
    )
    
    
    5,503,716
    
    
    
    168,852Effect of exchange rate changes
    
    
    
    
    
    
    (327
    )
    
    
    37
    
    
    
    1Change in cash and cash equivalents
    
    
    1,662,494
    
    
    
    335,941
    
    
    
    (1,276,596
    )
    
    
    (39,165
    )Cash and cash equivalents at the
beginning of year
    
    
    1,155,662
    
    
    
    2,818,156
    
    
    
    3,154,097
    
    
    
    96,766Cash and cash equivalents
at the end of year
    
    
    2,818,156
    
    
    
    3,154,097
    
    
    
    1,877,501
    
    
    
    57,601
 f.
    
    Statements of comprehensive income (loss)
 Year Ended December 312004
    
    2005
    
    2006NT$
    
    NT$
    
    NT$
    
    US$(In Thousands)Net income based on U.S. GAAP
    
    
    2,312,702
    
    
    
    1,631,655
    
    
    
    3,635,260
    
    
    
    111,528Other comprehensive income (loss):Reversal of unrealized loss on
available-for-sale security
    
    
    5,618
    
    
    
    805
    
    
    
    1,673
    
    
    
    51Unrealized loss on
available-for-sale security
    
    
    (805
    )
    
    
    (1,673
    )
    
    
    
    
    
    
    Unrecognized pension costs
    
    
    
    
    
    
    
    
    
    
    (63,395
    )
    
    
    (1,945
    )Translation adjustment
    
    
    (7,564
    )
    
    
    6,380
    
    
    
    (359
    )
    
    
    (11
    )Comprehensive income
    
    
    2,309,951
    
    
    
    1,637,167
    
    
    
    3,636,574
    
    
    
    111,568
 Components in other comprehensive income (loss) refer to investments in Ultima. Under ROC
laws, those losses and gains are not subject to income tax. Therefore, no tax expense or
benefit is allocated to such investments.
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g.
    
    Statements of accumulated comprehensive income (loss)
 Unrealized
    
    
    
    
    
    AccumulatedGain (Loss) on
    
    
    
    
    
    OtherUnrecognized
    
    Financial
    
    Translation
    
    ComprehensivePension Cost
    
    Instrument
    
    Adjustment
    
    Income (Loss)NT$
    
    NT$
    
    NT$
    
    NT$(In Thousands)January 1, 2004
    
    
    
    
    
    
    (5,618
    )
    
    
    (619
    )
    
    
    (6,237
    )Addition in 2004
    
    
    
    
    
    
    4,813
    
    
    
    (7,564
    )
    
    
    (2,751
    )December 31, 2004
    
    
    
    
    
    
    (805
    )
    
    
    (8,183
    )
    
    
    (8,988
    )Addition in 2005
    
    
    
    
    
    
    (868
    )
    
    
    6,380
    
    
    
    5,512December 31, 2005
    
    
    
    
    
    
    (1,673
    )
    
    
    (1,803
    )
    
    
    (3,476
    )Addition in 2006
    
    
    (63,395
    )
    
    
    1,673
    
    
    
    (359
    )
    
    
    (62,081
    )December 31, 2006
    
    
    (63,395
    )
    
    
    
    
    
    
    (2,162
    )
    
    
    (65,557
    )
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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description of Exhibits1.1
    
    

Articles
of Incorporation of Siliconware Precision Industries Co., Ltd., as amended on June 13, 2007
(English translation)*2.1
    
    
    Form of the Second Amended and Restated Deposit Agreement among Siliconware Precision Industries Co.,
Ltd., Citibank, N.A. and Holders and Beneficial owners of American Depositary Shares issued thereunder,
including the form of American Depositary Receipts(2)4.1
    
    
    Immunity Agreement with Motorola, Inc. (effective from November 5, 1996 to December 31, 2010)(3)4.2
    
    
    License Agreement with Flip Chip Technologies, L.L.C. (effective from November 28, 1999 to November 27,
2009)(4)4.3
    
    
    Joint Venture Agreement with Mosel Vitelic, Inc. (English translation)(5)*8.1
    
    
    List of Significant Subsidiaries of Siliconware Precision Industries Co., Ltd.11.1
    
    
    Code of Ethics(6)*12.1
    
    
    Certification of our Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*12.2
    
    
    Certification of our Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*13.1
    
    
    Certification by our Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002*13.2
    
    
    Certification by our Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
 
 *
    
    filed herewith.(1)
    
    Incorporated by reference to Exhibit 4.1 to our Registration Statement on Form F-1 (File No.
333-11812) filed with the SEC on April 29, 2000.(2)
    
    Incorporated by reference to Exhibit 10.2 to our Registration Statement on Form F-1 (File No.
333-11812) filed with the SEC on April 29, 2000.(3)
    
    Incorporated by reference to Exhibit 10.5 to our Registration Statement on Form F-1 (File No.
333-11812) filed with the SEC on April 29, 2000.(4)
    
    Incorporated by reference to Exhibit 10.6 to our Registration Statement on Form F-1 (File No.
333-11812) filed with the SEC on April 29, 2000.(5)
    
    Incorporated by reference to Exhibit 11.1 to our Year 2003 Form 20-F filed with the SEC on
June 28, 2004.